SB-2

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

Sionix Corporation

(Name of Small Business Issuer as Specified in its Charter)

Nevada (State or Jurisdiction of Incorporation or Organization) 3541 (Primary Standard Industrial Classification Code Number) 87-0428526 (I.R.S. Employer Identification Number)

2082 Michelson Drive, Suite 306

Irvine CA 92612

(949) 752-7980

(Address and Telephone Number of Principal Executive Offices)

James J. Houtz, President

Sionix Corporation

2082 Michelson Drive, Suite 306

Irvine CA 92612

(949) 752-7980

 (Name, Address, Including Zip Code, and Telephone Number,

Including Area Code, of Agent for Service)

Copies to:

Robert J. Zepfel

Haddan & Zepfel LLP

500 Newport Center Drive, Suite 580

 Newport Beach, CA 92660

  (949) 706-6000

Approximate date of proposed sale to the public: From time to time after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

CALCULATION OF REGISTRATION FEE

Title Of Each Class Of Securities To Be Registered	Amount To Be Registered (1)		Proposed Maximum Offering Price Per Share (2)		Proposed Maximum Aggregate Offering Price		Amount Of Registration Fee
Shares of Common Stock issuable upon conversion of Senior Convertible Notes		18,853,125	$	.29	$	5,467,406		167.85
Shares of Common Stock issuable as payment of interest in Common Stock on the Senior Convertible Notes		2,609,375		.29		756,719		23.23
Shares of Common Stock issuable upon conversion of Subordinated Convertible Debentures		4,659,087		.29		1,351,135		41.48
Shares of Common Stock issuable as payment of interest in Common Stock on the subordinated convertible debentures		352,728		.29		102,291		3.14
Shares of Common Stock issuable upon warrants		2,329,546		.29		675,568		20.74
Shares of Common Stock issuable upon conversion of Convertible Promissory Notes		8,600,000		.29		2,494,000		76.57
Shares of Common Stock issuable upon exercise of placement agent warrants		73,614		.29		21,348		.66
Shares of Common Stock issued under Consulting Agreement		4,592,915		.29		1,331,945		40.89
Total		42,070,390			$	12,200,413	$	374.56

__________________

(1)

Pursuant to Rule 416 under the Securities Act of 1933, as amended, there is also being registered hereby such indeterminate number of additional shares of Common Stock as may be issued or issuable because of stock splits, stock dividends, stock distributions, recapitalizations or similar events and other anti-dilution provisions, all in accordance with the terms of the senior convertible notes, the warrants and the placement agent warrants.

(2)

Estimated solely for the purpose of determining the amount of the registration fee, based on the closing price of the Common Stock as reported by the OTC Bulletin Board on November 13, 2007 in accordance with Rule 457(c) under the Securities Act of 1933.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.   

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED _______________, 2007

Sionix Corporation

PROSPECTUS

42,070,390 shares of Common Stock

This prospectus relates to the offering from time to time by the selling securityholders of Sionix Corporation identified in this prospectus under “Selling Securityholders” of up to 42,070,390  shares of Common Stock, par value $0.001 per share. The shares of Common Stock offered from time to time by the selling securityholders under this prospectus consist of:

• 18,853,125 shares of Common Stock issuable upon conversion of Senior Convertible Notes issued in 2006 (the "2006 Private Placement")

• 2,609,375  shares of Common Stock, which, based on our good faith estimate, may be issuable in the future if we elect to pay all interest due under the Senior Convertible Notes in shares of Common Stock;

• 4,659,087  shares of Common Stock issuable upon conversion of our Subordinated Convertible Debentures (the “Convertible Debentures ”) issued in a private placement transaction that closed in  June 2007 (the “2007 Private Placement”);

• 352,728  shares of Common Stock, which, based on our good faith estimate, may be issuable in the future if we elect to pay all interest due under the Convertible Debentures in shares of Common Stock;

• 2,329,546 shares of Common Stock issuable upon exercise of warrants (the “Warrants”) issued in the 2007 Private Placement.

• 8,600,000 shares of Common Stock issuable upon conversion of Convertible Promissory Notes issued in June 2007.

• 73,614 shares of Common Stock issuable upon exercise of placement agent warrants issued in connection with the 2007 Private Placement.

• 4,592,915  shares of Common Stock issued to Calico Capital Management, LLC and certain affiliates thereof,  as compensation for general financial and strategic consulting services rendered in 2006 and 2007;

For more details of the 2006 Private Placement and the 2007 Private Placement, see “Management's Discussion and Analysis of Financial Condition and Plan of Operation - Recent Private Placements”.

The selling securityholders have advised us that they will sell the shares of Common Stock from time to time in the open market, on the OTC Bulletin Board, in privately negotiated transactions or a combination of these methods, at fixed or negotiated prices.

We will not receive any proceeds from the sale of shares of Common Stock offered by the selling securityholders under this prospectus. We will receive the proceeds from all cash exercises of warrants, which we intend to use for general corporate purposes, including for working capital.

Our Common Stock is traded on the OTC Bulletin Board under the symbol “SINX.OB”. On November 12, 2007, the closing price of our Common Stock was $.29 per share.

Investing in our Common Stock involves a high degree of risk. Before making any investment in our Common Stock, you should read and carefully consider the risks described in this prospectus under “Risk Factors” beginning on page 2 of this prospectus.

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized anyone to provide you with different information.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated ___________, 2007

  TABLE OF CONTENTS

SUMMARY	1
RISK FACTORS	2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	8
BUSINESS	9
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION	15
SELLING SECURITYHOLDERS	17
USE OF PROCEEDS	19
DETERMINATION OF OFFERING PRICE	19
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	19
DIRECTORS AND EXECUTIVE OFFICERS	20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	21
EXECUTIVE COMPENSATION	22
PLAN OF DISTRIBUTION	23
DESCRIPTION OF SECURITIES	24
LEGAL MATTERS	26
EXPERTS	26
WHERE YOU CAN FIND MORE INFORMATION	26
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. This prospectus may be used only where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus, regardless of the time of any sale of securities.

SUMMARY

This summary is not complete and does not contain all of the information that should be considered before investing in our Common Stock. Investors should read the entire prospectus carefully, including the more detailed information regarding our business, the risks of purchasing our Common Stock discussed in this prospectus under “Risk Factors”, and our financial statements and the accompanying notes. In this prospectus, unless the context requires otherwise, “Sionix”, the “Company”, “we”, “us”, and “our” refer to Sionix Corporation, a Nevada corporation.

Sionix Corporation

Sionix Corporation designs and develops turn-key stand-alone water treatment systems for municipalities (both potable and wastewater), industrial (both make-up water and wastewater), emergency response, military and small residential communities. Sionix was initially incorporated in Utah in 1996, and reincorporated in Nevada in 2003.

Our executive offices and principal operations are located at 2082 Michelson Drive, Suite 306, Irvine, California 92612, and our manufacturing facilities are located at 14271 Corporate Drive, Garden Grove, California 92708. Our telephone number is (949) 752-7980, and our website is located at www.sionix.com.

  The Offering

Common stock outstanding (as at September 30, 2007)	106,635,201shares
Shares of Common Stock issuable upon conversion of Senior Convertible Notes	18,853,125 shares
Shares of Common Stock issued to Calico Capital Management, LLC and certain affiliates thereof,  as compensation for general financial and strategic consulting services rendered in 2006 and 2007	4,592,915 shares
Shares of Common Stock issuable upon conversion of our Subordinated Convertible Debentures	4,659,087 shares
Shares of Common Stock issuable in lieu of interest on subordinated convertible  debentures	352,728 shares
Shares of Common Stock issuable upon exercise of warrants issued in the June 2007 Private Placement	2,329,546 shares
Common Stock issuable upon conversion of Convertible Promissory Notes	8,600,000 shares
Shares of Common Stock issuable  upon exercise of placement agent warrants	73,614 shares
Use of Proceeds	We will not receive any proceeds from the sale of Common Stock offered by this prospectus. We will receive the proceeds from all cash exercises of warrants, which we intend to use for general corporate purposes, including for working capital.
OTC Bulletin Board Symbol	SINX.OB

1

RISK FACTORS

An investment in shares of our Common Stock is highly speculative and involves a high degree of risk. We face a variety of risks that may affect our operations or financial results and many of those risks are driven by factors that we cannot control or predict. The following discussion addresses those risks that management believes are the most significant, although there may be other risks that could arise, or may prove to be more significant than expected, that may affect our operations or financial results. Only those investors who can bear the risk of loss of their entire investment should participate in this offering. Prospective investors should carefully consider the following risk factors in evaluating an investment in our Common Stock. 

RISKS RELATED TO OUR COMPANY

We have never generated any revenues.

Although we have been in business for more than ten years, we have never generated any revenues from operations. We have been in a development stage since inception, and have yet to manufacture products for sale to customers. All of our working capital has been generated by sales of securities and loans from affiliates.

We have a history of operating losses, which may continue.

We have a history of losses and may continue to incur operating and net losses for the foreseeable future. We incurred a net loss of approximately $775,000 for the year ended September 30, 2006 and a net loss of approximately $950,000 for the nine months ended June 30, 2007. As of June 30, 2007 our accumulated deficit was approximately $16,400,000. We have not achieved profitability on a quarterly or on an annual basis. We may not be able to generate revenues or reach a level of revenue to achieve profitability.

Our future financial results, including our expected revenues, are unpredictable and difficult to forecast.

If we begin to generate revenues, it is likely that our revenues, expenses and operating results will fluctuate from quarter to quarter, which could increase the volatility of the price of our Common Stock. We expect that our operating results will continue to fluctuate in the future due to a number of factors, some of which are beyond our control. These factors include:

· Our ability, thus far unproven, to sell our products.

· If we receive orders for products, our ability to complete those orders in a timely fashion.

· The costs we will incur in manufacturing products.

· The costs of marketing our products, including customer relations and warranty repairs

Due to all of these factors, our operating results may fall below the expectations of investors, which could cause a decline in the price of our Common Stock. 

We will need to raise additional capital to meet our business requirements in the future and such capital raising may be costly or difficult to obtain and could dilute current stockholders’ ownership interests.

We will need to raise additional capital in the future, which may not be available on reasonable terms or at all. The raising of additional capital may dilute our current stockholders’ ownership interests. Our income from operations will not be sufficient to achieve our business plan. We will need to raise additional funds through public or private debt or equity financings to meet various objectives including, but not limited to:

· pursuing growth opportunities, including more rapid expansion;

· acquiring complementary businesses;

· making capital improvements to improve our infrastructure;

2

· hiring qualified management and key employees;  

· developing new products, accessories and services;  

· responding to competitive pressures; and

· complying with regulatory requirements.

 

Any additional capital raised through the sale of equity or equity backed securities may dilute current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. The terms of those securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect.

Furthermore, any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. The registration rights agreements  we entered into in connection with the 2006 Private Placement and the 2007 Private Placement provide that we will not, without the prior written consent of the majority of registered holders, file or request the acceleration of any other registration statement filed with the SEC, subject to certain exceptions, until the SEC has declared the registration statement contemplated by those registration rights agreement effective. In addition, negative covenants in the purchase agreements limit our ability to raise additional capital, including through the incurrence of debt or liens on our properties or the issuance of equity securities that include registration rights. These negative covenants may impair our ability to raise additional capital. If we are unable to obtain required additional capital, we may have to curtail our growth plans or cut back on existing business and, further, we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition. 

We may be required to pay liquidated damages to certain of our investors under certain circumstances.

We entered into registration rights agreements in connection with our 2006 Private Placement and our 2007 Private Placement. These registration rights agreements require us to pay partial liquidated damages under certain circumstances if we do not satisfy our obligations under such registration rights agreements, including our obligations to file or obtain or maintain the effectiveness of registration statements as required under these registration rights agreements. If we are unable to satisfy our obligations under these registration rights agreements and we are obligated to pay partial liquidated damages, it may adversely impact our financial condition.

Our auditors have indicated that our inability to generate sufficient revenue raises substantial doubt as to our ability to continue as a going concern.

Our audited financial statements for the period ended September 30, 2006 were prepared on a going concern basis in accordance with United States generally accounting principles. The going concern basis of presentation assumes that we will continue in operation for the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. However, our auditors have indicated that our inability to generate sufficient revenue raises substantial doubt as to our ability to continue as a going concern. In the absence of significant revenues and profits, we are seeking to raise additional funds to meet our working capital needs principally through the additional sales of our securities or debt financings. However, we cannot guarantee that will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us. In the event that these plans can not be effectively realized, there can be no assurance that we will be able to continue as a going concern.  

3

We intend to expand our operations and increase our expenditures in an effort to grow our business. If we are unable to achieve or manage significant growth and expansion, or if our business does not grow as we expect, our operating results may suffer.

Our business plan anticipates continued additional expenditure on development, manufacturing and other growth initiatives. We may not achieve significant growth. If achieved, significant growth would place increased demands on our management, accounting systems, network infrastructure and systems of financial and internal controls. We may be unable to expand associated resources and refine associated systems fast enough to keep pace with expansion, especially to the extent we expand into multiple facilities at distant locations. If we fail to ensure that our management, control and other systems keep pace with growth, we may experience a decline in the effectiveness and focus of our management team, problems with timely or accurate reporting, issues with costs and quality controls and other problems associated with a failure to manage rapid growth, all of which would harm our results of operations.

 Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.

We may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and directors to manage us.

Losing key personnel or failing to attract and retain other highly skilled personnel could affect our ability to successfully grow our business.

Our future performance depends substantially on the continued service of our senior management and other key personnel. We do not currently maintain key person life insurance. If our senior management were to resign or no longer be able to serve as our employees, it could impair our revenue growth, business and future prospects.

To meet our expected growth, we believe that our future success will depend upon our ability to hire, train and retain other highly skilled personnel.  We cannot be sure that we will be successful in hiring, assimilating or retaining the necessary personnel, and our failure to do so could cause our operating results to fall below our growth and profit targets.

Rules issued under the Sarbanes-Oxley Act of 2002 may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our Common Stock.

We may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for our effective management because of rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges and NASDAQ. The perceived increased personal risk associated with these recent changes may deter qualified individuals from accepting roles as directors and executive officers. 

Further, some of these recent changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management of our business and our ability to obtain or retain listing of our shares of Common Stock on any stock exchange or NASDAQ (assuming we elect to seek and are successful in obtaining such listing) could be adversely affected.

 RISKS RELATED TO OUR BUSINESS

 We Expect Intense Competition In Our Industry.

 Many of our competitors are large, diversified manufacturing companies with significant expertise in the water quality business and contacts with water utilities and industrial water consumers. These competitors have significantly greater name recognition and financial and other resources. We cannot assure you that we will succeed in the face of strong competition from other water treatment companies.

4

Certain Aspects of Our Industry Are Subject To Government Regulation

Treatment of domestic drinking water and wastewater is regulated by a number of federal state and local agencies, including the U.S. Environmental Protection Agency. The changing regulatory environment, including changes in water quality standards, could adversely affect our business or make our products obsolete.

The Operation of Our Products Could Result In Product Liability Claims

We, like any other manufacturer of products that are designed to treat food or water that will be ingested, face an inherent risk of exposure to product liability claims in the event that the use of our products results in injury. Such claims may include, among others, that our products fail to remove harmful contaminants or bacteria, or that our products introduce other contaminants into the water. While we intend to obtain product liability insurance, there can be no assurance that such insurance will continue to be available at a reasonable cost, or, if available, will be adequate to cover liabilities. We do not anticipate obtaining contractual indemnification from parties acquiring or using our products. In any event, any such indemnification if obtained will be limited by our terms and, as a practical matter, to the creditworthiness of the indemnifying party. In the event that we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions.

Our water treatment system and the related technology is unproven and may not achieve widespread market acceptance among our prospective customers.

Although we have installed a water treatment system on a pilot basis, our products have not been proven in a commercial context over any significant period of time. We have developed our proprietary technology and processes for water treatment based on dissolved air flotation technology, which competes with other forms of water treatment technologies that currently are in operation throughout the United States. Our water treatment system and the technology on which it is based may not achieve widespread market acceptance. Our success will depend on our ability to market our system and services to businesses and water providers on terms and conditions acceptable to us and to establish and maintain successful relationships with various water providers and state regulatory agencies.

We believe that market acceptance of our system and technology and our related success will depend on many factors including:

• the perceived advantages of our system over competing water treatment solutions;

• the actual and perceived safety and efficacy of our system;

• the availability and success of alternative water treatment solutions;

• the pricing and cost effectiveness of our system;

• our ability to access businesses and water providers that may use our system;

• the effectiveness of our sales and marketing efforts;

• publicity concerning our system and technology or competitive solutions;

• timeliness in assembling and installing our system on customer sites;

• our ability to respond to changes in the regulatory standards for  levels of various contaminants; and

• our ability to provide effective service and maintenance of our systems to our customers’ satisfaction.

If our system or technology fails to achieve or maintain market acceptance or if new technologies are introduced by others that are more favorably received than our technology, are more cost effective or otherwise render our technology obsolete, we may experience a decline in demand for our system. If we are unable to market and sell our system and services successfully, our revenues would decline and our operating results and prospects would suffer.

We have only recently leased a manufacturing facility for our products.

In September of 2007 we leased a 60,000 square foot manufacturing facility in Garden Grove, California. We are currently acquiring and assembling the necessary equipment and machinery for manufacturing our products, but have yet to commence manufacturing at the facility. We may encounter unexpected problems and expenses in making the facility ready to commence manufacturing.

5

We must meet evolving customer requirements for water treatment and invest in the development of our water treatment technologies.

If we are unable to develop or enhance our system and services to satisfy evolving customer demands, our business, operating results, financial condition and prospects will be harmed significantly. The market for water treatment is characterized by changing technologies, periodic new product introductions and evolving customer and industry standards. For instance, competitors in the water treatment industry are continuously searching for methods of water treatment that are more cost-effective and more efficient. Our current and prospective customers may choose water treatment systems that are offered at a lower price than our system. To achieve market acceptance for our system, we must effectively and timely anticipate and adapt to customer requirements and offer products and services that meet customer demands. This may cause us to pursue other technologies or capabilities through acquisitions or strategic alliances. Our customers may require us to provide water treatment systems for many different contaminants or higher volumes of water or to decrease the presence of contaminants. We also may experience design, engineering and other difficulties that could delay or prevent the development, introduction or marketing of any modifications to our system or our new services. Our failure to develop successfully and offer a system or services that satisfy customer requirements would significantly weaken demand for our system or services, which would likely cause a decrease in our revenues and harm our operating results. In addition, if our competitors introduce solutions and/or services based on new or alternative water treatment technologies, our existing and future system and/or services could become obsolete, which would also weaken demand for our system, thereby decreasing our revenues and harming our operating results.

Failure to protect our intellectual property rights could impair our competitive position.

Our water treatment systems utilize a variety of proprietary rights that are important to our competitive position and success. Because the intellectual property associated with our technology is evolving and rapidly changing, our current intellectual property rights may not protect us adequately. We rely on a combination of patents, trademarks, trade secrets and contractual restrictions to protect the intellectual property we use in our business. In addition, we generally enter into confidentiality or license agreements, or have confidentiality provisions in agreements, with our employees, consultants, strategic partners and customers and control access to, and distribution of, our technology, documentation and other proprietary information.

Because legal standards relating to the validity, enforceability and scope of protection of patent and intellectual property rights in new technologies are uncertain and still evolving, the future viability or value of our intellectual property rights is uncertain. Furthermore, our competitors independently may develop similar technologies that limit the value of our intellectual property or design around patents issued to us. If competitors or third parties are able to use our intellectual property or are able to successfully challenge, circumvent, invalidate or render unenforceable our intellectual property, we likely would lose any competitive advantage we might develop. We may not be successful in securing or maintaining proprietary or patent protection for the technology used in our system or services, and protection that is secured may be challenged and possibly lost.

Risks Related to Our Industry

Changes in governmental regulation and other legal uncertainties could adversely affect our customers or decrease demand for our systems, and thus harm our business, operating results and prospects.

In the United States, many different federal, state and local laws and regulations govern the treatment and distribution of  water, as well as and disposal of attendant wastes. The increased interest in the treatment of contaminated water due to increased media attention on the adverse health effects from contaminated drinking water may result in intervention by the EPA or state regulatory agencies under existing or newly enacted legislation and in the imposition of restrictions, fees or charges on users and providers of products and services in this area. These restrictions, fees or charges could adversely affect our potential customers, which could negatively affect our revenues. Conversely, the failure of the EPA or state regulatory agencies to act on a timely basis to set interim or permanent standards for pollutants, or to delay effective dates for standards for pollutants, grant waivers of compliance with such standards or take other discretionary actions not to enforce these standards, may decrease demand for our system if water utilities and agencies are not required to bring their water into compliance with such regulatory standards. While we are not aware of any currently proposed federal regulation directly affecting our business, we cannot predict whether there will be future legislation regarding the treatment and distribution of water and the disposal of attendant wastes.

Water treatment systems in the United States must generally be permitted by a regulatory agency prior to its use by our customers, and changing drinking water standards and other factors could affect the approval process with respect to our systems by such regulatory agencies.

In general, water treatment systems must be permitted by applicable state or local regulatory agencies prior to commencement of operations. We cannot assure you when or whether the various regulatory agencies will approve our system for use by our customers. The application process can be time consuming and often involves several information requests by the regulatory agencies with respect to the system. Any long waiting periods or difficulties faced by our customers in the application process could cause some of our customers to use competing technologies, products, services or sources of drinking water, rather than use our technology.

6

Demand for our products could be adversely affected by a downturn in government spending related to water treatment, or in the cyclical residential or non-residential building markets.

Our business will be dependent upon spending on water treatment systems by utilities, municipalities and other organizations that supply water, which in turn is often dependent upon residential construction, population growth, continued contamination of water sources and regulatory responses to this contamination. As a result, demand for our water treatment systems could be impacted adversely by general budgetary constraints on governmental or regulated customers, including government spending cuts, the inability of government entities to issue debt to finance any necessary water treatment projects, difficulty of customers in obtaining necessary permits or changes in regulatory limits associated with the contaminants we seek to address with our water treatment system.  A slowdown of growth in residential and non-residential building would reduce demand for drinking water and for water treatment systems. The residential and non-residential building markets are generally cyclical, and, historically, down cycles have typically lasted a number of years. Any significant decline in the governmental spending on water treatment systems or residential or non-residential building markets could weaken demand for our systems.

We operate in a competitive market, and if we are unable to compete effectively, our business, operating results and prospects could suffer.

The market environment in which we operate is very dynamic and is characterized by evolving standards, the development of new technology, regulations which continually reduce the acceptable levels for contaminants and affect the means, methods and costs of disposing of wastes derived from water treatment.

We will compete with large water treatment companies, such as  USFilter Corporation, a subsidiary of Siemens AG. Our competition may vary according to the contaminant being removed. Many of our current and potential competitors have technical and financial resources, marketing and service organizations, and market expertise significantly greater than ours. Many of our competitors also have longer operating histories, greater name recognition and large customer bases. Moreover, our competitors may forecast the course of market developments more accurately and could in the future develop new technologies that compete with our system and/or services or even render our system and/or services obsolete. Due to the evolving markets in which we compete, additional competitors with significant market presence and financial resources may enter those markets, thereby further increasing competition. These competitors may be able to reduce our market share by adopting more aggressive pricing policies than we can or by developing technology and services that gain wider market acceptance than our system and/or services. Existing and potential competitors also may develop relationships with distributors of our system and services or third parties with whom we have strategic relationships in a manner that could harm our ability to sell, market and develop our system and services significantly. If we do not compete successfully we may never achieve significant market penetration and we may be unable to maintain or increase our business or revenues, causing our operating results and prospects to suffer.  

RISKS RELATED TO OUR COMMON STOCK

You may have difficulty trading our Common Stock as there is a limited public market for shares of our Common Stock.

Our Common Stock is currently quoted on the NASD’s OTC Bulletin Board under the symbol “SINX.OB.” Our Common Stock is not actively traded and there is a limited public market for our Common Stock. As a result, a stockholder may find it difficult to dispose of, or to obtain accurate quotations of the price of, our Common Stock. This severely limits the liquidity of our Common Stock, and would likely have a material adverse effect on the market price for our Common Stock and on our ability to raise additional capital. An active public market for shares of our Common Stock may not develop, or if one should develop, it may not be sustained.

Applicable SEC rules governing the trading of “penny stocks” may limit the trading and liquidity of our Common Stock which may affect the trading price of our Common Stock.

Our Common Stock is currently quoted on the NASD’s OTC Bulletin Board.  Stocks such as ours which trade below $5.00 per share are considered “penny stocks” and subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s written agreement to a transaction prior to sale. These regulations have the effect of limiting the trading activity of our Common Stock and reducing the liquidity of an investment in our Common Stock. 

7

We do not anticipate dividends to be paid on our Common Stock, and stockholders may lose the entire amount of their investment.

A dividend has never been declared or paid in cash on our Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

You may experience dilution of your ownership interests because of the future issuance of additional shares of our Common Stock.

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders.  We are currently authorized to issue an aggregate of 150,000,000 shares of Common Stock.  As of September 30, 2007, there were 106,635,201 shares of Common Stock outstanding.  We may also issue additional shares of our Common Stock or other securities that are convertible into or exercisable for Common Stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes.  The future issuance of any such additional shares of our Common Stock or other securities may create downward pressure on the trading price of our Common Stock.  There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of our Common Stock are currently quoted on the OTC Bulletin Board. 

Even though we are not a California corporation, our Common Stock could still be subject to a number of key provisions of the California General Corporation Law.

Under Section 2115 of the California General Corporation Law (the “CGCL”), corporations not organized under California law may still be subject to a number of key provisions of the CGCL. This determination is based on whether the corporation has significant business contacts with California and if more than 50% of its voting securities are held of record by persons having addresses in California. In the immediate future, we will continue the business and operations of Sionix in California, and a majority of our business operations, revenue and payroll will be conducted in, derived from, and paid to residents of California. Therefore, depending on our ownership, we could be subject to certain provisions of the CGCL. Among the more important provisions are those relating to the election and removal of directors, cumulative voting, standards of liability and indemnification of directors, distributions, dividends and repurchases of shares, shareholder meetings, approval of certain corporate transactions, dissenters' and appraisal rights, and inspection of corporate records.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. This prospectus includes statements regarding our plans, goals, strategies, intentions, beliefs or current expectations. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished. These forward looking statements can be identified by the use of terms and phrases such as “believe,”“plan,”“intend,”“anticipate,”“target,”“estimate,”“expect,” and the like, and/or future-tense or conditional constructions “may,”“could,”“should,” etc. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Since our Common Stock is considered a “penny stock” we are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Although forward-looking statements in this prospectus reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this prospectus, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

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BUSINESS

We design and develop turn-key stand-alone water treatment systems for: municipalities (both potable and wastewater), industrial (both make-up water and wastewater), emergency response, military and small residential communities. Sionix was initially incorporated in Utah in 1996, and reincorporated in Nevada in 2003. Our executive offices and principal operations are located at 2082 Michelson Drive, Suite 306, Irvine, California 92612, and our manufacturing facilities are located at 14271 Corporate Drive, Garden Grove, California 92708. Our telephone number is (949) 752-7980, and our website is located at www.sionix.com.

The Water Purification Industry

INDUSTRY BACKGROUND. The water purification industry is highly fragmented, consisting of many companies involved in various capacities, including companies that design fully integrated systems for processing millions of gallons of water for municipal, industrial, and commercial applications. Demand for water purification has continued to grow due to economic expansion, population growth, scarcity of usable water, concerns about water quality and regulatory requirements. Drinking water, regardless of its source, may contain impurities that can affect the health of consumers. Although municipal agencies and water utilities in the United States are required to provide drinking water that complies with the U.S. Safe Drinking Water Act, the water supplied to homes and businesses from municipalities and utilities may contain high levels of bacteria, toxins, parasites and human and animal-health pharmaceuticals, as well as high levels of chlorine used to eliminate contaminants. The quality of drinking water outside the United States and other industrialized countries is generally much worse, with high levels of contaminants and often only rudimentary purification systems. In the industrialized world, water quality is often compromised by pollution, aging municipal water systems, and contaminated wells and surface water. In addition, the specter of terrorism directed at intentional contamination of water supplies has heightened awareness of the importance of reliable and secure water purification. The importance of effective water treatment is also critical from an economic standpoint, as health concerns and impure water can impair consumers' confidence in food

products. Discharge of impaired waters to the environment can further degrade the earth's water and violate environmental laws, with the possibility of significant fines and penalties from regulatory agencies.

There are over 200,000 public rural water districts in the United States. The great majority of these are considered small to medium-sized public water systems, which support populations of fewer than 10,000 people. A substantial portion of these are in violation of the Safe Drinking Water Act at any given time. This problem is expected to worsen, as more stringent EPA rules are implemented for small public water systems. Substantial expenditures will be needed in coming years for repair, rehabilitation, operation, and maintenance of the water and wastewater treatment infrastructure. The Company believes that water districts using conventional sand-anthracite filters will be unable to comply with the Clean Water Act without massive installations of on-site chemical filter aids and disinfection equipment, such as ozone or ultraviolet. On a worldwide level, water supply issues are viewed by many as the next global crisis; while the quantity of available fresh water is relatively fixed, the world population and demand for clean water is increasing at a rapid pace.

The market for the treatment and purification of drinking water and the treatment, recycling and reuse of wastewater has shown significant growth as world demand for water of specified quality continues to increase and as regulations limiting waste discharges to the environment continue to mount. In addition, urbanization in the third world and the spread of agricultural activities has increased the demand for public water systems.

EXISTING PURIFICATION SYSTEMS. Until the early twentieth century, municipal water supplies consisted of flowing water directly from the source to the end user with little or no processing. In the late 19th and early 20^th century, most large municipal water systems instituted a form of filtration called "slow sand filtration" to enhance the clarity and esthetics of delivered waters. These municipal water filtration systems however were extremely large plants that are typically excavated into the landscape of the facility. The surface area required for these filters could vary widely depending on the input quality of the water; generally, this involves extremely large areas or footprints. In a typical treatment facility, the first step adds to the raw incoming water a substance which causes tiny, sticky particles (called "floc") to form - these attract dirt and other particles suspended in the water. This process of coagulation results in the heavy particles of dirt and floc clumping together and falling to the bottom. These heavier particles form sediment which is siphoned off, leaving the clearer water, which passes on to filtration. The most common filtration method is known as "slow sand" or sand-anthracite, in which the water flows into large shallow beds and passes down through layers of sand, gravel and charcoal. The final process is disinfection, which is intended to kill bacteria or other microorganisms left in the water and leave a residual to keep the water safe through the delivery pipes to the customer. Chlorine is the most commonly employed disinfectant, although chloramine, ozone, and ultraviolet (UV) are also used.

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The current trend in water filtration, due to the higher demands for water and the reduction in clean or relatively clean source waters, is to clarify and heavily filter all municipal water supplies. Smaller municipalities and water districts will also be required to meet the added water quality goals of the larger systems and will require the infrastructure to do so.

While "slow sand" filtration is by far the most common treatment method used in the United States, it has serious drawbacks. The treatment facilities themselves occupy large tracts of land. The filtration beds are large, shallow

in-ground concrete structures, often hundreds of feet long to accommodate large volumes of water. The water being filtered must remain in these beds for a comparatively long-time (known as "residence time") in order for low density materials to settle out. The sand and charcoal filtering medium rapidly becomes plugged and clogged. The bed must then be taken off-line and back-flushed, which uses large volumes of water - water which becomes contaminated and is therefore wasted. Additional settling ponds are necessary to "de-water" this waste by evaporation so that the dried solids may be disposed of in an environmentally and expensive method.

 The average life expectancy of a treatment plant is about 20 years, after which they must be extensively renovated. Population growth necessitates enlarging old facilities or building new ones, occupying still more valuable land. This process requires lengthy environmental impact studies, long design periods, and complex financing programs to fund costly construction budgets, as lead times usually stretch out for years.

Aside from cost and logistical issues, however, there are many pathogens resistant to chlorine or small enough to pass through these existing methods of filtration. Illnesses such as hepatitis, gastroenteritis, Legionnaire's Disease, as well as increasingly pervasive chemical contaminants, have become increasingly common. One of the more difficult of these problems is monitoring and providing a barrier against microscopic protozoan parasites such as cryptosporidium (3-4 microns in size) and Giardia lamblia oocysts (5-7microns). These common organisms exist naturally in the digestive systems of livestock and wild animals, and end up in lakes and streams. They have caused severe illness in millions of people in the United States. Conventional "slow sand" water filtration beds, used in most of the nation's public water districts, will not filter out these parasites - the best treatment facilities are only able to remove particles larger than 10-15 microns.

In recent years, there have been several serious public health emergencies caused by microbes breaking through the filtration barrier in treatment facilities. When ingested, they can cause diarrhea, flu-like symptoms and dehydration. In persons with immune system impairment, the illness can be life-threatening. In 1993, over 400,000 people in Milwaukee, Wisconsin became ill and about 100 people died during a failure in the drinking water filtration system.

Most surface water bodies in the United States, many of which supply drinking water, are contaminated with these organisms. They are extremely resistant to disinfection, and increasing disinfectant levels in the attempt to kill them creates a new set of problems. Disinfectants such as chlorine can react with organic matter in the water to form new chemicals known as "disinfection byproducts". These byproducts, of which trihalomethanes (THM's) are the most common, are thought to be health-threatening and possibly cancer-causing. Recent modifications in the EPA-SDWA regulations have addressed minimum acceptable levels of THM's. Therefore, physical removal of the organisms from the water is vitally important to their control.

The challenge of removing organic matter from water has been at the crux of water treatment since antiquity. Organic matter causes water to be cloudy, or turbid. High levels of turbidity can indicate the presence of pathogens and signal that the filtration process is not working effectively. The presence of high levels of organic matter makes disinfection more difficult and clogs filter media, causing long back flush cycles, which in turn increases the volume of back flush waste-water. In a typical treatment plant, this back flush water can account for up to 20 percent of the raw water volume flowing through the facility.

Other filtration methods, such as reverse osmosis and activated charcoal, may be required to remove contaminants such as organic and inorganic chemicals, salts, color, odors, and viruses. However, they too are clogged quickly by organic particles in the water. These filter media are comparatively expensive, and frequent back flush cycles drastically shorten filter life, thereby increasing the cost of treatment.

Products and Technology

OUR BUSINESS STRATEGY. Sionix was formed to develop advanced water treatment technology for public and private potable drinking water systems and wastewater treatment systems, as well as industrial systems, in order to address these issues. We have initially targeted (1) small to medium public and private water districts that provide communities with drinking water or sewage treatment service and (2) water reclamation systems of commercial-industrial clients that create and dispose of contaminated wastewater.

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DISSOLVED AIR FLOTATION. Dissolved air flotation, or DAF, has been used in water and wastewater treatment for more than eighty years, primarily in Europe. Some of the first systems installed in the 1920's are still in operation in Scandinavia. The DAF method involves injecting microscopic bubbles of air under pressure into the water being treated. The air molecules bond with organic matter in the water, and because of their lightness, the clumps float to the surface, where they are skimmed away. Over the eight decades this technology has been utilized, various improvements have been made in the technology. Until recently, it has not been utilized widely in the United States, and then primarily for wastewater treatment.

SIONIX "ELIXIR" WATER TREATMENT SYSTEMS. The dissolved air flotation system developed by Sionix, which employs patented technology, removes more than 99.95+ percent of the organic particles in water, and provides a barrier against microbial contaminants such as cryptosporidium and Giardia lamblia. Each Elixir Water Treatment System is a self-contained water treatment system or pre-treatment process using ordinary air, with minimal chemical flocculent aids. Our goal is to provide effective, practical and economical solutions to problems caused by pollution and toxic chemicals that seriously threaten public health and our environment. Our systems significantly reduce the risk of bacterial or parasitic contamination, particularly cryptosporidium, giardia, and e-coli, with minimal disinfecting by-products. Our systems are designed for quick installation, easy access for simple maintenance and are cost-effective for even the smallest water utilities or commercial applications. This technology is designed to support public water treatment plants, sewage treatment plants, water reclamation facilities, commercial air conditioning cooling towers, emergency water systems for floods, earthquakes and other natural disasters. The Sionix system occupies a small footprint, is self-contained and portable.

Our Elixir system utilizes and refines this technology for a highly efficient pre-treatment process using ordinary oxygen. In addition, it helps ordinary filters meet EPA Safe Drinking Water Act regulations and eliminates potentially cancer-causing disinfection by-product precursors while reducing the risk of bacterial or parasitic contamination, particularly Trihalomethanes ("THM"), cryptosporidium and giardia. The Elixir system is designed for quick installation, easy access for simple maintenance and to be cost-effective for even the smallest water utilities or commercial applications.

By significantly reducing turbidity, the Elixir system remediates against disinfection byproducts such as THM. Used in conjunction with filtration or disinfection technology which may be required by specific raw water conditions, it reduces back-flushing cycle times, thereby lengthening the life of post-DAF equipment.

Completely modular, we plan to customize each system installation with filtration and disinfection options appropriate for the user. The entire unit is built into a standard thirty-foot or forty-foot ISO transportable container, making it easy to move by truck, train, plane, helicopter, or ship. Standard configuration includes a small control and testing laboratory located in the front of the container. The addition of a generator module makes the system self-powered. The customer can operate and control the entire system from a remote site via hardwired or wireless communications. A comprehensive service and maintenance program (which will be part of all equipment leases) includes a standard upgrade path.

A single unit should produce a minimum of 225 gallons of potable water per minute (about 325,000 gallons, or one acre-foot, per day), enough for a community of 2,400 people and its infrastructure - which is about 500-600 homes in the United States, based on U.S. Government guidelines. It is important to note that per capita usage of water in the U.S. is among the highest in the world. Two or more units can be ganged together for increased capacity.

 Our systems are ideal for small to medium-sized potable water treatment utilities. They serve equally well in commercial/industrial uses where incoming process water must be treated to high levels of purity, or wastewater must be decontaminated before discharge to the environment. The products can also address water quality issues faced by commercial and industrial facilities that process water or produce toxic wastewater, such as food and beverage processing plants, dairy products facilities, and fresh water aquaculture installations, such as fish farms.

A major problem facing the water treatment industry is the difficulty in monitoring and disposing of microscopic parasites such as Cryptosporidium (4-5 microns) and Giardia cysts (7-12 microns), common chlorine-resistant organisms that have infected millions of people in the United States. Sand-anthracite water filtration beds, in use in most of the nation's public water districts, will not filter out these parasites and experience frequent breakthroughs of Cryptosporidium sized particles.

Our system uses a more efficient method of saturating recirculated post-filter water with excess dissolved air, and injecting this excess air in the form of microscopic bubbles in a DAF particle separator. Pressurized water can hold an excess amount of dissolved air and forms microscopic bubbles when injected into water, which has a lower pressure. A booster pump recirculates a small amount (approximately 10%) of the post-filtered water through the dissolved air-saturation system. Oxygen and nitrogen molecules are transferred directly into the recirculated high-pressure water without forming air bubbles.  This method of transferring air into water is 100% efficient, and reduces the amount of energy required to saturate recirculated water with excess dissolved air. The Elixir provides a denser concentration of white water bubbles. This process requires less energy than a conventional system, and uses a fraction of the floor space.

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In general, water districts using sand-anthracite filters cannot meet the EPA Surface Water Treatment rules without a massive increase in on-site chemical filter-aids, additional filtering and the installation of ozone or other disinfection equipment. Plant operators must continually test raw influent water to adjust chemical filter aid dosage properly. Chemical and metal (alum) filter-aids increase sludge volume and landfill disposal problems.

Our systems include automatic computer controls to optimize ozone concentration levels and reduce monthly energy costs. Higher ozone contact concentration levels using smaller sized generators are possible if most of the algae are removed first by DAF. Extended contact time increases collision rate of ionized ozone molecules with negatively charged organic suspended particles. By utilizing the Elixir to pre-treat the feedwater, less energy is required to create the appropriate amount of ozone. By creating a turbulent flow of water and gas within the mixing chamber, we have achieved a much higher saturation with less ozone (and a minimum of excess ozone) than in other mixing methods.

The Elixir system is a sealed unit, thus preventing tampering or incursion by bio-terrorism or airborne contaminants due to the steel container in which the system is assembled. Should catastrophic damage be incurred, a replacement unit may be installed within a few days rather than many months or years with in-ground systems.

Pilot Program-Villa Park Dam

In November of 2006 we entered into an agreement with the Serrano Water District in Orange County, California to install an Elixir system at the Villa Park Dam (near Anaheim, California) for testing of the system by processing flood water residue behind the dam. Under the agreement, scientists and engineers from California State University at Fullerton are to coordinate with the Serrano Water District to trace and record the cleaning efficiency for the various contaminants in the water (thought to be iron, manganese and algae) against the flow rate capacity of the Elixir system. The system placed at the dam site was designed by Sionix for research purposes and contains a variety of sampling sites within the system to extract and test water outside the system, as well as a suite of internal water quality measurement instruments to monitor the cleaning process.

Villa Park Dam is operated by Orange County Flood Control and is designed to check the flow of flood waters from several small watersheds in the northern Santa Ana Mountains. The dam is capable of impounding up to 15,000 acre-feet of water (4.9 billion gallons), although its purpose is to check and safely release the waters during periods of heavy rainfall into Santiago Creek, where it is diverted to groundwater recharge ponds or allowed to discharge to the ocean. Serrano Water District has rights to 3,000 acre-feet of water from the impoundment pool. Until now, impounded waters have been released to flow downstream during storms. However, under the plan, rain and other water will flow down creeks and collect to form a useable pool of water behind the dam. This water slowly degrades during the summer and has been shown to have exceptionally high values of iron and manganese. This water has been prohibitively expensive to treat for drinking water.

In May of 2007 we placed an Elixir system at the dam and began processing runoff water. We began a thorough evaluation of every component in the system during this testing period. Data are being used to evaluate the baseline water quality to be treated, as part of an ongoing water collection and analysis study of the Elixir water treatment system. Several testing and research programs to evaluate the treatment system have been implemented and will continue throughout the fall of 2007.

On November 7, 2007, we acquired substantially all of the assets of RJ Metals, Inc. a manufacturer of specialty metal components, for 3,400,000 shares of our Common Stock. The machine shop operation of RJ Metals was moved into our manufacturing facility in Garden Grove, California, and will be used to fabricate parts and components for our systems.

Rodney L. Anderson, a director of Sionix, was the founder, President and a principal shareholder of RJ Metals, Inc. Mr. Anderson received 1,224,000 shares of Sionix Common Stock in the transaction. Under the agreement between Sionix and the former shareholders of RJ Metals, the former shareholders have certain piggyback registration rights with respect to the Sionix shares received by them.

Marketing and Customers

THE MARKET. The potable water market includes residential, commercial, and food service customers. Demand is driven both by consumers' desire to improve the taste and quality of their drinking water and by the expanded concern of regulatory agencies. Water safety concerns have driven the growth of the consumer bottled water market to over $2 billion in the United States, as well as the growth in the water filtration market.

According to industry data, it is estimated that one billion people in the world do not have safe drinking water. Demand is driven both by consumers' desire to improve the taste and quality of their drinking water and by the expanded concern of regulatory agencies. There is significant market potential in Asian, Pacific and Latin American countries, where the quality of drinking water has been found to be severely deficient in several regions.

In the United States, the Company plans to initially target the established base of small to medium water providers, as well as industrial users (such as the dairy industry, meat and poultry producers, cruise ship operators, food and beverage processors, pharmaceuticals, cooling tower manufacturers and oil and gas producers) and disaster relief agencies with a need for a clean and consistent water supply. Outside the United States, the Company plans to market principally to local water systems and international relief organizations.

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The Company's marketing efforts emphasize that its products are easily expandable and upgradable; for example, adding ozone and microfiltration equipment to a DAF unit is similar to adding a new hard drive to a personal computer. Each piece of equipment comes with state-of-the-art telemetry and wet-chemistry monitoring that expands as the system does. The Company plans to provide lease financing for all of its products, not only making it easy for a customer to acquire the equipment, but also guaranteeing that the customer will always have access to any refinements and improvements made to the Company's products.

Pilot study requirements and potential adverse environmental effects can generally be more easily addressed with Sionix' prepackaged plant approach. The company's initial approach to the market place is to supply the best of practice process for the largest number of water types encountered. The following is a brief description of the types of customers to be targeted:

DOMESTIC WATER UTILITIES. There are approximately 197,060 public rural water districts in the United States. The great majority of these are considered small to medium-sized public water systems, which support populations of fewer than 10,000 people. We believe that the Elixir system can provide a comprehensive solution for these utilities. It avoids most of the above problems, occupies a small footprint, is self-contained and portable. Equally important, in most cases, it does not require costly and time consuming environmental studies.

 INDUSTRIAL WASTEWATER PURIFICATION. Many industries use water in their manufacturing process which results in contamination. This wastewater must be treated and purified before it can be reused or released into the ocean or streams. Principal markets are: pharmaceutical manufacturers, producers of paper products, the dairy industry, and silicon chip manufacturers. The small footprint, low cost, and predictably efficient output of the Elixir system make it an excellent choice for customers in these markets.

 FOOD AND BEVERAGE INDUSTRY. The production of beer and wine, soft drinks, and food products require water of a specific purity that must be controlled and monitored as part of the production process. The food service industry has an increasing need for consistent global product quality. Food service includes water used for fountain beverages, steam ovens, coffee and tea.

HEALTHCARE INDUSTRY. Hospitals require clean, uncontaminated water for their normal day-to-day operations. They also produce contaminated water that may require treatment before being reused or released. The Sionix Elixir system will process waste-water to a specific and controlled purity. The systems can be used to filter water going into or coming out of use. In such exacting situations, the customer may be able to reuse contaminated water or ensure decontamination before discharge.

WASTEWATER UTILITIES (SEWAGE TREATMENT). The Elixir system can treat any degree of contamination. Sewage overflows are a major problem in many communities. The unit can function as a cost-effective emergency alternative to mitigate the problem of overflows.

 THIRD-WORLD MARKETS. In addition to the domestic market, fast spreading urbanization in third-world countries has created a growing demand for public water systems. Most of the fatal waterborne illnesses occur in these countries. Industrial and agricultural contamination of water supplies is epidemic because environmental controls are neither adequate nor well enforced.

 EMERGENCIES AND NATURAL DISASTERS. During natural disasters such as earthquakes, floods, hurricanes, and tornadoes, it is the role of the National Guard and the Federal Emergency Management Agency (FEMA) to assist local authorities with emergency services. Damage to local utilities can disrupt the drinking water supply and cause the failure of wastewater (sewage) treatment plants. The Elixir system can help address both of these problems. The system is completely self-contained, can be easily transported from place to place, is highly efficient, and can be equipped with its own power package.

 DESALINIZATION. Reverse osmosis (RO) is among the most efficient desalinization processes available today. An RO desalinization system requires prefiltration to reduce clogging of the filter membrane by organic matter. Placed in front of an RO filter unit in a desalinization system, the Elixir unit will greatly lengthen the time between costly back-flushes and prolong the life of the RO filters.

MARKETING METHODS. We plan to market our products through participation in industry groups, selected advertising in specialized publications, trade shows, and direct mail. Sionix initially will utilize in-house marketing in conjunction with outsourced marketing consultants and national and international distributorships.

Patents

We hold eight U.S. patents on technology incorporated into the Elixir system and related components, with an additional two patents pending. Our patents cover process, system and waste handling, an automatic backflushing system using air pressure to activate the valves, the ozone mixing system, and the inline wet-chemistry water quality monitoring system. The extent to which patents provide a commercial advantage, or inhibit the development of competing products, varies. We plan to be aggressive in securing additional patents to further protect and position Sionix for the future. We also rely on common law concepts of confidentiality and trade secrets, as well as economic barriers created by the required investments in tooling and technical personnel and the development of customer relationships, to protect our proprietary products.

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Competition

Our products will compete with other producers of water filtration and purification equipment, such as USFilter and Cuno, Inc., many of which are more established and have significantly greater resources. We will also compete with large architectural/engineering firms that design and build water treatment plants and wastewater facilities. In addition to conventional methods such as chlorination and ozonation, our products may also compete with other new technologies for water filtration. Competitive factors include system effectiveness, operational cost and practicality of application, pilot study requirements and potential adverse environmental effects. In competing in this marketplace, we have to address the conservative nature of public water agencies and fiscal constraints on the installation of new systems and technologies.

Regulatory Matters

Process water treatment plants and wastewater plants must comply with clean water standards set by the Environmental Protection Agency under the authority of the Clean Water Act and standards set by states and local communities. In many jurisdictions, including the United States, because process water treatment facilities and wastewater treatment systems require permits from environmental regulatory agencies, delays in permitting could cause delays in construction or usage of the systems by prospective customers.

 In 1974, the Safe Drinking Water Act (SDWA) was passed. It empowered the EPA to set maximum levels of contamination allowable for health-threatening microbes, chemicals, and other substances which could find their way into drinking water systems, and gave the agency the power to delegate enforcement.

 By 1986, Congress was dissatisfied with the speed with which the EPA was regulating and enforcing contaminant limits. The SDWA revision that year set rigid timetables for establishing new standards and ordered water systems to monitor their supplies for many substances not yet regulated by EPA standards.

Additionally, it limited polluting activities near public groundwater wells used as drinking water sources - an acknowledgment of the growing threat to underground water supplies. It named 83 contaminants and set out a program for adding 25 more every three years, as well as specifying the "best available technology" for treating each contaminant.

The timetable for imposing these regulations was rigid and tended to treat all contaminants as equally dangerous, regardless of relative risk. The cost to water districts for monitoring compliance became a significant burden, especially to small or medium-sized districts. The 1986 law authorized the EPA to cover 75 percent of state administrative costs, but in actuality, only about 35 percent was funded.

Congress updated the SDWA again in 1996, improving on the existing regulations in two significant ways. First, they changed the focus of contaminant regulations to reflect the risk of adverse health effects, the rate of occurrence of the contaminant in public water systems, and the estimated reduction in health risk resulting from regulation. Along with this, a thorough cost-benefit analysis must be performed by the EPA, with public health protection the primary basis for determining the level at which drinking water standards are set. Second, states were given greater flexibility to implement the standards while arriving at the same level of public health protection. In addition, a revolving loan fund was established to help districts build necessary improvements to their systems.

Research and Development

Research and development expenses for the year ended September 30, 2006 were $0.  Only direct costs associated with tooling for new products are capitalized. All other costs, including salaries and wages of employees included in research and development, are expensed as incurred.

Raw Materials

Materials and components to be used for manufacturing will be carefully selected based on stringent specifications for usage and operating conditions. Every effort will be made to specify parts from multiple sources for  independence from manufacturers and distributors.

Employees

 Sionix has  four  full-time employees, none of whom are covered by any collective bargaining agreement. The Company considers its relationship with its employees to be good.

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Legal Proceedings

From time to time we may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government actions, administrative actions, investigations or claims are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business and financial condition.

Property

Our office facility is located in Irvine, California and is leased pursuant to a lease expiring in February 28, 2009. The facility consists of approximately 1,994 square feet of office area. Our manufacturing facilities are located at 14271 Corporate Drive, Garden Grove, California 92708. We plan to lease a separate facility for manufacturing and warehouse space. Our management believes the facilities will provide adequate space for our office, product assembly and warehouse activities, and that suitable additional space will be available to accommodate planned expansion.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

 CONDITION AND PLAN OF OPERATION

General.

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes thereto, included elsewhere in this Prospectus. 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 this Prospectus should be read as being applicable to all related forward-looking statements wherever they appear in this Prospectus. 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 in this Prospectus.

Plan of Operation.

During the next twelve months we plan to continue testing of our ELIXIR unit currently installed at the Villa Park Dam under our arrangement with the Serrano Water District. We believe that if the unit continues to operate 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 continues to operate successfully, we believe we will receive orders for additional units.

Results of Operations (Year Ended September 30, 2006 Compared To Year Ended September 30, 2005).

The Company was relatively inactive during most of the 2006 fiscal year due to lack of resources, although it reactivated operations in the last quarter. Revenues for both the 2005 and 2006 fiscal years were zero, as the Company had not yet commenced the sale of products. General and administrative expenses for the 2006 fiscal year totaled $639,259, an increase of $216,046 over general and administrative expenses for the 2005 fiscal year. Research and development expenses decreased by $1,810, from $1,810 in 2005 to zero in 2006, due to the suspension of research and development activities in 2006 as a result of the lack of funds to finance such activities.

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Interest expense for 2006 of $10,080 represented an increase of $1,956, due largely to interest accruals on unpaid interest. During 2006 the Company incurred an extraordinary loss on settlement of debts of $94,221, with no corresponding loss during 2005. As a result of these items, the loss for the 2006 fiscal was $774,887, an increase of $307,870 over the loss for the 2005 fiscal year.

Results of Operations (Nine Months Ended June 30, 2007 Compared To Nine Months Ended June 30, 2006).

 The Company was relatively inactive during the period of nine months ended June 30, 2006 due to lack of resources. During the first nine months of fiscal 2007, the Company raised capital through the sale of Convertible Debentures, and was able to resume activities in the first quarter of fiscal 2007. Revenues for both the nine month period ended June 30, 2006 and the nine month period ended June 30, 2007 were zero, as the Company has not yet commenced the sale of products. General and administrative expenses for the period of nine months ended June 30, 2007 totaled $932,668, an increase of $485,421 over the $447,247 incurred in the corresponding period in 2006, due to the resumption of development and capital-raising activities. Interest expense increased to $144,895 from $7,218 in the 2006 period, representing interest on Convertible Debentures issued during the past nine months.  

As a result of these items, the loss for the nine months ended June 30, 2007 was $1,100,620, an increase of $528,448 over the loss of $572,172 for the corresponding period in the 2006 fiscal year.  

Liquidity and Capital Resources.

On June 30, 2007, the Company had cash and cash equivalents of $455,563. The sole source of liquidity has been borrowings from affiliates and the sale of securities. 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 June 30, 2007, the Company had an accumulated deficit of $16,400,573. 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.

Recent Private Placements

In a private offering that commenced in October of 2006 and concluded in early 2007, we issued convertible bridge notes in the amount of $750,000 to a group of private investors. The notes bear interest at 10% per annum, expire eighteen months after issuance, and are convertible into our Common Stock at a conversion price of $ .04 per share. The holders have the option to convert accrued interest on these notes into Common Stock of the Company at the same conversion rate.

In June of 2007 we completed a private offering of 10% Convertible Promissory Notes of $86,000 to five private investors. The notes are convertible into Common Stock at a conversion price of $.01 per share: provided, however, that the right of the holders of these notes to convert is subject to the completion of certain financing milestones.

In July of 2007 we completed a private offering, principally to private investment funds, in the amount of $1,025,000. The investors received Subordinated Convertible Debentures that bear interest at 8% per annum, expire twelve months after issuance, and are convertible into our Common Stock at a conversion price of $ .22 per share.

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, there is doubt about our ability to continue as a going concern.

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SELLING SECURITYHOLDERS

This prospectus covers the resale from time to time by the selling securityholders identified in the table below of:

 18,853,125 shares of Common Stock issuable upon conversion of our Senior Convertible Notes due March 2008 sold in a private placement transaction that closed in  late  2006 (the “2006 Private Placement”);

2,609,375 shares of Common Stock, which, based on our good faith estimate, may be issuable in the future if we elect to pay all interest due under the Senior Convertible Notes in shares of Common Stock;

 4,659,087 shares of Common Stock issuable upon conversion of our Subordinated Convertible Debentures due in June 2008 sold in a private placement transaction that closed in  June 2007 (the “2007 Private Placement”);

352,728 shares of Common Stock, which, based on our good faith estimate, may be issuable in the future if we elect to pay all interest due under the Senior Convertible Notes in shares of Common Stock;

2,329,546 shares of Common Stock issuable upon exercise of warrants (the “June 2007 Warrants”) issued in the 2007 Private Placement;

8,600,000 shares of Common Stock issuable upon conversion of Convertible Promissory Notes issued in June 2007.

4,592,915 shares of Common Stock issued to Calico Capital Management, LLC and certain affiliates thereof,  as compensation for general financial and strategic consulting services rendered in 2006 and 2007; and

73,614 shares of Common Stock issuable upon exercise of placement agent warrants.

Pursuant to the registration rights agreement executed in connection with the 2006 Private Placement and the 2007 Private Placement, we have filed with the SEC a registration statement on Form SB-2, of which this prospectus forms a part, under the Securities Act to register such resales. The selling securityholders identified in the table below may from time to time offer and sell under this prospectus any or all of the shares of Common Stock described under the column “Shares of Common Stock Being Offered in this Offering” in the table below.

The table below has been prepared based upon the information furnished to us by the selling securityholders. Information concerning the selling securityholders may change from time to time and, if necessary, we will amend or supplement this prospectus accordingly. We cannot provide an estimate as to the number of shares of Common Stock that will be held by the selling securityholders upon termination of the offering covered by this prospectus because the selling securityholders may offer some or all of their shares of Common Stock under this prospectus.

The following table sets forth the name of each selling securityholder, the nature of any position, office, or other material relationship, if any, which the selling securityholder has had, within the past three years, with us or with any of our predecessors or affiliates, and the number of shares of our Common Stock beneficially owned by such selling securityholder before this offering. The number of shares owned are those beneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership is deemed to include any shares of Common Stock as to which a person has sole or shared voting power or investment power and any shares of Common Stock which the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement.

We have assumed all shares of Common Stock reflected on the table will be sold from time to time in the offering covered by this prospectus. Because the selling securityholders may offer all or any portion of the shares of Common Stock listed in the table below, no estimate can be given as to the amount of those shares of Common Stock covered by this prospectus that will be held by the selling securityholders upon the termination of the offering.

Unless otherwise set forth below, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the securityholder’s name, subject to community property laws, where applicable.

In computing the number of shares of Common Stock beneficially owned by a person and the percentage of ownership of that person, shares of Common Stock subject to options, warrants or other convertible securities held by that person that are currently convertible or exercisable or become convertible or exercisable within 60 days of the date of this prospectus are deemed outstanding even if they have not actually been converted or exercised.

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Selling Securityholder	Shares of Common Stock Owned Before this Offering(a)	Shares of Common Stock Being Offered in this Offering(b)	Shares of Common Stock Owned upon Completion of this Offering(c)	Percentage of Common Stock Outstanding Upon Completion of this Offering
Calico Capital Management, LLC (d)	8,326,775	8,326,775	0	0
Gregory D. Van Enkevort	3,326,590	3,236,590	0	0
K&K West, Inc.	3,172,272	3,172,272	0	0
Southridge Partners	2,946,340	2,946,340	0	0
E. David Kailbourne	8,473,044	2,182,044	6,291,000	5.9
Jeffrey B. Van Horn	1,617,045	1,617,045	0	0
Bradley Papietro	1,437,500	1,437,500	0	0
Anuj Mathers	1,437,500	1,437,500	0	0
BRAX Capital Group (d)	1,000,000	1,000,000	0	0
Michael Clofine	900,000	900,000	0	0
Gene Salkind (d)	800,000	800,000	0	0
Ridgewood Ltd.	790,625	790,625	0	0
Troy Kailbourne	718,750	718,750	0	0
Steven Sjoblad	718,750	718,750	0	0
New Start America, Inc.	718,750	718,750	0	0
Marc Sperling	718,750	718,750	0	0
Herbert F. Kozlov and Ellen Kozlov	718,750	718,750	0	0
Christopher Andrews	718,750	718,750	0	0
Bridge Ventures, LLC	718,750	718,750	0	0
Corey Sauerbrey	718,750	718,750	0	0
Southridge Capital Fund, Ltd.	718,182	718,182	0	0
Klondike Resources Inc.	718,182	718,182	0	0
Iroquois Capital Fund.	718,182	718,182	0	0
Brian P. Shanahan	718,182	718,182	0	0
Alpine Capital Cayman Masterfund, L.P.	718,182	718,182	0	0
Simon Oren	575,000	575,000	0	0
Angela Jane Clofine	461,008	461,008	0	0
James W. Alexander	384,375	359,375	25,000	*
Christopher W. Johnson	359,375	359,375	0	0
Barbara K. Alexander	384,375	359,375	25,000	*
H. Lawrence Clofine	300,000	300,000	0	0
Tricia Reilly Johnson	287,500	287,500	0	0
Rick Tochett	287,500	287,500	0	0
Danielle Billera	287,500	287,500	0	0
Elisha Y. Goldberg	246,968	246,968	0	0
John Lawrence Clofine	230,504	230,504	0	0
Ella Jane Clofine	230,504	230,504	0	0
Jeff Shanahan	179,545	179,545	0	0
Egatniv LLC	179,545	179,545	0	0
Dan Carlo	179,545	179,545	0	0
D. Kirk. Van Horn	179,545	179,545	0	0
Mark Tunney	100,000	100,000	0	0
Michael Sellinger	75,000	75,000	0	0
Arthur Dozortzev	75,000	75,000	0	0
John Cenatiempo	50,000	50,000	0	0

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* Less than 1%

(a)  Includes shares issuable upon conversion of Senior Convertible Notes, Convertible Promissory Notes, Subordinated Convertible Debentures, exercise of warrants, and pursuant to other agreements.

(b)  This column does not reflect, and there is also being registered hereby, such indeterminate number of additional shares of Common Stock as may be issued or issuable because of stock splits, stock dividends, stock distributions, recapitalizations or similar events and other anti-dilution provisions, all in accordance with the terms of the Senior Convertible Notes, the Convertible Promissory Notes, Subordinated Convertible Debentures and the Warrants.

(c) Assumes all of the shares of Common Stock covered by this prospectus held by the selling securityholders are sold in this offering.

(d) Includes shares issuable only upon satisfaction of certain financing milestones.

USE OF PROCEEDS

We will not receive any proceeds from the sale of shares of Common Stock by the selling securityholders under this prospectus. We will receive the proceeds from all cash exercises of warrants, which we intend to use for general corporate purposes, including for working capital.

DETERMINATION OF OFFERING PRICE

The selling securityholders will determine at what price they may sell the shares of Common Stock offered by this prospectus, and such sales may be made at prevailing market prices, or at privately negotiated prices.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is quoted on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. under the symbol “SINX.OB”. The following table sets forth, for the fiscal quarters indicated, the high and low closing bid prices per share of our Common Stock as reported by the National Association of Securities Dealers composite feed or other qualified interdealer quotation medium. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.   

	High Bid		Low Bid
Quarter ended
September 30, 2006	$	.06	$	.01
December 31, 2006	$	.11	$	.04
March 31, 2007	$	.46	$	.10
June 30, 2007	$	.40	$	.25
September 30, 2005	$	.06	$	.01
December31, 2005	$	.11	$	.04
March31, 2006	$	.46	$	.10
June30, 2006	$	.40	$	.25

As of September 30, 2007 there were 106,635,201  shares of our Common Stock issued and outstanding.

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Dividend Policy

We have never declared or paid dividends on shares of our Common Stock and we intend to retain future earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.

Securities Authorized for Issuance Under Equity Compensation Plans

As of June 30, 2007 we had the following securities authorized for issuance under equity compensation plans:  

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)	(c)
E  Equity compensation plans approved by security holders		$		0
E  Equity compensation plans not approved by security holders	7,343,032	$	.15	233,648
Total	7,343,032	$	.15	233,648

DIRECTORS AND EXECUTIVE OFFICERS

 Set forth below is certain information regarding our directors, executive officers and key personnel.

Name	Age		Position
Dr. John H. Foster		61		Chairman of the Board of Directors
James J. Houtz		69		President and a Director
Robert McCray		72		Chief Financial Officer and a Director
Rodney Anderson		81		Director
David Ross		69		Director
Dr. W. Richard Laton		43		Director

Dr. Foster has been a consultant to Sionix since early 2004, and has served as Chairman of the Board of Directors since 2007. He is a Professor at California State University, Fullerton where he has taught for over 15 years. Prior to teaching he was employed as a senior geologist for the Irvine Consulting Group and Schaefer Dixon Associates, where he supervised the environmental division.

Mr. Houtz has been President, Chief Executive Officer and a director of the Company since March 1998.

Mr. McCray has been Chief Financial Officer and a director of the Company since July 1998.

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Mr. Anderson has been President of R.J. Metal Products, Anaheim, California, a high technology research and development machine shop operation focused on commercial and military aircraft and aerospace projects, for more than 20 years. He has served on the Company's Board of Directors since 2001.

Mr. Ross has consulted with the Company since 2004, and has served on the Board of Directors since 2007. He is a principal of Ross/Katagiri and Associates, a management consulting practice, specializing in early stage technology-driven organizations. He is a board member and former chairman of the Orange County Taxpayers Association, a member of the Water Advisory Committee of Orange County, a former member of the Orange County Sanitation District Bio-solids Advisory Committee and sits on the boards of several Orange County charitable organizations. He is a graduate of the University of Colorado with a B. S. in Finance and brings over 40 years of widely diversified national and international business experience.

 Dr. Laton has served on the Board of Directors since 2007. He brings over 15 years of water related experience, including consulting, sales and education. Dr. Laton is an Associate Professor of Hydrogeology at California State University, Fullerton. He has served as a director of the National Ground Water Association and has published, presented and taught water- related research throughout the world.

 Directors serve for one year and until their successors are duly elected and qualified. The Company has not established an executive committee of the Board of Directors or any committee that would serve similar functions such as an audit, incentive compensation or nominating committee.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of June 30, 2007. The table sets forth the beneficial ownership of each person who, to our knowledge, beneficially owns more than 5% of the outstanding shares of Common Stock, each of our directors and executive officers, and all of our directors and executive officers as a group.

Name and Address	No. of Shares	Percentage
E. David Kailbourne	8,473,044	7.9 %
3830 Highcrest Dr Brighton Mi 48116
James J. Houtz	6,268,167 (1)	6.1
2082 Michelson, Suite 306
Irvine, CA   92612
Robert E. McCray	933,200 (1)	0.9
2082 Michelson, Suite 306
Irvine, CA   92612
Rodney Anderson	300,901	0.2
2082 Michelson, Suite 306
Irvine, CA   92612
Dr. John H. Foster	150,000	0.1
2082 Michelson, Suite 306
Irvine, CA   92612
David Ross	115,000	0.1
2082 Michelson, Suite 306
Irvine, CA   92612
Dr. W. Richard Laton	50,000	-
2082 Michelson, Suite 306
Irvine, CA   92612
All Directors and Officers as a	7,817,268 (1)	7.6
Group (6 Persons)

 * Less than 1%

 ____________________

 (1) Consists principally of shares issuable upon exercise of currently exercisable options.

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Beneficial ownership percentages are calculated based on Common Stock issued and outstanding as of June 30, 2007. Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act. The number of shares beneficially owned by a person includes shares of Common Stock underlying options or warrants held by that person that are currently exercisable or exercisable within 60 days of June 30, 2007. The shares issuable pursuant to the exercise of those options or warrants are deemed outstanding for computing the percentage ownership of the person holding those options and warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite that person’s name, subject to community property laws, where applicable, unless otherwise noted in the applicable footnote.

EXECUTIVE COMPENSATION

The following table summarizes all compensation recorded by us in each of the last two completed fiscal years for our principal executive officer, each other executive officer serving as such whose annual compensation exceeded $100,000 and up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our company at the end of our fiscal year. Such officers are referred to herein as our “Named Executive Officers.”

Summary Compensation Table

The following table sets forth certain information concerning the compensation of the four most highly compensated officers of the Company for the past three fiscal years:

					LONG-TERM COMPENSATION
		ANNUAL COMPENSATION			AWARDS		PAYOUTS
				Other		Securities		All
				Annual	Restricted	Underlying		Other
Name and	Fiscal			Compen-	Stock	Options/	LTIP	Compen-
Principal position	Year	Salary	Bonus	Sation	Awards	Sars	Payouts	Sation
James J. Houtz, President	2006	$  -0-	-0-	-0-	-0-	-0-	-0-	-0-
	2005	$  -0-	-0-	-0-	-0-	-0-	-0-	-0-
	2004	$  -0-	-0-	-0-	-0-	-0-	-0-	-0-
Robert McCray, CFO	2006	$  -0-	-0-	-0-	-0-	-0-	-0-	-0-
	2005	$  -0-	-0-	-0-	-0-	-0-	-0-	-0-
	2004	$  -0-	-0-	-0-	-0-	-0-	-0-	-0-

The following table sets forth certain information as of September 30, 2006 with respect to options held by the Named Executive Officers. The Company has no outstanding stock appreciation rights, either freestanding or in tandem with options. No options were issued during the past fiscal year.

	Shares		Number of unexercised	Value of unexercised
	Acquired on	Value	Options at	In-the-money options at
	Exercise	Realized	September 30, 2006	September 30, 2006 (1)
Name	(#)	($)	Exercisable/unexercisable	Exercisable/unexercisable
James J. Houtz	N/A	-0-	6,171,000/-0-	-0-/ -0-
Robert McCray	N/A	-0-	583,200/-0-	-0-/ -0-

(1) Assumes that a share of Common Stock was valued at $.06 per share on September 30, 2006 (the closing price of the Common Stock on that date as reported by the OTC Bulletin Board). Values are reflected as zero as the exercise prices of all options exceeded the market price.

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PLAN OF DISTRIBUTION

The selling securityholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or quoted or in private transactions. These sales may be at fixed or negotiated prices. The selling securityholders may use any one or more of the following methods when selling shares:

·     ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors;

·     block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·     purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·     an exchange distribution in accordance with the rules of the applicable exchange;

·     privately negotiated transactions;

·     to cover short sales made after the date that this Registration Statement is declared effective by the Commission;

·     broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;

·     a combination of any such methods of sale; and

  ·     any other method permitted pursuant to applicable law.

The selling securityholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. Broker-dealers engaged by the selling securityholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling securityholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling securityholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

The selling securityholders may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of Common Stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling securityholders to include the pledgee, transferee or other successors in interest as selling securityholders under this prospectus.

Upon the Company being notified in writing by a selling securityholder that any material arrangement has been entered into with a broker-dealer for the sale of Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling securityholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of Common Stock were sold, (iv)the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a selling securityholder that a donee or pledgee intends to sell more than 500 shares of Common Stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.

The selling securityholders also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

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The selling securityholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Shares will be paid by the selling securityholder and/or the purchasers. Each selling securityholder has represented and warranted to the Company that it acquired the securities subject to this registration statement in the ordinary course of such selling securityholder’s business and, at the time of its purchase of such securities such selling securityholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

The Company has advised each selling securityholder that it may not use shares registered on this Registration Statement to cover short sales of Common Stock made prior to the date on which this Registration Statement shall have been declared effective by the Commission. If a selling securityholder uses this prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The selling securityholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such selling securityholders in connection with resales of their respective shares under this Registration Statement.

The Company is required to pay all fees and expenses incident to the registration of the shares, but the Company will not receive any proceeds from the sale of the Common Stock. The Company has agreed to indemnify the selling securityholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

DESCRIPTION OF SECURITIES

Authorized Capital Stock

We are authorized to issue 150,000,000 shares of Common Stock. The holders of our Common Stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our Common Stock that are present in person or represented by proxy. Except as otherwise provided by law, amendments to our Articles of Incorporation generally must be approved by a majority of the votes entitled to be cast by all outstanding shares of Common Stock. The Articles of Incorporation do not provide for cumulative voting in the election of directors. Upon liquidation, dissolution or winding up of us, our Common Stock holders will be entitled to receive pro rata all assets available for distribution to such holders.

Indemnification; Limitation of Liability

Nevada Revised Statutes (“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe his/her conduct was unlawful.

Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined such officer or director did not meet the standards.  

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Our bylaws include an indemnification provision under which we have the power to indemnify our directors and officers (including heirs and personal representatives) against all costs, charges and expenses actually and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which the director or officer is made a party by reason of being or having been a director or officer of ours or any of our subsidiaries.

Our bylaws also provide that our directors may cause us to purchase and maintain insurance for the benefit of a person who is or was serving as a director, officer, employee or agent of ours or any of our subsidiaries (including heirs and personal representatives) against a liability incurred by him/her as a director, officer, employee or agent.

Our indemnification agreements with certain of our executive officers and directors contain provisions which require us to indemnify them for costs, charges and expenses incurred in connection with their service as such. We are required to provide such indemnification if (i) the executive officer acted honestly and in good faith with a view to our best interests, and (ii) in the case of a criminal action or proceeding, the executive officer had reasonable grounds for believing that his conduct was lawful.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Anti-Takeover Effects of Provisions of Nevada State Law

We may be or in the future we may become subject to Nevada's control share law. A corporation is subject to Nevada's control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and if the corporation does business in Nevada or through an affiliated corporation.

The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares is sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (1) one-fifth or more but less than one-third, (2) one-third or more but less than a majority, or (3) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

The effect of the control share law is that the acquiring person, and those acting in association with it, obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to take away voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder's shares.  

Nevada's control share law may have the effect of discouraging corporate takeovers.

In addition to the control share law, Nevada has a business combination law, which prohibits certain business combinations between Nevada corporations and "interested stockholders" for three years after the "interested stockholder" first becomes an "interested stockholder" unless the corporation's board of directors approves the combination in advance. For purposes of Nevada law, an "interested stockholder" is any person who is (1) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term "business combination" is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation's assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

The effect of Nevada's business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.

25

LEGAL MATTERS

The validity of the Common Stock being offered hereby will be passed upon by Haddan & Zepfel LLP, Newport Beach, California.

EXPERTS

Kabani & Company, Inc., an independent registered public accounting firm, audited our financial statements for the year ended September 30, 2006, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual reports, quarterly reports, current reports, proxy statements and other information with the SEC. You may read or obtain a copy of these reports at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room and their copy charges by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains registration statements, reports, proxy information statements and other information regarding registrants that file electronically with the SEC. The address of the website is http://www.sec.gov.

We have filed with the SEC a registration statement on Form SB-2 under the Securities Act to register the shares offered by this prospectus. The term “registration statement” means the original registration statement and any and all amendments thereto, including the schedules and exhibits to the original registration statement or any amendment. This prospectus is part of that registration statement. This prospectus does not contain all of the information set forth in the registration statement or the exhibits to the registration statement. For further information with respect to us and the shares we are offering pursuant to this prospectus, you should refer to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete, and you should refer to the copy of that contract or other documents filed as an exhibit to the registration statement. You may read or obtain a copy of the registration statement at the SEC’s public reference facilities and Internet site referred to above.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS 

Item 24. Indemnification of Directors and Officers.

Under Nevada law, a corporation shall indemnify a director or officer against expenses, including attorneys’ fees, actually and reasonably incurred by him, to the extent the director or officer has been successful on the merits or otherwise in defense of any action, suit or proceeding. A corporation may indemnify a director or officer who was or is a party or is threatened to e made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him/her in connection with the action, suit or proceeding. Exempt from that immunity are:

·     A willful failure to deal fairly with the company or its stockholders in connection with a matter in which the director has a material conflict of interest;

·     A violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);

·     A transaction from which the director derived an improper personal profit; and

·     Willful misconduct.

Our bylaws include an indemnification provision under which we have the power to indemnify our directors, officers, employees and other agents (including heirs and personal representatives) against all costs, charges and expenses actually and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which the director or officer is made a party by reason of being or having been a director or officer of ours. Our bylaws further provide for the advancement of all expenses incurred in connection with a proceeding upon receipt of an undertaking by or on behalf of such person to repay such amounts if it is determined that the party is not entitled to be indemnified under our bylaws. No advance will be made by us to a party if it is determined that the party acted in bad faith. The indemnification rights are contractual rights and will continue as to a person who has ceased to be a director, officer, employee, or other agent, and will inure to the benefit of the heirs, executors, and administrators of such a person.

Anti-Takeover Effects of Provisions of Nevada State Law

We may be or in the future we may become subject to Nevada's control share law. A corporation is subject to Nevada's control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and if the corporation does business in Nevada or through an affiliated corporation.

The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares is sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (1) one-fifth or more but less than one-third, (2) one-third or more but less than a majority, or (3) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

The effect of the control share law is that the acquiring person, and those acting in association with that person, obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to take away voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder's shares.

27

Nevada's control share law may have the effect of discouraging corporate takeovers.

In addition to the control share law, Nevada has a business combination law, which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder” unless the corporation's board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (1) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation's assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

The effect of Nevada's business combination law is to potentially discourage parties interested in taking control of the Company from doing so if it cannot obtain the approval of our board of directors.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of ours under Nevada law or otherwise, we have been advised the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than payment by us for expenses incurred or paid by a director, officer or controlling person of ours in successful defense of any action, suit, or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question of whether such indemnification by it is against public policy in said Act and will be governed by the final adjudication of such issue.

Item 25. Other Expenses of Issuance and Distribution.

Set forth below is an estimate (except for registration fees, which are actual) of the approximate amount of the fees and expenses payable by us in connection with this offering.

EXPENSE	AMOUNT
SEC Registration Fees	$	374.56
Legal Fees and Expenses		35,000.00
Accounting Fees and Expenses		5,000.00
Miscellaneous Fees and Expenses		4,625.44
Total		45,000.00

Item 26. Recent Sales of Unregistered Securities.

There have been no sales of unregistered securities within the last three years which would be required to be disclosed pursuant to Item 701 of Regulation S-B, except for the following:

In a private offering that commenced in October of 2006 and concluded in early 2007, the Registrant issued convertible bridge notes in the amount of $750,000 to a group of private investors. The notes bear interest at 10% per annum, expire eighteen months after issuance, and are convertible into Common Stock at a conversion price of $ .04 per share. The holders have the option to convert accrued interest on these notes into Common Stock of the Company at the same conversion rate.

In August 2006, the Company entered into a Consulting Agreement with Calico Capital Management, LLC for financial management and strategic consulting services. The Agreement calls for the issuance of up to 4% of the outstanding shares of Common Stock of the Company, calculated on a fully-diluted basis, based on achievement of certain milestones. As of the date of this Prospectus, a total of 4,592,915 shares have been issued under this Agreement. The Consulting Agreement was amended and restated in March 2007 and terminated on November 13, 2007..

In June of 2007 the Registrant issued convertible notes in the principal amount of $86,000 to a group of investors. These notes bear interest at 10% per annum, expire on December 31, 2008, and are convertible into  Common Stock at a conversion price of $ .01 per share, but only if certain milestones relating to capital raising are satisfied.

In November 2007 the Registrant issued 3,400,000 shares of Common Stock to the shareholders of RJ Metals, Inc. in connection with the acquisition of that company.

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In July of 2007 the Registrant completed a private offering, principally to private investment funds, in the amount of $1,025,000. The investors received convertible debentures that bear interest at 10% per annum, expire twelve months after issuance, and are convertible into Common Stock at a conversion price of $ .22 per share.

The transactions described above were exempt from registration under Section 4(2) of the Securities Act or Rule 506 of Regulation D as promulgated by the SEC.

Item 27. Exhibits

No.	Description
3.1	Amended and Restated Articles of Incorporation of the Company (1)
3.2	Amended and Restated Bylaws of the Company (1)
5.1	Opinion of Haddan & Zepfel LLP (to be filed by amendment)
10.1	Lease between the Company and J. C. Brown Enterprises, dated February 19, 2007 (2)
10.2	Employment Agreement, dated September 30, 2003, between the Registrant and James J. Houtz (2)
10.3	Employment Agreement, dated October 1, 2005 between the Registrant and Robert E. McCray (2)
10.4	Form of Convertible Promissory Note, dated June 6, 2007, issued by the Company to certain investors
10.5	Form of Securities Purchase Agreement, dated as of June 18, 2007, between Sionix Corporation and certain investors (3)
10.6	Form of Convertible Debenture, dated as of June 18, 2007, issued by Sionix Corporation to certain investors (3)
10.7	Form of Registration Rights Agreement, dated as of June 18, 2007, between Sionix Corporation and certain investors (3)
10.8	Form of Warrant, dated as of June 18, 2007, issued by Sionix Corporation to certain investors. (3)
10.9	Standard Industrial Commerical Single-Tenant Lease-Net between Klein Investments Family Limited Partnership the Company, dated August 30, 2007
10.10	Share Exchange Agreement, dated November 7, 2007
23.1	Consent of Kabani & Company, Inc.
23.2	Consent of Haddan & Zepfel LLP (included in Exhibit 5.1)

___________________

(1) Incorporated by reference from Registrant's Current Report on Form 8-K, filed with the Commission on July 15, 2003, and incorporated herein by reference.

(2) Incorporated by reference from Registrant's Annual Report on Form 10-KSB, filed with the Commission on June 8, 2007, and incorporated herein by reference.

(3) Incorporated by reference from Registrant's Current Report on Form 8-K, filed with the Commission on August 14, 2007, and incorporated herein by reference.

Item 28. Undertakings.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and  

(iii) Include any additional or changed material information on the plan of distribution.

29

(2) For determining liability under the Securities Act, to treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(4) For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and

 (iv) Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.  

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) (§ 230.424(b) of this chapter) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§ 230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in Irvine, California, on November 14, 2007.

SIONIX CORPORATION
By:	/s/ James J. Houtz
	Name: James J. Houtz
	Title: President

In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement was signed by the following persons in the capacities and on the dates stated: 

Signature	Title	Date
/s/ James J. Houtz	Chief Executive Officer and Director	November 14, 2007
James J. Houtz	(Principal Executive Officer)
/s/ John H. Foster	Chairman of the Board	November 14, 2007
John H. Foster
/s/ Robert McCray	Chief Financial Officer and a Director	November 14, 2007
Robert  McCray	(Principal Financial and Accounting Officer)
/s/ Rodney Anderson	Director	November 14, 2007
Rodney Anderson
/s/ David Ross	Director	November 14, 2007
David Ross
/s/ W. Richard Laton	Director	November 14, 2007
W. Richard Laton

31

SIONIX CORPORATION

INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements	Page
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheet as of  September 30, 2006		F-3
Statements of Operations for the years ended September 30, 2006 and September 30, 2005 and Cumulative From Inception (October 3, 1994) to September 30, 2006		F-4
Statements of Stockholders’ Equity (Deficit) from Inception (October 3, 1994) to September 30, 2006		F-5
Statements of Cash Flows for the years ended September 30, 2006 and September 30, 2005 and Cumulative From Inception (October 3, 1994) to September 30, 2006		F-6
Notes to Financial Statements		F-7

Unaudited Interim Financial Statements	Page
Balance Sheet as of  June 30, 2007 (unaudited)	F-14
Statements of Operations for the periods of three and nine months ended June 30, 2007 and June 30, 2006 and from Inception (October 3, 1994) to June 30, 2007		F-15
Statements of Stockholders’ Equity (Deficit) from Inception (October 3, 1994) to June 30, 2007		F-16
C  Statements of Cash Flows for the periods of nine months ended June 30, 2007 and June 30, 2006 and Cumulative From Inception (October 3, 1994) to June 30, 2007		F-17
Notes to Financial Statements		F-21

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Sionix Corporation

We have audited the accompanying balance sheet of Sionix Corporation (a Nevada corporation) as of September 30, 2006 and the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended September 30, 2006 and 2005 and for the period from October 3, 1994 (inception) to September 30, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sionix Corporation as of September 30, 2006 and the results of its operations and its cash flows for the years ended September 30, 2006 and 2005 and for the period from October 3, 1994 (inception) to September 30, 2006, in conformity with accounting principles generally accepted in the United States of America.

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has deficit accumulated from inception amounting to $15,299,053 at September 30, 2006 including a net loss of $774,887 incurred in the year ended September 30, 2006. These factors as discussed in Note 11 to the financial statements, raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Kabani & Company, Inc.

Certified Public Accountants

Los Angeles, California.

January 2, 2007

F-2

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET

AS OF SEPTEMBER 30, 2006

ASSETS

CURRENT ASSETS:
Cash & cash equivalents	$	4,544
PROPERTY AND EQUIPMENT, NET		44,761
Total assets	$	49,306
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	272,610
Accrued expenses		1,136,771
Notes payable-related parties		129,000
Note payable-officers		66,660
Equity line of credit		327,336
Total current liabilities		1,932,377
COMMITMENTS & CONTINGENCIES		--
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 150,000,000 shares authorized;
102,524,186 shares issued and 102,042,286 shares outstanding		102,042
Additional paid-in capital		13,270,039
Shares to be issued		43,900
Deficit accumulated during development stage		(15,299,053	)
Total stockholders' deficit		(1,883,072	)
Total liabilities & stockholders' deficit	$	49,306

The accompanying notes form an integral part of these financial statements

F-3

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

	For the years ended						Cumulative  From Inception (October 3, 1994) to
	September 30,						September 30,
	2006			2005			2006
REVENUES	$	--		$	--		$	--
OPERATING EXPENSES:
General and administrative		639,259			423,213			11,743,298
Research and development		--			1,810			1,449,474
Impairment of intangible assets		--			--			1,267,278
Inventory obsolescence		--			--			365,078
Depreciation and amortization		31,326			33,931			500,406
Total operating expenses		670,585			458,953			15,325,534
LOSS FROM OPERATIONS		(670,585	)		(458,953	)		(15,325,534	)
OTHER INCOME (EXPENSES)
Interest income		--			60			53,657
Interest expense		(10,080	)		(8,124	)		(234,686	)
Loss on settlement of debts		(94,221	)		--			(230,268	)
Legal settlement		--			--			434,603
Total other income (expenses)		(104,302	)		(8,064	)		23,305
LOSS BEFORE INCOME TAXES		(774,887	)		(467,017	)		(15,289,154	)
Income taxes		--			900			9,900
NET LOSS	$	(774,887	)	$	(467,917	)	$	(15,299,053	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.01	)	$	(0.00	)
*BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON
STOCK OUTSTANDING		102,524,186			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 financial statements

F-4

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FROM INCEPTION (OCTOBER 3, 1994) TO SEPTEMBER 30, 2006

																			Deficit			Total
	Common stock						Additional			Stock		Stock			Stock		Unamortized		accumulated			stockholders'
	Number of						paid-In			to be		subscription			to be		consulting		from			equity
	shares			Amount			capital			issued		receivable			cancelled		fees		inception			(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 service		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 service		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
Shares issued for cash		722,733			723			365,857			-		-			-		-		-			366,580
Shares 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
Shares issued for cash		2,810,000			2,810			278,190			-		-			-		-		-			281,000
Shares issued for service		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

F-5

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FROM INCEPTION (OCTOBER 3, 1994) TO SEPTEMBER 30, 2006

									Deficit		Total
	Common stock		Additional	Stock	Stock	Stock	Unamortized		accumulated		stockholders'
	Number of		paid-In	to be	subscription	to be	consulting		from		equity
	shares	Amount	capital	issued	receivable	cancelled	fees		inception		(deficit)
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 service	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	)
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 service	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 service 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 shares to be issued for cash	-	-	-	10,000	-	-	-		-		10,000

F-6

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FROM INCEPTION (OCTOBER 3, 1994) TO SEPTEMBER 30, 2006

							Deficit	Total
Common stock		Additional	Stock	Stock	Stock	Unamortized	accumulated	stockholders'
Number of		paid-In	to be	subscription	to be	consulting	from	equity
shares	Amount	capital	issued	receivable	cancelled	fees	inception	(deficit)

Net loss for the year ended September 30, 2001	-		-		-		-		-	-	-		(1,353,429	)	(1,353,429	)
639,509 Shares to be issued for debt settlement in 2001	-		-		-		103,295		-	-	-		-		103,295
Balance September 30, 2001	62,688,698		62,688		9,229,213		113,295		-	-	(141,318	)	(9,522,180	)	(258,302	)
Shares issued for service 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

F-7

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FROM INCEPTION (OCTOBER 3, 1994) TO SEPTEMBER 30, 2006

																				Deficit
																				Accumulated			Total
	Common stock						Additional		Stock			Stock		Stock						During			Stockholders'
	Number of						Paid-in		to be			Subscription		to be			Unamortized			Development			Equity
	Shares			Amount			Capital		Issued			Receivable		Cancelled			Consulting			Stage			(deficit)
Balance September 30, 2002		74,540,411		$	74,540		$	11,074,334	$	300,000		$	--	$	--		$	(86,918	)	$	(10,765,489	)	$	596,467
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		--			--		--			(13,075	)		(14,056,250	)		(653,344	)
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		--			--		--			--			(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		--		$	--	$	--		$	--		$	(15,299,053	)	$	(1,883,072	)

The accompanying notes form an integral part of these financial statements

F-8

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

							Cumulative
							From Inception
	For the years ended September 30,						(October 3, 1994) to September 30,
	2006			2005			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(774,887	)	$	(467,917	)	$	(15,299,053	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		31,326			33,931			587,324
Amortization of consulting fee		--			13,075			13,075
Issuance of common stock for compensation		--			--			1,835,957
Issuance of common stock for services & prepaid consulting fees		--			--			2,096,557
Impairment of assets		--			--			514,755
Write-down of obsolete assets		--			--			38,862
Impairment of intangible assets		--			--			1,117,601
Loss on settlement of debts		94,221			--			130,268
Other		--			--			40,370
Increase in other current assets		--			--			(510,727	)
Decrease in other receivable		--			--			3,000
Increase in deposits		--			6,831			-
Increase (decrease) in accounts payable		50,147			38,545			342,610
Increase in accrued interest		10,080			8,124			68,681
Increase (decrease) in accrued expense		543,873			305,086			1,067,914
Total adjustments		729,647			405,590			7,346,241
Net cash used in operating activities		(45,240	)		(62,327	)		(7,952,807	)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) of certificate of deposit		--			--			--
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 to related party		49,440			62,220			457,433
Proceeds from notes payable under equity line of credit		--			--			756,000
Payment of notes		--			--			(151,842	)
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		49,440			62,220			8,491,585
Net increase (decrease) in cash & cash equivalents		4,201			(107	)		4,544
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD		343			450			--
CASH & CASH EQUIVALENTS, END OF PERIOD	$	4,544		$	343		$	4,544
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid	$	--		$	--
Income tax paid	$	--		$	--

The accompanying notes form an integral part of these financial statements

F-9

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

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectibility of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.

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 $3,355 and $9,170 for the years ended September 30, 2006 and 2005, respectively.

STOCK BASED COMPENSATION

SFAS No. 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i) using the new fair value method or (ii) using the existing accounting rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and related interpretations with pro forma disclosure of what net income and earnings per share would have been had the Company adopted the new fair value method. The Company has chosen to account for stock-based compensation using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and has adopted the disclosure only provisions of SFAS 123. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee is required to pay for the stock.

F-10

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Valuation of shares for services is based on the estimated fair market value of the services performed.

BASIC AND DILUTED NET LOSS PER SHARE

Net loss per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 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.

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.

RECLASSIFICATIONS

Certain items in the prior year financial statements have been reclassified to conform to current period's presentation. These reclassifications have no effect on the previously reported income (loss).

REPORTING SEGMENTS

Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131), which superseded Statement of Financial Accounting Standard No. 14, Financial Reporting for Segments of a Business Enterprise, establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographic areas and major customers. SFAS No. 131 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. The company adopted this standard in 1998 and the implementation of this standard did not have a material impact on its financial statements. During the years ended September 30, 2006 and 2005, the Company only operated in one segment; therefore segment disclosure has not been presented.

REVENUE RECOGNITION

The Company's policy is 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.

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 generated any revenue since its inception.

F-11

RECENT PRONOUNCEMENTS

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company's first fiscal year that begins after September 15, 2006. The management is currently evaluating the effect of this pronouncement on financial statements.

In March 2006 FASB issued SFAS 156 `Accounting for Servicing of Financial Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:

1. Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.

2. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3. Permits an entity to choose `Amortization method' or Fair value measurement method' for each class of separately recognized servicing assets and servicing liabilities:

4. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.

5. Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

This Statement is effective as of the beginning of the Company's first fiscal year that begins after September 15, 2006. Management believes that this statement will not have a significant impact on the consolidated financial statements.  In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having

previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring 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. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

a.       A brief description of the provisions of this Statement

b.       The date that adoption is required

c.       The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

F-12

The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements.

In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. FAS159 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. The management is currently evaluating the effect of this pronouncement on financial statements.

3. PROPERTY AND EQUIPMENT

Equipment and machinery	$	187,805
Furniture and fixtures		22,183
		209,988
Less accumulated depreciation		(165,227	)
	$	44,761

Depreciation expenses for the fiscal years ended September 30, 2006 and 2005 were $31,326 and $33,931, respectively.

4. ACCRUED EXPENSES

Accrued expenses comprised of the following at September 30, 2006:

Payroll taxes	$	143,572
Wages		853,115
Professional fees		30,000
Interest payable		51,699
Other accruals		58,385
Total	$	1,136,771

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 September 30, 2006, notes payable amounted to $129,000. Accrued interest on the notes amounted to $51,699 at September 30, 2006. Interest expenses on the notes for the year ended September 30, 2006 and 2005 amounted to $10,080 and $8,134 respectively.

6. NOTES PAYABLE-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 September 30, 2006 and 2005 were $66,660 and $66,660, respectively.

F-13

7. NOTES PAYABLE UNDER EQUITY LINE OF CREDIT

During the year ended September 30, 2003, the Company received $1,307,500 proceeds from promissory notes issued to Cornell Capital Partners, LP, net of a 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 9). 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 entered into a settlement agreement with Cornell Capital Partner to pay the total amount of $327,336; $50,000 payable by 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 a loss on settlement on debt of $94,221 for the year ended September 30, 2006.

8. INCOME TAXES

Through September 30, 2006, the Company incurred net operating losses for tax purposes of approximately $9,835,000. The net operating loss carryforward for federal and state purposes may be used to reduce taxable income through the year 2025. The availability of the Company's net operating loss carryforward is subject to limitation if there is a 50% or more positive change in the ownership of the Company's stock.

A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry forward cannot reasonably be assured. Components of deferred tax asset at December 31, 2006 are as follows:

	2006			2005
Net operating loss	$	3,344,000		$	3,318,000
Less Valuation allowance		(3,344,000	)		(3,318,000	)
	$	-		$	-

The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Statements of Operations:

	2006		2005
Tax expense (credit) at statutory rate-federal		(34)%		(34)%
State tax expense net of federal tax		(6)%		(6)%
Changes in valuation allowance		40%		40%
Tax expense at actual rate		-		-

F-14

9.  STOCKHOLDERS' EQUITY

COMMON STOCK

The Company has 150,000,000 authorized shares, with 0.001 par value per share. As of September 30, 2006, the Company had 102,524,186 shares issued and outstanding.

The Company did not issue any shares for the fiscal years ended September 30, 2006 and 2005.

STOCK OPTIONS

2001 Executive Officers Stock Option Plan

In 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.

Options outstanding:

	Weighted
	Average		Number of
	Exercise Price		Options
Outstanding at September 30, 2005	$	0.15		7,343,032
Granted		-		-
Exercised		-		-
Outstanding at September 30, 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	3.5 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 for the years ended September 30, 2006 and 2005: dividend yields of 0%; risk free interest rates of 6%; expected volatility of 100% and expected lives of 4.9 years.

The Company has adopted the disclosure-only provisions of SFAS No. 123. Because the exercise price of the options granted was greater than the fair value of the common stock at the grant date, no compensation cost has been recognized. Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant date for awards consistent with the provisions of SFAS No. 123, the Company's net loss and loss per share for the year ended September 30, 2006 and 2005 would have been as follows:

	2006			2005
Net loss as reported	$	(774,887	)	$	(467,917	)
Net loss, pro forma	$	(906,442	)	$	(598,379	)
Basic loss per share as reported	$	(0.01	)	$	(0.00	)
Basic loss per share, pro forma	$	(0.01	)	$	(0.01	)

F-15

10. EARNINGS (LOSS) PER SHARE

Earnings (loss) per share were determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock and common stock equivalents outstanding. Stocks to be issued are regarded as common stock equivalents and are considered in diluted earnings per share calculations.

Weighted average number of shares used to compute basic and diluted loss per share is the same since the effect of dilutive securities is antidilutive.

11. 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 September 30, 2006, the Company had incurred cumulative losses of $15,299,053, including current loss of $774,887. 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.

12. SUBSEQUENT EVENT

The Company paid $50,000 against a note payable under an equity line of credit in November 2006 (See note 7).

F-16

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET

AS OF JUNE 30, 2007

(Unaudited)

ASSETS
CURRENT ASSETS:
Cash & cash equivalents	$	455,563
PROPERTY AND EQUIPMENT, net		46,399
DEPOSIT		4,600
Total assets	$	506,562
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	204,804
Accrued expenses		1,525,397
Notes payable-related parties		129,000
Note payable-officers		32,860
Convertible notes		792,314
Equity line of credit		102,336
Total current liabilities		2,786,712
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 150,000,000 shares authorized;
107,117,101 shares issued and 106,635,201 shares outstanding		106,635
Additional paid-in capital		13,969,888
Shares to be issued		43,900
Deficit accumulated during development stage		(16,400,573	)
Total stockholders' deficit		(2,280,150	)
Total liabilities & stockholders' deficit	$	506,562

The accompanying notes form an integral part of these unaudited financial statements

F-17

SIONIX CORPORATION

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Month Periods Ended June 30,						Nine Month Periods Ended June 30,						Cumulative from Inception (October 3, 1994) to
	2007			2006			2007			2006			June 30, 2007
Net sales	$	-		$	-		$			$	-		$	-
Operating expenses:
General and administrative		444,544			242,236			932,668			447,247			12,675,067
Research and development		-			-			-			-			1,449,474
Impairment of intangible assets		-			-			-			-			1,267,278
Inventory obsolescence		-			-			-			-			365,078
Depreciation and amortization		7,936			7,745			23,723			23,486			524,129
Total operating expenses		452,480			249,981			956,391			470,733			16,281,026
Loss from operations		(452,480	)		(249,981	)		(956,391	)		(470,733	)		(16,281,026	)
Other income (expenses)
Interest income		56			-			666			-			54,324
Interest expense		(74,307	)		(2,406	)		(144,895	)		(7,218	)		(379,582	)
Loss on settlement of debts		-			-			-			(94,221	)		(230,268	)
Loss on legal settlement		-			-			-			-			434,603
Total other income (expenses)		(74,252	)		(2,406	)		(144,229	)		(101,439	)		(120,924	)
Loss before income taxes		(526,732	)		(252,387	)		(1,100,620	)		(572,172	)		(16,388,874	)
Income taxes		900			-			900			-			11,700
Net loss	$	(527,632	)	$	(252,387	)	$	(1,101,520	)	$	(572,172	)	$	(16,400,573	)
Basic and diluted loss per share	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
*Basic and diluted weighted average number of common stock outstanding		106,431,387			102,524,186			105,901,243			102,524,186

*Weighted average number of shares used to compute basic and diluted loss per share is the same as the effect of dilutive securities is anti-dilutive

The accompanying notes form an integral part of these unaudited financial statements

F-18

SIONIX CORPORATION

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

	For The Nine Month Periods Ended June 30,							Cumulative From Inception (October 3, 1994) to June 30,
CASH FLOWS FROM OPERATING ACTIVITIES:	2007			2006				2007
Net loss	$	(1,101,520	)	$	(572,172	)	$	(16,400,573	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization		23,723			23,486			611,046
Amortization of consulting fees		-			-			13,075
Amortization of debt discount on convertible NP		75,827			-			75,827
Issuance of common stock for compensation		-			-			1,835,957
Issuance of common stock for services & prepaid consulting fees		84,929			-			2,181,486
Impairment of assets		-			-			514,755
Write-down of obsolete assets		-			-			38,862
Impairment of intangible assets		-			-			1,117,601
Loss on settlement of debts		-			94,221			130,268
Other		-			-			40,370
Changes in assets and liabilities:
Increase in other current assets		-			-			(510,727	)
Decrease in other receivable		-			-			3,000
Increase in deposits		(4,600	)		-			(4,600	)
Increase (decrease) in accounts payable		(67,806	)		7,713			274,804
Increase in accrued interest		69,068			7,218			137,749
Increase (decrease) in accrued expense		319,558			422,139			1,387,473
Total adjustments		500,700			554,777			7,846,947
Net cash used in operating activities		(600,821	)		(17,395	)		(8,553,626	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of patents		-			-			(154,061	)
Purchase of equipment		(25,361	)		-			(405,535	)
Net cash used in investing activities		(25,361	)		-			(559,596	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes		1,336,000			47,780			1,793,433
Proceeds from (payment for) notes payable under equity line of credit		(225,000	)		-			531,000
Payment of notes to officers		(33,800	)		(30,340	)		(185,642	)
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		1,077,201			17,440			9,568,785
Net increase in cash & cash equivalents		451,019			45			455,563
CASH & CASH EQUIVALENTS, BEGINNING		4,544			343			-
CASH & CASH EQUIVALENTS, ENDING		455,563		$	388		$	455,563
SUPPLEMENTAL INFORMATION:
Taxes	$	-		$	-
Interest expense	$	-		$	-

The accompanying notes form an integral part of these unaudited financial statements

F-19

SIONIX CORPORATION

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FROM INCEPTION (OCTOBER 3,1994) TO JUNE 30, 2007

(Unaudited)

																			Deficit			Total
	Common stock						Additional			Stock		Stock			Stock		Unamortized		accumulated			stockholders'
	Number of						paid-In			to be		subscription			to be		consulting		from			equity
	shares			Amount			capital			issued		receivable			cancelled		fees		inception			(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 service		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 service		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
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
Share issued for cash		2,810,000			2,810			278,190			-		-			-		-		-			281,000
Share issued for service		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

F-20

SIONIX CORPORATION

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

FROM INCEPTION (OCTOBER 3,1994) TO JUNE 30, 2007

(Unaudited)

	Common stock															Deficit			Total
	Number of				Additional paid-In		Stock to be		Stock subscription		Stock to be		Unamortized consulting			accumulated from			stockholders' equity
	shares		Amount		capital		issued		receivable		cancelled		fees			inception			(deficit)
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
Share issued for service		705,746		706		215,329		-		-		-		-			-			216,035
Share 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	)
Share 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 service		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 service and prepaid expenses		2,517,376		2,517		530,368		-		-		-		(141,318	)		-			391,567
Share issued for cash		6,005,000		6,005		594,495				-		-		-			-			600,500
100,000 share to be issued for cash		-		-		-		10,000		-		-		-			-			10,000

F-21

SIONIX CORPORATION

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

FROM INCEPTION (OCTOBER 3,1994) TO JUNE 30, 2007

(Unaudited)

	Common stock													Deficit		Total
	Number of shares		Amount		Additional paid-in capital		Stock to be issued		Stock subscription receivable	Stock to be cancelled		Unamortized consulting fees		accumulated from inception		stockholders' equity (deficit)
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 service 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
Share 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
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	)	-		-		-

F-22

SIONIX CORPORATION

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

FROM INCEPTION (OCTOBER 3,1994) TO JUNE 30, 2007

(Unaudited)

	Common stock						Additional		Stock		Stock		Stock			Unamortized			Deficit accumulated			Total stockholders'
	Number of shares			Amount			paid-In capital		to be issued		subscription receivable		to be cancelled			consulting fees			from inception			equity (deficit)
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	)
Amortization of consuting 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	)		(1,883,072	)
Stock issued for consulting	4,592,915			4,593			80,336		-		-		-			-			-			84,929
Beneficial conversion feature	-			-			619,513		-		-		-			-			-			619,513
Net loss for the period June 30, 2007	-			-			-		-		-		-			-			(1,101,520	)		(1,101,520	)
Balance June 30, 2007	106,635,201		$	106,635		$	13,969,888	$	43,900	$	-	$	-		$	-		$	(16,400,573	)	$	(2,280,150	)

The accompanying notes form an integral part of these unaudited financial statements

F-23

SIONIX CORPORATION

Notes to financial statements (unaudited)

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 unaudited 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 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 nine month periods ended June 30, 2007 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.

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.

F-24

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

ADVERTISING

The cost of advertising is expensed as incurred. Total advertising costs were $3,385 and $3,310 for the nine month periods ended June 30, 2007 and 2006, 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. Company management is currently evaluating the effect of this pronouncement on 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 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. Company management is currently evaluating the effect of this pronouncement on 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.

F-25

Note 3. PROPERTY AND EQUIPMENT

Equipment and machinery	$	213,166
Furniture and fixtures		22,183
		235,349
Less accumulated depreciation		(188,950	)
	$	46,399

Depreciation expenses for the nine month periods ended June 30, 2007 and 2006 were $23,723 and $23,486, respectively.

Note 4. ACCRUED EXPENSES

Accrued expenses comprised of the following at June 30, 2007:

Payroll taxes	$	142,672
Accrued salaries		1,098,182
Interest payable		120,767
Other accruals		163,776
Total	$	1,525,397

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 June 30, 2007, notes payable amounted to $129,000. The Company recorded $27,315 interest expense for the nine month period ended June 30, 2007.

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 balance at June 30, 2007 was $32,860.

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 notes 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 of debt of $94,221 for the year ended September 30, 2006.

The balance payable was $102,336 as of June 30, 2007.

F-26

Note 7. CONVERTIBLE NOTES

During the nine month period ended June 30, 2007, the Company entered into various debenture agreements (the “Bridge Notes”) with several investors. Under the terms of the agreements, the notes bear interest at the rate of 10% per annum. The notes 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, the notes have been converted into shares of the Company’s common stock.

The notes are 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 a registration statement covering the underlying shares 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 June 30, 2007 the Company had received $836,000 under the Bridge Notes.

On July 18, 2007 Sionix completed an offering of $1,025,000 of Subordinated Convertible Debentures to a group of institutional and accredited investors. The Subordinated Convertible Debentures are convertible into shares of Common Stock of Sionix at an initial conversion rate of $ .22 per share, subject to anti-dilution adjustments. For each $100,000 of Convertible Debentures purchased, the investor received Warrants to purchase 227,272 shares of Common Stock. Each Warrant entitles the holder to purchase one share of common stock of Sionix (the "Warrant Shares") for a period of five years at a price of $0.50 per Warrant Share.

Under the terms of the Registration Rights Agreement , Sionix is required to file a registration statement under the Securities Act of 1933 Act in order to register the resale of the shares of Common Stock issuable upon conversion of the Subordinated Convertible Debentures and the Warrant Shares (collectively, the "Registrable Securities"). If Sionix does not file a registration statement with respect to the Registrable Securities within forty-five days following the closing of the Offering, or if the Registration Statement is not declared effective by the Securities and Exchange Commission within 90 days, then Sionix must pay to each purchaser damages equal to 1.5% of the purchase price paid by the purchaser for its Subordinated Convertible Debentures, for each 30 days that transpires after these deadlines. The amount of the aggregate damages payable by Sionix is limited to 15% of the purchase price.

Southridge Investment Group LLC, Ridgefield, Connecticut (“Southridge”) acted as agent for Sionix in arranging the transaction, and received a placement fee of $102,500. Southridge also received warrants to purchase 698,863 shares of Common Stock of Sionix, on the same terms and conditions as the Warrants issued to the purchasers.

As part of the above offering the Company received $500,000 of financing under the convertible debenture and issued 1,136,364 warrants as of June 30, 2007. The grant date fair value of the warrants amounted to $318,939 was calculated using the Black-Scholes option pricing model, using the following assumptions: risk free rate of return of 6%, volatility of 195.97%, and dividend yield of 0% and expected life of five years.

As of June 30, 2007, the Company recorded beneficial conversion feature expense of $75,827 and the unamortized beneficial conversion feature amount of $353,082 and unamortized warrant discount of 190,604 showing as net of the note payable amount of $1,336,000. The Company recorded an interest expense of $46,464 on the notes.

Note 8. STOCKHOLDERS’ EQUITY

COMMON STOCK

The Company has 150,000,000 authorized shares, par value $ .001 per share. As of June 30, 2007, the Company had 107,117,101 shares issued and 106,635,201 shares outstanding.

During the nine month period ended June 30, 2007, the company issued 3,292,915 shares, valued at $0.01 per share, and 1,300,000 shares valued at $0.04 per share for consulting services recorded at the fair market value.

F-27

STOCK OPTIONS

2001 Executive Officers Stock Option Plan

In October of 2000, the company entered into amendments to the employment agreements 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.

Options outstanding:

	Weighted average exercise price	Number of outstanding options	Aggregate intrinsic value
Outstanding as of September 30, 2006	$0.15	7,343,032	$   -
Granted
Forfeited
Exercised
Outstanding as of June 30, 2007	$0.15	7,343,032	$881,165

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 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 nine month period ended June 30, 2007.

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 June 30, 2007, the Company had incurred cumulative losses of $16,400,573, including a current loss of $1,101,520. 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.

F-28

EX-10..4

EXHIBIT 10.4

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER TIM SECURITIES
ACT OF 1933, AS AMENDED. 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.

                               SIONIX CORPORATION

                           CONVERTIBLE PROMISSORY NOTE

$__________________                                                 June 6, 2007

         SIONIX CORPORATION (THE "COMPANY" ), a Nevada corporation, for value
received, having a place of business promises to pay _______________________ or
its assign (_________________________ or its assign is hereinafter referred to
as the "HOLDER") the principal sum of ____________ Dollars ($______) (the
"PRINCIPAL AMOUNT"), plus simple interest thereon at the rate of ten percent
(10.00% ) per annum (the "BASE RATE"), and such interest to be payable the
Maturity Date (as hereinafter defined) or upon the earlier acceleration of this
Note as provided herein, 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 all unpaid and accrued interest, shall become
due and payable upon the earlier of (i) the occurrence of an Event of Default or
(ii) 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 As used herein, "MATURITY DATE" means such date, which shall be a
Business Day (as hereinafter defined) that is not sooner than December 31, 2008,
as the Holder may specify in written notice delivered to the Company not less
than thirty (30) days prior to such specified date, and "BUSINESS DAY" means any
day other than a Saturday, Sunday or other day on which banking institutions are
authorized or required to be closed in New York, New York. The Company may not
prepay this Note or any portion hereof (including, without limitation, any
accrued but unpaid interest) except with the prior written consent of the
Holder.

         Payments of both the Principal Amount and interest are to be made to
the Holder in lawful money of the United Sates of America at the address of the
Holder set forth in SECTION 7(D) below or at such other place in the United
States as the Holder shall designate to the Company in writing. Interest on this
Note shall be computed on the basis of a 360-day year consisting of twelve
30-day months.

         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. CONVERSION.

                  (a) OPTIONAL CONVERSION. At any time prior to the payment of
this Note in full, the outstanding Principal Amount 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 one cent ($0.01) 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;
PROVIDED, HOWEVER, that the Conversion Price shall be adjusted in accordance
with SECTIONS 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) hereof.
Notwithstanding anything contained herein to the contrary, the Holder's right to
convert this Note, or any portion or portions hereof, shall be subject to such
conditions as are set forth in EXHIBIT B attached hereto and made a part hereof.

                  (b) ADJUSTMENTS TO CONVERSION PRICE. In the event the Company
shall at any time while this Note or any portion hereof remains outstanding
issue Additional Shares of Common Stock (as hereinafter defined), without
consideration or for a consideration per share less than the 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 ($0.001) 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), (ea 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 Exhibit A attached hereto and made a part hereof, 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


                                      -2-


                           (vi) shares of Common Stock issued in connection with
a transaction where the Holder has indicated in writing that such transaction
should be exempt from the anti-dilution adjustment provisions hereof.

             (c) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company,
at any time while this Note or any portion hereof remains outstanding, 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 (u) 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 hereof 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) NOTICES. Whenever the Conversion Price or number of shares
purchasable hereunder shall be adjusted pursuant to SUBSECTION 1(B). (C), (D) or
(E) 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, 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. 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, which failure
results in a material adverse effect upon the Company and is not cured within
thirty (30) days after the receipt of written notice thereof by the Holder;

                           (iii) any petition in bankruptcy being filed by or
against the 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 the Company, either through reorganization,
composition, extension or otherwise, and which, in the case of any involuntary
proceedings, shall be acquiesced to by the Company or shall continue for a
period of ninety (90) days undismissed, undischarged or unbonded;

                           (iv) the making by the Company of an assignment for
the benefit of creditors, which assignment results in a material adverse effect
upon the Company and is not cured within thirty (30) days after the receipt of
written notice thereof by the Holder;

                           (v) the appointment of a receiver of any property of
the 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 the
Company.


                                      -4-


                  (b) REMEDIES. Upon the occurrence of an Event of Default under
SECTION 3(A) hereof, at the option and upon the declaration of the. Holder, the
entire unpaid Principal Amount 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 the 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.

         4. 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 the Note,
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
the 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.

         5. 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.

         6. 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.

         7. 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.


                                      -5-


                  (b) RESTRICTIONS. The Holder acknowledges that the shares of
capital stock acquired upon the conversion of this Note will be subject to
restrictions upon 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 communication
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
                                    Airport Tower Plaza
                                    2082 Michelson Drive Suite 304
                                    Irvine, CA 92612
                                    Attn: James J. Houtz, President and CEO/COO

             To the Holder:         At the address of the. Holder set forth
                                    above or at such other address of which the
                                    Holder has given the Company written notice

         or to such other single place as any single addressee shall designate
         by written notice to the other addressee.

                  (e) CHOICE OF VENUE; WAIVER OF RIGHT TO JURY TRIAL.

                           (i) THIS NOTE E 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 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 N 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 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


                                      -6-


WITH RESPECT TO MIS NOTE 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 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 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 ARISLNG OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CON I
EMPLATED HEREBY.

               (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.

               (g) AMENDMENT OR WAIVER. This Note may only be amended with the
prior written consent of the Holder and the Company.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                      -7-


IN WITNESS WHEREOF, the undersigned has caused this Convertible Promissory Note
to be executed by its officer thereunto duly authorized.

                               COMPANY:

                               SIONIX CORPORATION

                               By /S/ JAMES J. HOUTZ
                                  -------------------------
                               Name: James J. Houtz
                               Title: President and CEO/COO


                                      -8-


                                                                       EXHIBIT A

                         EXCLUDED SHARES OF COMMON STOCK
                         -------------------------------

SIONIX CORPORATION
Shares Issued & To Be Issued

ISSUED & OUTSTANDING PER BOOKS                                     103,505,622

2001 Employee Stock Option Plan -                                    7,885,572
         SEC Form S-8 Dated 7/3/02

2006  Employee. Stock Option Plan - Est.
         James J. Houtz   (308,550/Qtr. X 20)     6,171,000
         Joan C. Houtz - (13,997/Qtr. X4)            55,988
         Robert E. McCray (29,160/Qtr. X4)          116,640          6,343,628
                                                ------------
                                                                     7,349,204
         Stock Bonus Shares Returned
         Purchase of R. J. Metals                                    2,769,230
         Advisory. Board Compensation                                2,400,000
         Shares for Cash/Option - Unissued

         Total Shares to Be Issued                                   1,463 336
         Total Shares Issued & To Be Issued


         ISSUED & OUTSTANDING PER REGISTRAR                         28,210,970
                                                                  -------------
                                                                   131,716,592
                                                                  -------------
                                                                   102,524,186
         Add: Shares for Cash - Unissued                              1,463,336
                                                                  -------------
                                                                    103,987,522
         Sub-Total
         Less: Cert. #1567 - J. Moorehead - Held                       -481,900
                                                                  -------------
         Total Issued & Outstanding Shares                           103,505.622
                                                                  -------------

And such additional shares as may be issued or issuable upon the exercise of any
Secured Convertible Promissory Notes issued pursuant to that certain. Secured
Convertible Note Purchase Agreement, dated as of October 18, 2006, by and among
the Company and certain purchasers identified therein.


                                      -9-


                                                                       EXHIBIT B

                   CONDITION TO EXERCISE OF CONVERSION RIGHTS
                   ------------------------------------------

Notwithstanding anything: in this Note to the contrary, the. Holder shall be
entitled to exercise the conversion rights under this Note subject to the
following conditions:

         1 . This Note may be exercised with respect to twenty-six thousand
         dollars ($26,000.00) of the original principal amount of this Note
         (plus the amount of accrued and unpaid interest on such twenty-six
         thousand dollars ($26,000.00) of the original principal amount of this
         Note) only upon and following the date as which the gross proceeds
         received by the Company after June 6, 2007 from or with respect to any
         financing or financings (in any form, whether equity or debt, including
         any financing(s) provided by any bank or other institutional lender)
         shall aggregate at least three million dollars ($3,000,000.00); and

         2. This Note may be exercised with respect to an additional twenty-six,
         thousand dollars ($26,000.00) of the original principal amount of this
         Note (plus the amount of accrued and unpaid interest on such additional
         twenty-six thousand dollars ($26,000.00) of the original principal
         amount of this Note) only upon and following the date as which the
         gross proceeds received by the Company after June 6, 2007 from or with
         respect to any financing or financings (in any form, whether equity or
         debt, including any financing(s) provided by any bank or other
         institutional lender) shall aggregate at least five million dollars
         ($5,000,000,00).


                                      -10-


                              NOTICE OF CONVERSION

         (To convert the foregoing Note, execute this faun and supply required
information.)

To:      SIONIX CORPORATION

(1) The undersigned hereby elects to convert the attached 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 $0.01); or

         _______           _______________ shares 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)


                                      -11-


                                 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 such
Note set forth below:

________________________________________________________________________________
         (Name and Address of Assignee Must be Printed or Typewritten)

___________________  ________________________________  _________________________
Social Security No.                Address        Principal Amount or Tax ID No.

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 name of the
Holder as it appears upon the fate of the. Note in every particular, without
alteration or enlargement or any change whatever.


                                      -12-

EX-10.9

EXHIBIT 10.9


                     AIR COMMERCIAL REAL ESTATE ASSOCIATION

             STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--NET
                (DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS ("Basic Provisions").

         1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only,
August 30, 2007, is made by and between Klein Investments Family Limited
Partnership, a California limited liability company ("Lessor") and Sionix
Corporation, a Nevada corporation ("Lessee"), (collectively the "Parties," or
individually a "Party").

         1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 14271 Corporate Drive, Garden Grove, located in the County of Orange,
State of California, and generally described as (describe briefly the nature of
the property and, if applicable, the "PROJECT", if the property is located
within a Project) that certain approximately 59,876 square foot freestanding
industrial building situated on approximately 2.59 acres, parcel AP#099-182-29
("Premises"). (See also Paragraph 2)

         1.3 TERM: Five (5) years and no (0) months ("Original Term") commencing
October 1, 2007 ("Commencement Date") and ending September 30, 2012 ("Expiration
Date"). (See also Paragraph 3)

         1.4 EARLY POSSESSION: Upon execution of leases, Lessor's receipt of
monies per paragraph 1.6e ("Early Possession Date"). (See also Paragraphs 3.2
and 3.3)

         1.5 BASE RENT: $18, 000.00 per month ("Base Rent"), payable on the
first (1 st) day of each month commencing October 1, 2007. On April 1, 2008,
Base Rent increases to $35,925 per month. (See also Paragraph 4)

  If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.

         1.6 BASE RENT PAID UPON EXECUTION:

         (a)      BASE RENT: $18, 000.00 for the period October 1, 2007 through
                  March 31, 2008.
         (b)      SECURITY DEPOSIT: $100,000.00 ("Security Deposit"). See also
                  Paragraph 5
         (c)      ASSOCIATION FEES: $ NONE
         (d)      OTHER: SEE PARAGRAPH 53
         (e)      TOTAL DUE UPON EXECUTION OF THIS LEASE $118,000.00

         1.7 AGREED USE: The manufacture and distribution of water purification
systems. (See also Paragraph 6)

         1.8 INSURING PARTY: Lessor is the "Insuring Party" unless otherwise
stated herein. (See also Paragraph 8)

         1.9 REAL ESTATE BROKERS: (See also Paragraph 15)

               (a) REPRESENTATION: The following real estate brokers
      (collectively, the "Brokers") and brokerage relationships exist in this
      transaction (check applicable boxes):

|X| Lee & Associates - Commerce, Inc. and Lee & Associates - Orange, Inc.
represents Lessor exclusively ("Lessor's Broker");

|X| Lee & Associates - Irvine, Inc. represents Lessee exclusively ("Lessee's
Broker"); or


|_| ________________________________ represents both Lessor and Lessee ("Dual
Agency").



                  (b) PAYMENT TO BROKERS: Upon execution and delivery of this
         Lease by both Parties, Lessor shall pay to the Broker the fee agreed to
         in their separate written agreement (or if there is no such agreement,
         the sum of Five (5%) percent of the total Base Rent and three (3%)
         percent of the Total Base Rent if Lessee exercises its option to renew
         the Lease under paragraph 52 or __________% of the total Base Rent for
         the brokerage services rendered by the Brokers

         1.10 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by None ("Guarantor"). (See also Paragraph 37)

         1.11 ATTACHMENTS. Attached hereto are the following, all of which
constitute a part of this Lease:

|X|  an Addendum consisting of Paragraphs 51 through 54;
|_|  a plot plan depicting the Premises;
|_|  a current set of the Rules and Regulations;
|_|  a Work Letter;
|_|  other
     (specify):_________________________________________________________________
     ___________________________________________________________________________
     __________________________________________________________________________.

     2.  PREMISES.

         2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.

         2.2 CONDITION. Lessor shall deliver the Premises to Lessee broom clean
and free of debris on the Commencement Date or the Early Possession Date,
whichever first occurs ("START DATE"), and, so long as the required service
contracts described in Paragraph 7.1(b) below are obtained by Lessee within
thirty (30) days following the Start Date, warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems ("HVAC"), loading doors, sump pumps, if any, and all other
such elements in the Premises, other than those constructed by Lessee, shall be
to good operating condition on said date and that the structural elements of the
roof, bearing walls and foundation of any buildings on the Premises (the
"BUILDING") shall be free of material defects and that the Premises do not
contain hazardous levels of any mold or fungi defined as toxic under applicable
stat or federal law. If a non-compliance with said warranty exists as of the
Start Date, or if one of such systems or elements should malfunction or fail
within the appropriate warranty period, Lessor shall, as Lessor's sole
obligation with respect to such matter, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If, after the Start Date, Lessee does not give Lessor written
notice of any non-compliance with this warranty within: (1) one year as to the
surface of the roof and the structural portions of the roof, foundations and
bearing walls, (ii) six (6) months as to the HVAC systems, (iii) thirty (30)
days as to the remaining systems and other elements of the Building, correction
of such non-compliance shall be the obligation of Lessee at Lessee's sole cost
and expense.

         2.3 COMPLIANCE. Lessor warrants that to the best of its knowledge the
improvements on the Premises comply with all applicable laws, covenants or
restrictions of record, building codes, regulations and ordinances ("APPLICABLE
REQUIREMENTS") that were in effect at the time that each improvement, or portion
thereof, was constructed. Said warranty does not apply to the use to which
Lessee will put the Premises or to any Alterations or Utility Installations (as
defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: LESSEE IS
RESPONSIBLE FOR DETERMINING WHETHER OR NOT THE ZONING IS APPROPRIATE FOR
LESSEE'S INTENDED USE, AND ACKNOWLEDGES THAT PAST USES OF THE PREMISES MAY NO
LONGER BE ALLOWED. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided, promptly after receipt of written notice
from Lessee setting forth with specificity the nature and extent of such


                                      -2-


non-compliance, rectify the same at Lessor's expense. If Lessee does not give
Lessor written notice of a non-compliance with this warranty within six (6)
months following the Start Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense. If the Applicable
Requirements are hereafter changed so as to require during the term of this
Lease the construction of an addition to or an alteration of the Premises and/or
Building, the remediation of any Hazardous Substance, or the reinforcement or
other physical modification of the Unit, Premises and/or Building ("Capital
Expenditure"), Lessor and Lessee shall allocate the cost of such work as
follows:

                  (a) Subject to Paragraph 2.3(c) below, if such Capital
         Expenditures are required as a result of the specific and unique use of
         the Premises by Lessee as compared with uses by tenants in general,
         Lessee shall be fully responsible for the cost thereof, provided,
         however that if such Capital Expenditure is required during the last
         two (2) years of this Lease and the cost thereof exceeds six (6)
         months' Base Rent, Lessee may instead terminate this Lease unless
         Lessor notifies Lessee, in writing, within ten (10) days after receipt
         of Lessee's termination notice that Lessor has elected to pay the
         difference between the actual cost thereof and the amount equal to six
         (6) months' Base Rent. If Lessee elects termination, Lessee shall
         immediately cease the use of the Premises which requires such Capital
         Expenditure and deliver to Lessor written notice specifying a
         termination date at least ninety (90) days thereafter. Such termination
         date shall, however, in no event be earlier than the last day that
         Lessee could legally utilize the Premises without commencing such
         Capital expenditure.

                  (b) If such Capital Expenditure is not the result of the
         specific and unique use of the Premises by Lessee (such as,
         governmentally mandated seismic modifications), then Lessor and Lessee
         shall allocate the obligation to pay each month during the remainder of
         the term of this Lease, on the date that on which the Base rent is due,
         an amount equal to 144th of the portion of such costs reasonably
         attributable to the Premises. Lessee shall pay interest on the balance
         but may prepay its obligation at any time. If however, such Capital
         Expenditure is required during the last two years of this Lease or if
         Lessor reasonably determines that it is not economically feasible to
         pay its share thereof, Lessor shall have the option to terminate this
         Lease upon ninety (90) days prior written notice to Lessee unless
         Lessee notifies Lessor, in writing, within ten (10) days after receipt
         of Lessor's termination notice that Lessee will pay for such Capital
         Expenditure. If Lessor does not elect to terminate, and fails to tender
         its share of any such Capital Expenditure, Lessee may advance such
         funds and deduct same, with Interest, from Rent until Lessor's share of
         such costs have been fully paid. If Lessee is unable to finance
         Lessor's share, or if the balance of the Rent due and payable for the
         remainder of this Lease is not sufficient to fully reimburse Lessee on
         an offset basis, Lessee shall have the right to terminate this Lease
         upon thirty (30) days written notice to Lessor.

                  (c) Notwithstanding the above, the provisions concerning
         Capital Expenditures are intended to apply only to non-voluntary,
         unexpected, and new Applicable Requirements. If the Capital
         Expenditures are instead triggered by Lessee as a result of an actual
         or proposed change in use, change in intensity of use, or modification
         to the Premises then, and in that event, Lessee shall be fully
         responsible for the cost thereof, and Lessee shall not have any right
         to terminate this Lease.

         2.4 ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been advised
by Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable
Requirements and the Americans with Disabilities Act), and their suitability for
Lessee's intended use; (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to its occupancy of the Premises; and (c) neither Lessor,
Lessor's agents, nor any Broker has made any oral or written representations or
warranties with respect to said matters other than as set forth in this Lease.
In addition, Lessor acknowledges that: (i) Broker has made no representations,
promises or warranties concerning Lessee's ability to honor the Lease or
suitability to occupy the Premises; and (ii) it is Lessor's sole responsibility
to investigate the financial capability and/or suitability of all proposed
tenants.

         2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.


                                      -3-


3. TERM.

         3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.

         3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
(including, but not limited to, the obligations to pay Real Property Taxes and
insurance premiums and to maintain the Premises) shall be in effect during such
period. Any such early possession shall not affect the Expiration Date.

         3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession by such date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease. Lessee shall not,
however, be obligated to pay Rent or perform its other obligations until it
receives possession of the Premises and any period of rent abatement that Lessee
would otherwise have enjoyed shall run from the date of delivery of possession
and continued for a period equal to what Lessee would otherwise have enjoyed
under the terms hereof, but minus any days of delay caused by the acts or
omissions of Lessee. If possession is not delivered within sixty (60) days after
the Commencement Date, Lessee may, at its option, by notice in writing within
ten (10) days after the end of such sixty (60) day period, cancel this Lease, in
which event the Parties shall be discharged from all obligations hereunder. If
such written notice is not received by Lessor within said ten (10) day period,
Lessee's right to cancel shall terminate. Except as otherwise provided, if
possession is not tendered to Lessee by the Start Date and Lessee does not
terminate. If possession of the Premises is not delivered within 120 days after
the Commencement Date, this Lease shall terminate unless other agreements are
reached between Lessor and Lessee, in writing.

         3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.

4. RENT.

         4.1 RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("RENT").

         4.2 PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. All monetary amounts shall be rounded to the nearest whole dollar. In the
event that any invoice prepared by Lessor is inaccurate such inaccuracy shall
not constitute a waiver and Lessee shall be obligated to pay the amount set
forth in this Lease. Rent for any period during the term hereof which is for
less than one (1) full calendar month shall be prorated based upon the actual
number of days of said month. Payment of Rent shall be made to Lessor at its
address stated herein or to such other persons or place as Lessor may from time
to time designate in writing. Acceptance of a payment which less than the amount
then due shall not be a waiver of Lessor's rights to the balance of such Rent,
regardless of Lessor's endorsement of any check so stating. In the event that
any check, draft, or other instrument of payment given by Lessee to Lessor is
dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in
addition to any late charge and Lessor, at its option, may require all future
Rent to be paid by cashier's check. Payments will be applied first to accrued
late charges and attorney's fees, second to accrued interest, then to Base Rent
and Common Area Operating Expenses, and any remaining amount to any other
outstanding charges or costs.


                                      -4-


      4.3 ASSOCIATION FEES. In addition to the Base Rent, Lessee shall pay to
Lessor each month an amount equal to any owner's association or condominium fees
levied or assessed against the Premises. Said monies shall be paid at the same
time and in the same manner as the Base Rent.

5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor for Rents which will
be due in the future, and/or to reimburse or compensate Lessor for any
liability, expense, loss or damage which Lessor may suffer or incur by reason
thereof. If Lessor uses or applies all or any portion of said Security Deposit,
Lessee shall within ten (10) days after written request therefor deposit monies
with Lessor sufficient to restore said Security Deposit to the full amount
required by this Lease. If the Base Rent increases during the term of this
Lease, Lessee shall, upon written request from Lessor, deposit additional monies
with Lessor so that the total amount of the Security Deposit shall at all times
bear the same proportion to the increased Base Rent as the initial Security
Deposit bore to the initial Base Rent. Should the Agreed Use be amended to
accommodate a material change in the business of Lessee or to accommodate a
sublessee or assignee, Lessor shall have the right to increase the Security
Deposit to the extent necessary, in Lessor's reasonable judgment, to account for
any increased wear and tear that the Premises may suffer as a result thereof. If
a change in control of Lessee occurs during this Lease and following such change
the financial condition of Lessee is, in Lessor's reasonable judgment,
significantly reduced, Lessee shall deposit such additional monies with Lessor
as shall be sufficient to cause the Security Deposit to be at a commercially
reasonable level based on said change in financial condition. Lessor shall not
be required to keep the Security Deposit separate from its general accounts.
Within ninety (90) days after the expiration or termination of this Lease,
Lessor shall return that portion of the Security Deposit not used or applied by
Lessor. No part of the Security Deposit shall be considered to be held in trust,
to bear interest or to be prepayment for any monies to be paid by Lessee under
this Lease.

6. USE.

         6.1 USE. Lessee shall use and occupy the premises only for the Agreed
Use, or any other legal use which is reasonably comparable thereto, and for no
other purpose. Lessee shall not use or permit the use of the Premises in a
manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring premises or
properties. Other than guide, signal and Seeing Eye dogs, Lessee shall not keep
or allow any pets, animals, birds, fish, or reptiles. Lessor shall not
unreasonably withhold or delay its consent to any written request for a
modification of the Agreed Use, so long as the same will not impair the
structural integrity of the Improvements on the Premises or the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within seven (7)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in the Agreed
Use.

         6.2   HAZARDOUS SUBSTANCES.

                  (a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
         SUBSTANCE" as used in this Lease shall mean any product, substance, or
         waste whose presence, use, manufacture, disposal, transportation, or
         release, either by itself or in combination with other materials
         expected to be on the Premises, is either: (i) potentially injurious to
         the public health, safety or welfare, the environment or the Premises,
         (ii) regulated or monitored by any governmental authority, or (iii) a
         basis for potential liability of Lessor to any governmental agency or
         third party under any applicable statute or common law theory.
         Hazardous Substances shall include, but not be limited to,
         hydrocarbons, petroleum, gasoline, and/or crude oil or any products,
         by-products or fractions thereof. Lessee shall not engage in any
         activity in or on the Premises which constitutes a Reportable Use of
         Hazardous Substances without the express prior written consent of
         Lessor and timely compliance (at Lessee's expense) with all Applicable
         Requirements. "REPORTABLE USE" shall mean (i) the installation or use
         of any above or below ground storage tank, (ii) the generation,
         possession, storage, use, transportation, or disposal of a Hazardous
         Substance that requires a permit from, or with respect to which a
         report, notice, registration or business plan is required to be filed
         with, any governmental authority, and/or (iii) the presence at the
         Premises of a Hazardous Substance with respect to which any Applicable
         Requirements requires that a notice be given to persons entering or


                                      -5-


         occupying the Premises or neighboring properties. Notwithstanding the
         foregoing, Lessee may use any ordinary and customary materials
         reasonably required to be used in the normal course of the Agreed Use,
         so long as such use is in compliance with all Applicable Requirements,
         is not a Reportable Use, and does not expose the Premises or
         neighboring property to any meaningful risk of contamination or damage
         or expose Lessor to any liability therefor. In addition, Lessor may
         condition its consent to any Reportable Use upon receiving such
         additional assurances as Lessor reasonably deems necessary to protect
         itself, the public, the Premises and/or the environment against damage,
         contamination, injury and/or liability, including, but not limited to,
         the installation (and removal on or before Lease expiration or
         termination) of protective modifications (such as concrete encasements)
         and/or increasing the Security Deposit.

                  (b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
         cause to believe, that a Hazardous Substance has come to be located in,
         on, under or about the Premises, other than as previously consented to
         by Lessor, Lessee shall immediately give written notice of such fact to
         Lessor, and provide Lessor with a copy of any report, notice, claim or
         other documentation which it has concerning the presence of such
         Hazardous Substance.

                  (c) LESSEE REMEDIATION. Lessee shall not cause or permit any
         Hazardous Substance to be spilled or released in, on, under, or about
         the Premises (including through the plumbing or sanitary sewer system)
         and shall promptly, at Lessee's expense, take all investigatory and/or
         remedial action reasonably recommended, whether or not formally ordered
         or required, for the cleanup of any contamination of, and for the
         maintenance, security and/or monitoring of the Premises or neighboring
         properties, that was caused or materially contributed to by Lessee, or
         pertaining to or involving any Hazardous Substance brought onto the
         Premises during the term of this Lease, by or for Lessee, or any third
         party.

                  (d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
         hold Lessor, its agents, employees, lenders and ground lessor, if any,
         harmless from and against any and all loss of rents and/or damages,
         liabilities, judgments, claims, expenses, penalties, and attorneys' and
         consultants' fees arising out of or involving any Hazardous Substance
         brought onto the Premises by or for Lessee, or any third party
         (provided, however, that Lessee shall have no liability under this
         Lease with respect to underground migration of any Hazardous Substance
         under the Premises from adjacent properties). Lessee's obligations
         shall include, but not be limited to, the effects of any contamination
         or injury to person, property or the environment created or suffered by
         Lessee, and the cost of investigation, removal, remediation,
         restoration and/or abatement, and shall survive the expiration or
         termination of this Lease. NO TERMINATION, CANCELLATION OR RELEASE
         AGREEMENT ENTERED INTO BY LESSOR AND LESSEE SHALL RELEASE LESSEE FROM
         ITS OBLIGATIONS UNDER THIS LEASE WITH RESPECT TO HAZARDOUS SUBSTANCES,
         UNLESS SPECIFICALLY SO AGREED BY LESSOR IN WRITING AT THE TIME OF SUCH
         AGREEMENT .

                  (e) LESSOR INDEMNIFICATION. Lessor and its successors and
         assigns shall indemnify, defend, reimburse and hold Lessee, its
         employees and lenders, harmless from and against any and all
         environmental damages, including the cost of remediation, which existed
         as a result of Hazardous Substances which existed on the Premises prior
         to Lessee's occupancy or which are caused by the gross negligence or
         willful misconduct of Lessor, its agents or employees. Lessor's
         obligations, as and when required by the Applicable Requirements, shall
         include, but not be limited to, the cost of investigation, removal,
         remediation, restoration and/or abatement, and shall survive the
         expiration or termination of this Lease.

                  (f) INVESTIGATIONS AND REMEDIATION'S. Lessor shall retain the
         responsibility and pay for any investigations or remediation measures
         required by governmental entities having jurisdiction with respect to
         the existence of Hazardous Substances on the Premises prior to Lessee's
         occupancy, unless such remediation measure is required as a result of
         Lessee's use (including "Alterations," as defined in Paragraph 7.3(a)
         below) of the Premises, in which event Lessee shall be responsible for
         such payment. Lessee shall cooperate fully in any such activities at
         the request of Lessor, including allowing Lessor and Lessor's agents to
         have reasonable access to the Premises at reasonable times in order to
         carry out Lessor's investigative and remedial responsibilities.


                                      -6-


                  (g) LESSOR TERMINATION OPTION. If a Hazardous Substance
         Condition (see Paragraph 9.1 (e)) occurs during the term of this Lease,
         unless Lessee is legally responsible therefor (in which case Lessee
         shall make the investigation and remediation thereof required by the
         Applicable Requirements and this Lease shall continue in full force and
         effect, but subject to Lessor's rights under Paragraph 6.2(d) and
         Paragraph 13), Lessor may, at Lessor's option, either (i) investigate
         and remediate such Hazardous Substance Condition, if required, as soon
         as reasonably possible at Lessor's expense, in which event this Lease
         shall continue in full force and effect, or (ii) if the estimated cost
         to remediate such condition exceeds twelve (12) times the then monthly
         Base Rent or $100,000, whichever is greater, give written notice to
         Lessee, within thirty (30) days after receipt by Lessor of knowledge of
         the occurrence of such Hazardous Substance Condition, of Lessor's
         desire to terminate this Lease as of the date sixty (60) days following
         the date of such notice. In the event Lessor elects to give a
         termination notice, Lessee may, within ten (10) days thereafter, give
         written notice to Lessor of Lessee's commitment to pay the amount by
         which the cost of the remediation of such Hazardous Substance Condition
         exceeds an amount equal to twelve (12) times the then monthly Base Rent
         or $100,000, whichever is greater. Lessee shall provide Lessor with
         said funds or satisfactory assurance thereof within thirty (30) days
         following such commitment. In such event, this Lease shall continue in
         full force and effect, and Lessor shall proceed to make such
         remediation as soon as reasonably possible after the required funds are
         available. If Lessee does not give such notice and provide the required
         funds or assurance thereof within the time provided, this Lease shall
         terminate as of the date specified in Lessor's notice of termination.

         6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements. Likewise,
Lessee shall immediately give written notice to Lessor of: (i) any water damage
to the Premises and any suspected seepage, pooling, dampness or other condition
conducive to the production of mold; or (ii) any mustiness or other odors that
might indicate the presence of mold in the Premises.

         6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "LENDER" (as defined in
Paragraph 30 below) and consultants shall have the right to enter into Premises
at any time, in the case of an emergency, and otherwise at reasonable times
after reasonable notice, for the purpose of inspecting the condition of the
Premises and for verifying compliance by Lessee with this Lease. The cost of any
such inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or Hazardous Substance Condition (see paragraph 9.1) is found to
exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lesser
for the cost of such inspections, so long as such inspection is reasonably
related to the violation or contamination. In addition, Lessee shall provide
copies of all relevant material safety data sheets (MSDS) to Lessor within 10
days of the receipt of a written request therefore.

7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS.

         7.1   LESSEE'S OBLIGATIONS.

                  (a) IN GENERAL. Subject to the provisions of Paragraph 2.2
         (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
         Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction),
         and 14 (Condemnation), Lessee shall, at Lessee's sole expense, keep the
         Premises, Utility Installations, and Alterations in good order,
         condition and repair (whether or not the portion of the Premises
         requiring repairs, or the means of repairing the same, are reasonably
         or readily accessible to Lessee, and whether or not the need for such
         repairs occurs as a result of Lessee's use, any prior use, the elements
         or the age of such portion of the Premises), including, but not limited
         to, all equipment or facilities, such as plumbing, heating,


                                      -7-


         ventilating, air-conditioning, electrical, lighting facilities,
         boilers, pressure vessels, fire protection system, fixtures, walls
         (interior and exterior), foundations, ceilings, roofs, floors, windows,
         doors, plate glass, skylights, landscaping, driveways, parking lots,
         fences, retaining walls, signs, sidewalks and parkways located in, on,
         or adjacent to the Premises. Lessee, in keeping the Premises in good
         order, condition and repair, shall exercise and perform good
         maintenance practices, specifically including the procurement and
         maintenance of the service contracts required by Paragraph 7.1(b)
         below. Lessee's obligations shall include restorations, replacements or
         renewals when necessary to keep the Premises and all improvements
         thereon or a part thereof in good order, condition and state of repair.
         Lessee shall, during the term of this Lease, keep the exterior
         appearance of the Building in a first-class condition (including, e.g.
         graffiti removal) consistent with the exterior appearance of other
         similar facilities of comparable age and size in the vicinity,
         including, when necessary, the exterior repainting of the Building.

                  (b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
         procure and maintain contracts, with copies to Lessor, in customary
         form and substance for, and with contractors specializing and
         experienced in the maintenance of the following equipment and
         improvements, if any, if and when installed on the Premises: (i) HVAC
         equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing
         systems, including fire alarm and/or smoke detection, (iv) landscaping
         and irrigation systems, (v) roof covering and drains, (vi) driveways
         and parking lots, (vii) clarifiers, however, Lessor reserves the right,
         upon notice to Lessee, to procure and maintain any or all of such
         service contracts, and Lessee shall reimburse Lessor, upon demand, for
         the cost thereof.

                  (c) FAILURE TO PERFORM. If Lessee fails to perform Lessee's
         obligations under this Paragraph 7.1, Lessor may enter upon the
         Premises after 10 days' prior written notice to Lessee (except in the
         case of an emergency, in which case no notice shall be required),
         perform such obligations on Lessee's behalf, and put the Premises in
         good order, condition and repair, and Lessee shall promptly pay to
         Lessor a sum equal to 115% of the cost thereof.

                  (d) REPLACEMENT. Subject to Lessee's indemnification of Lessor
         as set forth in Paragraph 8.7 below, and without relieving Lessee of
         liability resulting from Lessee's failure to exercise and perform good
         maintenance practices, if an item described in Paragraph 7.1(b) cannot
         be repaired other than at a cost which is in excess of 50% of the cost
         of replacing such items, then such item shall be replaced by Lessor,
         and the cost thereof shall be prorated between the Parties and Lessee
         shall only be obligated to pay, each month during the remainder of the
         term of this Lease, on the date on which Base Rent is due, an amount
         equal to the product of multiplying the cost of such replacement by a
         fraction, the numerator of which is one, and the denominator of which
         is 144 (i.e. 1/144th of the cost per month). Lessee shall pay interest
         on the unamortized balance but may prepay its obligation at any time.

         7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation),
it is intended by the Parties hereto that Lessor have no obligation, in any
manner whatsoever, to repair and maintain the Premises, or the equipment
therein, all of which obligations are intended to be that of the Lessee. It is
the intention of the Parties that the terms of this Lease govern the respective
obligations of the Parties as to maintenance and repair of the Premises, and
they expressly waive the benefit of any statute now or hereafter in effect to
the extent it is inconsistent with the terms of this Lease.

         7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.

                  (a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
         INSTALLATIONS" refers to all floor and window coverings, air lines,
         power panels, electrical distribution, security and fire protection
         systems, communication systems, lighting fixtures, HVAC equipment,
         plumbing, and fencing in or on the Premises. The term "TRADE FIXTURES"
         shall mean Lessee's machinery and equipment that can be removed without
         doing material damage to the Premises. The term "ALTERATIONS" shall
         mean any modification of the improvements, other than Utility
         Installations or Trade Fixtures, whether by addition or deletion.
         "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
         Alterations and/or Utility Installations made by Lessee that are not
         yet owned by Lessor pursuant to Paragraph 7.4(a).


                                      -8-


                (b) CONSENT. Lessee shall not make any Alterations or Utility
         Installations to the Premises without Lessor's prior written consent.
         Lessee may, however, make non-structural Utility Installations to the
         Interior of the Premises (excluding the roof) without such consent but
         upon notice to Lessor, as long as they are not visible from the
         outside, do not involve puncturing, relocating or removing the roof or
         any existing walls, will not affect the electrical, plumbing, HVAC,
         and/or life safety systems, and the cumulative cost thereof during this
         Lease as extended does not exceed a sum equal to 3 month's Base Rent in
         the aggregate or a sum equal to one month's Base Rent in any one year.
         Notwithstanding the foregoing, Lessee shall not make or permit any roof
         penetrations and/or install anything on the roof without the prior
         written approval of Lessor. Lessor may, as a precondition to granting
         such approval, require Lessee to utilize a contractor chosen and/or
         approved by Lessor. Any Alterations or Utility installations that
         Lessee shall desire to make and which require the consent of the Lessor
         shall be presented to the Lessor in written form with detailed plans.
         Consent shall be deemed conditioned upon Lessee's: (i) acquiring all
         applicable governmental permits, (ii) furnishing Lessor with copies of
         both permits and the plans and specifications prior to commencement of
         the work, and (iii) compliance with all conditions of said permits and
         other Applicable Requirements in a prompt and expeditious manner. Any
         Alterations or Utility installations shall be performed in a
         workmanlike manner with good and sufficient materials. Lessee shall
         promptly upon completion furnish Lessor with as-built plans and
         specifications. For work which costs an amount in excess of one month's
         Base Rent, Lessor may condition its consent upon Lessee providing a
         lien and completion bond in an amount equal to 150% of the estimated
         cost of such Alteration or Utility Installation and/or upon Lessee's
         posting an additional Security Deposit with Lessor.

                  (c) LIENS; BONDS. Lessee shall pay, when due, all claims for
         labor or materials furnished or alleged to have been furnished to or
         for Lessee at or for use on the Premises, which claims are or may be
         secured by any mechanic's or material men's lien against the Premises
         or any interest therein. Lessee shall give Lessor not less than ten
         (10) days' notice prior to the commencement of any work in, on or about
         the Premises, and Lessor shall have the right to post notices of
         non-responsibility. If Lessee shall contest the validity of any such
         lien, claim or demand, then Lessee shall, at its sole expense defend
         and protect itself, Lessor and the Premises against the same and shall
         pay and satisfy, any such adverse judgment that may be rendered thereon
         before the enforcement thereof. If Lessor shall require, Lessee shall
         furnish a surety bond in an amount equal to 150% of the amount of such
         contested lien, claim or demand, indemnifying Lessor against liability
         for the same. If Lessor elects to participate in any such action,
         Lessee shall pay Lessor's attorneys' fees and costs.

         7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.

                  (a) OWNERSHIP. Subject to Lessor's right to require removal or
         elect ownership as hereinafter provided, all Alterations and Utility
         Installations made by Lessee shall be the property of Lessee, but
         considered a part of the Premises. Lessor may, at any time, elect in
         writing to be the owner of all or any specified part of the Lessee
         Owned Alterations and Utility Installations. Unless otherwise
         instructed per Paragraph 7.4(b) hereof, all Lessee Owned Alterations
         and Utility Installations shall, at the expiration or termination of
         this Lease, become the property of Lessor and be surrendered by Lessee
         with the Premises.

                  (b) REMOVAL. By delivery to Lessee of written notice from
         Lessor not earlier than ninety (90) and not later than thirty (30) days
         prior to the end of the term of this Lease, Lessor may require that any
         or all Lessee Owned Alterations or Utility Installations be removed by
         the expiration or termination of this Lease. Lessor may require the
         removal at any time of all or any part of any Lessee Owned Alterations
         or Utility Installations made without the required consent.

                  (c) SURRENDER; RESTORATION. Lessee shall surrender the
         Premises by the Expiration Date or any earlier termination date, with
         all of the improvements, parts and surfaces thereof broom clean and
         free of debris, and in good operating order, condition and state of
         repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall
         not include any damage or deterioration that would have been prevented
         by good maintenance practice. Notwithstanding the foregoing, if this
         Lease is for 12 months or less, then Lessee shall surrender the
         Premises in the same condition as delivered to Lessee on the Start Date
         with NO allowance for ordinary wear and tear. Lessee shall repair any
         damage occasioned by the installation, maintenance or removal of Trade


                                      -9-


         Fixtures. Lessee Owned Alterations and/or Utility Installations,
         furnishings, and equipment as well as the removal of any storage tank
         installed by or for Lessee. Lessee shall completely remove from the
         Premises any and all Hazardous Substances brought onto the Premises by
         or for Lessee, or any third party (except Hazardous Substances which
         were deposited via underground migration from areas outside of the
         Premises, or if applicable, the Premises) even if such removal would
         require Lessee to perform or pay for work that exceeds statutory
         requirements. Trade Fixtures shall remain the property of Lessee and
         shall be removed by Lessee. Any personal property of Lessee not removed
         on or before the Expiration Date or any earlier termination date shall
         be deemed to have been abandoned by Lessee and may be disposed of or
         retained by Lessor as Lessor may desire. The failure by Lessee to
         timely vacate the Premises pursuant to this Paragraph 7.4(c) without
         the express written consent of Lessor shall constitute a holdover under
         the provisions of Paragraph 26 below.

8. INSURANCE; INDEMNITY.

         8.1 PAYMENT FOR INSURANCE. Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per
occurrence. Premiums for policy periods commencing prior to or extending beyond
the Lease term shall be prorated to correspond to the Lease term. Payment shall
be made by Lessee to Lessor within ten (10) days following receipt of an
invoice.

         8.2   LIABILITY INSURANCE.

                  (a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
         Commercial General Liability Policy of Insurance protecting Lessee and
         Lessor against claims for bodily injury, personal injury and property
         damage based upon or arising out of the ownership, use, occupancy or
         maintenance of the Premises and all areas appurtenant thereto. Such
         insurance shall be on an occurrence basis providing single limit
         coverage in an amount not less than $1,000,000 per occurrence with an
         annual aggregate of not less than $2,000,000. Lessee shall add Lessor
         as an additional insured by means of an endorsement at least as broad
         as the Insurance Service Organization's "Additional Insured-Managers or
         Lessors of Premises" Endorsement. The policy shall not contain any
         intra-insured exclusions as between insured persons or organizations,
         but shall include coverage for liability assumed under this Lease as an
         "INSURED CONTRACT" for the performance of Lessee's indemnity
         obligations under this Lease. The limits of said insurance shall not,
         however, limit the liability of Lessee nor relieve Lessee or any
         obligation hereunder. Lessee shall provide an endorsement on its
         liability policy (ies) which provides that its insurance shall be
         primary to and not contributory with any similar insurance carried by
         Lessor, whose insurance shall be considered excess insurance only.

                  (b) CARRIED BY LESSOR. Lessor shall maintain liability
         insurance as described in Paragraph 8.2(a), in addition to, and not in
         lieu of, the insurance required to be maintained by Lessee. Lessee
         shall not be named as an additional insured therein.

         8.3   PROPERTY INSURANCE--BUILDING, IMPROVEMENTS AND RENTAL VALUE.

                  (a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
         and keep in force a policy or policies in the name of Lessor, with loss
         payable to Lessor, any ground-lessor, and to any Lender(s) insuring
         loss or damage to the Premises. The amount of such insurance shall be
         equal to the full replacement cost of the Premises, as the same shall
         exist from time to time, or the amount required by any Lenders, but in
         no event more than the commercially reasonable and available insurable
         value thereof. If Lessor is the Insuring Party, however, Lessee Owned
         Alterations and Utility Installations, Trade Fixtures, and Lessee's
         personal property shall be insured by Lessee under Paragraph 8.4 rather
         than by Lessor. If the coverage is available and commercially
         appropriate such policy or policies shall insure against all risks of
         direct physical loss or damage (except the perils of flood and/or
         earthquake unless required by a Lender), including coverage for debris
         removal and the enforcement of any Applicable Requirements requiring
         the upgrading, demolition, reconstruction or replacement of any portion
         of the Premises as the result of a covered loss. Said policy or
         policies shall also contain an agreed valuation provision in lieu of


                                      -10-


         any coinsurance clause, waiver of subrogation, and inflation guard
         protection causing an increase in the annual property insurance
         coverage amount by a factor of not less than the adjusted U.S.
         Department of Labor Consumer Price Index for All Urban Consumers for
         the city nearest to where the Premises are located. If such insurance
         coverage has a deductible clause, the deductible amount shall not
         exceed $1,000 per occurrence, and Lessee shall be liable for such
         deductible amount in the event of an Insured Loss.

                  (b) RENTAL VALUE. The Insuring Party shall obtain and keep in
         force a policy or policies in the name of Lessor with loss payable to
         Lessor and any Lender, insuring the loss of the full Rent for one (1)
         year with an extended period of indemnity for an additional 180 days
         ("Rental Value insurance"). Said insurance shall contain an agreed
         valuation provision in lieu of any coinsurance clause, provide that in
         the event the Lease is terminated by reason of an insured loss, the
         period of indemnity for such coverage shall be adjusted annually to
         reflect the projected Rent otherwise payable by Lessee, for the next
         twelve (12) month period. Lessee shall be liable for any deductible
         amount in the event of such loss.

                  (c) ADJACENT PREMISES. If the Premises are part of a larger
         building, or of a group of buildings owned by Lessor which are adjacent
         to the Premises, the Lessee shall pay for any increase in the premiums
         for the property insurance of such building or buildings if said
         increase is caused by Lessee's acts, omissions, use or occupancy of the
         Premises.

         8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.

                  (a) PROPERTY DAMAGE. Lessee shall obtain and maintain
         insurance coverage on all of Lessee's personal property, Trade
         Fixtures, and Lessee Owned Alterations and Utility Installations. Such
         insurance shall be full replacement cost coverage with a deductible of
         not to exceed $1,000 per occurrence. The proceeds from any such
         insurance shall be used by Lessee for the replacement of personal
         property, Trade Fixtures and Lessee Owned Alterations and Utility
         Installations. Lessee shall provide Lessor with written evidence that
         such insurance is in force.

                  (b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain
         loss of income and extra expense insurance in amounts as will reimburse
         Lessee for direct or indirect loss of earnings attributable to all
         perils commonly insured against by prudent lessees in the business of
         Lessee or attributable to prevention of access to the premises as a
         result of such perils.

                  (c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
         representation that the limits or forms of coverage of insurance
         specified herein are adequate to cover Lessee's property, business
         operations or obligations under this Lease.

         8.5 INSURANCE POLICIES. Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least A-, VI, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least ten (10) days prior to the
expiration of such polices, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.

         8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is not limited by the


                                      -11-


amount of insurance carried or required, or by any deductibles applicable
hereto. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation that such companies may have against
Lessor or Lessee, as the case may be so long as the insurance is not invalidated
thereby.

         8.7 INDEMNITY. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be defended or indemnified.

         8.8 EXEMPTION OF LESSOR FROM LIABILITY. Notwithstanding the negligence
of this Lease by Lessor or its agents, neither Lessor nor its agents shall be
liable under any circumstances for: (i) for injury or damage to the person or
goods, wares, merchandise or other property of Lessee, Lessee's employees,
contractors, invitees, customers, or any other person in or about the Premises,
whether such damage or injury is caused by or results from fire, steam,
electricity, gas, water or rain, indoor air quality, the presence of mold or
from breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. (ii) any damages arising from any act or
neglect of any other tenant of Lessor or from failure of Lessor or its agents to
enforce the provisions of any other lease in the Project, or (iii) injury to
Lessee's business or for any loss of income or profit therefrom. Instead, it is
intended that Lessee's sole recourse in the event of such damages or injury be
to file a claim on the insurance policy(ies) that Lessee is required to maintain
pursuant to the provisions of paragraph 8.

         8.9 FAILURE TO PROVIDE INSURANCE. Lessee acknowledges that any failure
on its part to obtain or maintain the insurance required herein will expose
Lessor to risks and potentially cause Lessor to incur costs not contemplated by
this Lease, the extent of which will extremely difficult to ascertain.
Accordingly, for any month or portion thereof that Lessee does not maintain the
required insurance and/or does not provide Lessor with the required binders or
certificates evidencing the existence of the required insurance, the Base Rent
shall be automatically increased, without any requirement for notice to Lessee,
by an amount equal to 10% of the then existing Base Rent or $100, whichever is
greater. The parties agree that such increase in Base Rent represents fair and
reasonable compensation for the additional risk/costs that Lessor will incur by
reason of Lessee's failure to maintain such insurance, prevent the exercise of
any of the other rights and remedies granted hereunder, nor relieve Lessee of
its obligation to maintain the insurance specified in this Lease.

9. DAMAGE OR DESTRUCTION.

         9.1 DEFINITIONS.

                  (a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
         to the improvements on the Premises, other than Lessee Owned
         Alterations and Utility Installations, which can reasonably be repaired
         in six (6) months or less from the date of the damage or destruction.
         Lessor shall notify Lessee in writing within thirty (30) days from the
         date of the damage or destruction as to whether or not the damage is
         Partial or Total. Notwithstanding the foregoing, Premises Partial
         Damage shall not include damage to windows, doors, and/or other similar
         items which Lessee has the responsibility to repair or replace pursuant
         to the provisions of Paragraph 7.1.

                  (b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
         destruction to the Premises, other than Lessee Owned Alterations and
         Utility Installations and Trade Fixtures, which cannot reasonably be
         repaired in six (6) months or less from the date of the damage or


                                      -12-


         destruction. Lessor shall notify Lessee in writing within thirty (30)
         days from the date of the damage or destruction as to whether or not
         the damage is Partial or Total.

                  (c) "INSURED LOSS" shall mean damage or destruction to
         improvements on the Premises, other than Lessee Owned Alterations and
         Utility Installations and Trade Fixtures, which was caused by an event
         required to be covered by the insurance described in Paragraph 8.3(a),
         irrespective of any deductible amounts or coverage limits involved.

                  (d) "REPLACEMENT COST" shall mean the cost to repair or
         rebuild the improvements owned by Lessor at the time of the occurrence
         to their condition existing immediately prior thereto, including
         demolition, debris removal and upgrading required by the operation of
         Applicable Requirements, and without deduction for depreciation.

                  (e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence
         or discovery of a condition involving the presence of, or a
         contamination by, a Hazardous Substance as defined in Paragraph 6.2(a),
         in, on, or under the Premises.

         9.2 PARTIAL DAMAGE-INSURED LOSS. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to: (i) make
such restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect; (ii) have this Lease terminate thirty (30) days thereafter. Lessee shall
not be entitled to reimbursement of any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.

         9.3 PARTIAL DAMAGE-UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.

         9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate sixty (60) days
following such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.


                                      -13-


         9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds one
(1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten (10)days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.

         9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES .

                  (a) ABATEMENT. In the event of Premises Partial Damage or
         Premises Total Destruction or a Hazardous Substance Condition for which
         Lessee is not responsible under this Lease, the Rent payable by Lessee
         for the period required for the repair, remediation or restoration of
         such damage shall be abated in proportion to the degree to which
         Lessee's use of the Premises is impaired, but not to exceed the
         proceeds received from the Rental Value insurance. All other
         obligations of Lessee hereunder shall be performed by Lessee, and
         Lessor shall have no liability for any such damage, destruction,
         remediation, repair or restoration except as provided herein.

                  (b) REMEDIES. If Lessor shall be obligated to repair or
         restore the Premises and does not commence, in a substantial and
         meaningful way, such repair or restoration within ninety (90) days
         after such obligation shall accrue, Lessee may, at any time prior to
         the commencement of such repair or restoration, give written notice to
         Lessor and to any Lenders of which Lessee has actual notice, of
         Lessee's election to terminate this Lease on a date not less than sixty
         (60) days following the giving of such notice. If Lessee gives such
         notice and such repair or restoration is not commenced within thirty
         (30) days thereafter, this Lease shall terminate as of the date
         specified in said notice. If the repair or restoration is commenced
         within said thirty (30) days, this Lease shall continue in full force
         and effect. "COMMENCE " shall mean either the unconditional
         authorization of the preparation of the required plans, or the
         beginning of the actual work on the Premises, whichever first occurs.

         9.7 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.

10. REAL PROPERTY TAXES.

         10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES " shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located. Real
Property Taxes shall also include any tax, fee, levy, assessment or charge, or
any increase therein; (i) imposed by reason of events occurring during the term


                                      -14-


of this Lease, including but not limited to, a change in the ownership of the
Premises, and (ii) levied or assessed on machinery or equipment provided by
Lessor to Lessee pursuant to this Lease.

         10.2 PAYMENT OF TAXES. In addition to Base Rent, Lessee shall pay to
Lessor an amount equal to the Real Property Taxes installment due at least
twenty (20) days prior to applicable delinquency date. If any such installment
shall cover any period of time prior to or after the expiration or termination
of this Lease, Lessee's share of such installment shall be prorated. In the
event Lessee incurs a late charge on any Rent payment, Lessor may estimate the
current Real Property Taxes, and require that such taxes be paid in advance to
Lessor by Lessee monthly in advance with the payment of the Base Rent. Such
monthly payments shall be an amount equal to the amount of the estimated
installment of taxes divided by the number of months remaining before the month
in which said installment becomes delinquent. When the actual mount of the
applicable tax bill is known, the amount of such equal monthly advance payments
shall be adjusted as required to provide the funds needed to pay the applicable
taxes. If the amount collected by Lessor is insufficient to pay such Real
Property Taxes when due, Lessee shall pay Lessor, upon demand, such additional
sum as is necessary. Advance payments may be intermingled with other moneys of
Lessor and shall not bear interest. In the event of a Breach by Lessee in the
performance of its obligations under this Lease, then any such advance payments
may be treated by Lessor as an additional Security Deposit.

         10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed;
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.

         10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.

11. UTILITIES AND SERVICES. Lessee shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered or billed. There shall be
no abatement of rent and Lessor shall not be liable in any respect whatsoever
for the inadequacy, stoppage, interruption or discontinuance of any utility or
service due to riot, strike, labor dispute, breakdown, accident, repair or other
cause beyond Lessor's reasonable control or in cooperation with governmental
request or directions.

12. ASSIGNMENT AND SUBLETTING.

         12.1 LESSOR'S CONSENT REQUIRED.

                  (a) Lessee shall not voluntarily or by operation of law
         assign, transfer, mortgage or encumber (collectively, "assign OR
         ASSIGNMENT ") or sublet all or any part of Lessee's interest in this
         Lease or in the Premises without Lessor's prior written consent, which
         shall not be unreasonably withheld.

                  (b) Unless Lessee is a corporation and its stock is publicly
         traded on a national stock exchange, a change in the control of Lessee
         shall constitute an assignment requiring consent. The transfer, on a
         cumulative basis, of twenty-five percent (25%) or more of the voting
         control of Lessee shall constitute a change in control for this
         purpose.

                  (c) The involvement of Lessee or its assets in any
         transaction, or series of transactions (by way of merger, sale,
         acquisition, financing, transfer, leveraged buy-out or otherwise),
         whether or not a formal assignment or hypothecation of this Lease or
         Lessee's assets occurs, which results or will result in a reduction of


                                      -15-


         the Net Worth of Lessee by an amount greater than twenty-five percent
         (25%) of such Net Worth as it was represented at the time of the
         execution of this Lease or at the time of the most recent assignment to
         which Lessor has consented, or as it exists immediately prior to said
         transaction or transactions constituting such reduction, whichever was
         or is greater, shall be considered an assignment of this Lease to which
         Lessor may withhold its consent. " NET WORTH OF LESSEE " shall mean the
         net worth of Lessee (excluding any guarantors) established under
         generally accepted accounting principles.

                  (d) An assignment or subletting without consent shall, at
         Lessor's option, be a Default curable after notice per Paragraph
         13.1(c), or a noncurable Breach without the necessity of any notice and
         grace period. If Lessor elects to treat such unapproved assignment or
         subletting as a noncurable Breach, Lessor may either: (i) terminate
         this Lease, or (ii) upon thirty (30) days written notice, increase the
         monthly Base Rent to one hundred ten percent (110%) of the Base Rent
         then in effect. Further, in the event of such Breach and rental
         adjustment, (i) the purchase price of any option to purchase the
         Premises held by Lessee shall be subject to similar adjustment to one
         hundred ten percent (110%) of the price previously in effect, and (ii)
         all fixed and non-fixed rental adjustments scheduled during the
         remainder of the Lease term shall be increased to One Hundred Ten
         Percent (110%) of the scheduled adjusted rent.

                  (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
         shall be limited to compensatory damages and/or injunctive relief.

                  (f) Lessor may reasonably withhold consent to proposed
         assignment or subletting if Lessee is in Default at the time consent is
         requested.

                  (g) Notwithstanding the foregoing, allowing a de minimis
         portion of the Premises, i.e. 20 square feet or less, to be used by a
         third party vendor in connection with the installation of a vending
         machine or payphone shall not constitute a subletting.

         12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

                  (a) Regardless of Lessor's consent, any assignment or
         subletting shall not: (i) be effective without the express written
         assumption by such assignee or sublessee of the obligations of Lessee
         under this Lease, (ii) release Lessee of any obligations hereunder, or
         (iii) alter the primary liability of Lessee for the payment of Rent or
         for the performance of any other obligations to be performed by Lessee.

                  (b) Lessor may accept Rent or performance of Lessee's
         obligations from any person other than Lessee pending approval or
         disapproval of an assignment. Neither a delay in the approval or
         disapproval of such assignment nor the acceptance of Rent or
         performance shall constitute a waiver or estoppel of Lessor's right to
         exercise its remedies for Lessee's Default or Breach.

                  (c) Lessor's consent to any assignment or subletting shall not
         constitute a consent to any subsequent assignment or subletting.

                  (d) In the event of any Default or Breach by Lessee, Lessor
         may proceed directly against Lessee, any Guarantors or anyone else
         responsible for the performance of Lessee's obligations under this
         Lease, including any assignee or sublessee, without first exhausting
         Lessor's remedies against any other person or entity responsible
         therefore to Lessor, or any security held by Lessor.

                  (e) Each request for consent to an assignment or subletting
         shall be in writing, accompanied by information relevant to Lessor's
         determination as to the financial and operational responsibility and
         appropriateness of the proposed assignee or sublessee, including but
         not limited to the intended use and/or required modification of the
         Premises, of any, together with a few of $500 as consideration for
         Lessor's considering and processing said request. Lessee agrees to
         provide Lessor with such other or additional information and/or
         documentation as may be reasonably requested. (See also Paragraph 36)


                                      -16-


                  (f) Any assignee of, or sublessee under, this Lease shall, by
         reason of accepting such assignment or entering into such sublease, be
         deemed to have assumed and agreed to conform and comply with each and
         every term, covenant, condition and obligation herein to be observed or
         performed by Lessee during the term of said assignment or sublease,
         other than such obligations as are contrary to or inconsistent with
         provisions of an assignment or sublease to which Lessor has
         specifically consented to in writing.

                  (g) Lessor's consent to any assignment or subletting shall not
         transfer to the assignee or sublessee any Option granted to the
         original Lessee by this Lease unless such transfer is specifically
         consented to by Lessor in writing. (See Paragraph 39.2)

         12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

                  (a) Lessee hereby assigns and transfers to Lessor all of
         Lessee's interest in all Rent payable on any sublease, and Lessor may
         collect such Rent and apply same toward Lessee's obligations under this
         Lease; provided, however, that until a Breach shall occur in the
         performance of Lessee's obligations, Lessee may collect said Rent.
         Lessor shall not, by reason of the foregoing or any assignment of such
         sublease, nor by reason of the collection of Rent, be deemed liable to
         the sublessee for any failure of Lessee to perform and comply with any
         of Lessee's obligations to such sublessee. Lessee hereby irrevocably
         authorizes and directs any such sublessee, upon receipt of a written
         notice from Lessor stating that a Breach exists in the performance of
         Lessee's obligations under this Lease, to pay to Lessor all Rent due
         and to become due under the sublease. Sublessee shall rely upon any
         such notice from Lessor and shall pay all Rents to Lessor without any
         obligation or right to inquire as to whether such Breach exists,
         notwithstanding any claim from Lessee to the contrary.

                  (b) In the event of a Breach by Lessee, Lessor may, at its
         option, require sublessee to attorn to Lessor, in which event Lessor
         shall undertake the obligations of the sublessor under such sublease
         from the time of the exercise of said option to the expiration of such
         sublease; provided, however, Lessor shall not be liable for any prepaid
         rents or security deposit paid by such sublessee to such sublessor or
         for any prior Defaults or Breaches of such sublessor.

                  (c) Any matter requiring the consent of the sublessor under a
         sublease shall also require the consent of Lessor.

                  (d) No sublessee shall further assign or sublet all or any
         part of the Premises without Lessor's prior written consent.

                  (e) Lessor shall deliver a copy of any notice of Default or
         Breach by Lessee to the sublessee, who shall have the right to cure the
         Default of Lessee within the grace period, if any, specified in such
         notice. The sublessee shall have a right of reimbursement and offset
         from and against Lessee for any such Defaults cured by the sublessee.

13. DEFAULT; BREACH; REMEDIES .

         13.1 DEFAULT; BREACH. A " DEFAULT " is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
rules under this Lease. A " BREACH " is defined as the occurrence of one or more
of the following Defaults, and the failure of Lessee to cure such Default within
any applicable grace period:

                  (a) The abandonment of the Premises; or the vacating of the
         Premises without providing a commercially reasonable level of security,
         or where the coverage of the property insurance described in Paragraph
         8.3 is jeopardized as a result thereof, or without providing reasonable
         assurances to minimize potential vandalism.


                                      -17-


                  (b) The failure of Lessee to make any payment of Rent or any
         Security Deposit required to be made by Lessee hereunder, whether to
         Lessor or to a third party, when due, to provide reasonable evidence of
         insurance or surety bond, or to fulfill any obligation under this Lease
         which endangers or threatens life or property, where such failure
         continues for a period of three (3) business days following written
         notice to Lessee. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT
         OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF LESSOR'S
         RIGHTS, INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE PREMISES.

                  (c) The failure of Lessee to allow Lessor and/or its agents
         access to the Premises or the commission of waste, act or acts
         constituting public or private nuisance, and /or an illegal activity on
         the Premises by Lessee, where such actions continue for a period of
         three (3) business days following written notice to potential
         vandalism.

                  (d) The failure by Lessee to provide (i) reasonable written
         evidence of compliance with Applicable Requirements, (ii) the service
         contracts, (iii) the rescission of an unauthorized assignment or
         subletting, (iv) a Estoppel Certificate, (v) a requested subordination,
         (vi) evidence concerning any guaranty and/or Guarantor, (vii) any
         document requested under Paragraph 42 (easements), or (viii) any other
         documentation or information which Lessor may reasonably require of
         Lessee under the terms of this Lease, where any such failure continues
         for a period of ten (10) days following written notice to Lessee.

                  (e) A Default by Lessee as to the terms, covenants, conditions
         or provisions of this Lease, or of the rules adopted under Paragraph 40
         hereof, other than those described in subparagraphs 13.1(a), (b) or
         (c), above, where such Default continues for a period of thirty (30)
         days after written notice; provided, however, that if the nature of
         Lessee's Default is such that more than thirty (30) days are reasonably
         required for its cure, then it shall not be deemed to be a Breach if
         Lessee commences such cure within said thirty (30) day period and
         thereafter diligently prosecutes such cure to completion.

                  (f) The occurrence of any of the following events: (i) the
         making of any general arrangement or assignment for the benefit of
         creditors; (ii) becoming a " DEBTOR " as defined in 11 U.S.C. Section
         101 or any successor statute thereto (unless, in the case of a petition
         filed against Lessee, the same is dismissed within sixty (60) days);
         (iii) the appointment of a trustee or receiver to take possession of
         substantially all of Lessee's assets located at the Premises or of
         Lessee's interest in this Lease, where possession is not restored to
         Lessee within thirty (30) days; or (iv) the attachment, execution or
         other judicial seizure of substantially all of Lessee's assets located
         at the Premises or of Lessee's interest in this Lease, where such
         seizure is not discharged within thirty (30) days; provided, however,
         in the event that any provision of this subparagraph 13.1 (e) is
         contrary to any applicable law, such provision shall be of no force or
         effect, and not affect the validity of the remaining provisions.

                  (g) The discovery that any financial statement of Lessee or of
         any Guarantor given to Lessor was materially false.

                  (h) If the performance of Lessee's obligations under this
         Lease is guaranteed: (i) the death of a Guarantor; (ii) the termination
         of a Guarantor's liability with respect to this Lease other than in
         accordance with the terms of such guaranty; (iii) a Guarantor's
         becoming insolvent or the subject of a bankruptcy filing; (iv) a
         Guarantor's refusal to honor the guaranty; or (v) a Guarantor's breach
         of its guaranty obligation on an anticipatory basis, and Lessee's
         failure, within sixty (60) days following written notice of any such
         event, to provide written alternative assurance or security, which,
         when coupled with the then existing resources of Lessee, equals or
         exceeds the combined financial resources of Lessee and the Guarantors
         that existed at the time of execution of this Lease.

         13.2 REMEDIES. If Lessee fails to perform any of its affirmative duties
or obligations, within ten (10) days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs


                                      -18-


and expenses incurred by Lessor in such performance upon receipt of invoice
therefor. In the event of a Breach, Lessor may, with or without further notice
or demand, and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such Breach:

                  (a) Terminate Lessee's right to possession of the Premises by
         any lawful means, in which case this Lease shall terminate and Lessee
         shall immediately surrender possession to Lessor. In such event Lessor
         shall be entitled to recover from Lessee: (i) the unpaid Rent which had
         been earned at the time of termination; (ii) the worth at the time of
         award of the amount by which the unpaid rent which would have been
         earned after termination until the time of award exceeds the amount of
         such rental loss that the Lessee proves could have been reasonably
         avoided; (iii) the worth at the time of award of the amount by which
         the unpaid rent for the balance of the term after the time of award
         exceeds the amount of such rental loss that the Lessee proves could be
         reasonably avoided; and (iv) any other amount necessary to compensate
         Lessor for all the detriment proximately caused by the Lessee's failure
         to perform its obligations under this Lease or which in the ordinary
         course of things would be likely to result therefrom, including but not
         limited to the cost of recovering possession of the Premises, expenses
         of reletting, including necessary renovation and alteration of the
         Premises, reasonable attorneys' fees, and that portion of any leasing
         commission paid by Lessor in connection with this Lease applicable to
         the unexpired term of this Lease. The worth at the time of award of the
         amount referred to in provision (iii) of the immediately preceding
         sentence shall be computed by discounting such amount at the discount
         rate of the Federal Reserve Bank of the District within which the
         Premises are located at the time of award plus one percent (1%).
         Efforts by Lessor to mitigate damages caused by Lessee's Breach of this
         Lease shall not waive Lessor's right to recover damages under Paragraph
         12. If termination of this Lease is obtained through the provisional
         remedy of unlawful detainer, Lessor shall have the right to recover in
         such proceeding any unpaid Rent and damages as are recoverable therein,
         or Lessor may reserve the right to recover all or any part thereof in a
         separate suit. If a notice and grace period required under Paragraph
         13.1 was not previously given, a notice to pay rent or quit, or to
         perform or quit given to Lessee under the unlawful detainer statute
         shall also constitute the notice required by Paragraph 13.1. In such
         case, the applicable grace period required by Paragraph 13.1 and the
         unlawful detainer statute shall run concurrently, and the failure of
         Lessee to cure the Default within the greater of the two such grace
         periods shall constitute both an unlawful detainer and a Breach of this
         Lease entitling Lessor to the remedies provided for in this Lease
         and/or by said statute.

                  (b) Continue the Lease and Lessee's right to possession and
         recover the Rent as it becomes due, in which event Lessee may sublet or
         assign, subject only to reasonable limitations. Acts of maintenance,
         efforts to relet, and/or the appointment of a receiver to protect the
         Lessor's interests, shall not constitute a termination of the Lessee's
         right to possession.

                  (c) Pursue any other remedy now or hereafter available under
         the laws or judicial decisions of the state wherein the Premises are
         located. The expiration or termination of this Lease and/or the
         termination of Lessee's right to possession shall not relieve Lessee
         from liability under any indemnity provisions of this Lease as to
         matters occurring or accruing during the term hereof or by reason of
         Lessee's occupancy of the Premises.

         13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into this
Lease, all of which concessions are hereinafter referred to as " INDUCEMENT
PROVISIONS, " shall be deemed conditioned upon Lessee's full and faithful
performance of all of the terms, covenants and conditions of this Lease. Upon
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or
the cure of the Breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.


                                      -19-


         13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) business days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a one-time late charge equal to ten percent (10%) of each such
overdue amount or $100, whichever is greater. The Parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Lessor will
incur by reason of such late payment. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with respect
to such overdue amount, nor prevent the exercise of any of the other rights and
remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive installments of
Base Rent, then notwithstanding any provision of this Lease to the contrary,
Base Rent shall, at Lessor's option, become due and payable quarterly in
advance.

         13.5 INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments (such as
Base Rent) or within thirty (30) days following the date on which it was due for
non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments, or the thirty-first (31st) day after it was due as to
non-scheduled payments. The interest (" INTEREST ") charged shall be computed at
the rate of 10% per annum but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4.

         13.6 BREACH BY LESSOR.

                  (a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
         this Lease unless Lessor fails within a reasonable time to perform an
         obligation required to be performed by Lessor. For purposes of this
         Paragraph, a reasonable time shall in no event be less than thirty (30)
         days after receipt by Lessor, and any Lender whose name and address
         shall have been furnished Lessee in writing for such purpose, of
         written notice specifying wherein such obligation of Lessor has not
         been performed; provided, however, that if the nature of Lessor's
         obligation is such that more than thirty (30) days are reasonably
         required for its performance, then Lessor shall not be in breach if
         performance is commenced within such thirty (30) day period and
         thereafter diligently pursued to completion.

                  (b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event
         that neither Lessor nor Lender cures said breach within thirty (30)
         days after receipt of said notice, or if having commenced said cure
         they do not diligently pursue it to completion, then Lessee may elect
         to cure said breach at Lessee's expense and offset from Rent the actual
         and reasonable cost to perform such cure, provided, however, that such
         offset shall not exceed an amount equal to the greater of one month's
         Base Rent or the Security Deposit, reserving Lessee's right to seek
         reimbursement from Lessor for any such expense in excess of such
         offset. Lessee shall document the cost of said cure and supply said
         documentation to Lessor.

14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively " CONDEMNATION "), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than ten percent (10%) of any building portion of the
Premises, or more than twenty-five percent (25%) of the land area portion of the
Premises not occupied by any building, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee's
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises
by Lessee, for purposes of Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.


                                      -20-


15. BROKERS' FEE.

         15.1 ADDITIONAL COMMISSION. In addition to the payments owed pursuant
to Paragraph 1.9 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee
or anyone affiliated with Lessee acquires any rights to the Premises or other
premises owned by Lessor and located within the same Project, if any, within
which the Premises is located, (c) if Lessee remains in possession of the
Premises, with the consent of Lessor, after the expiration of this Lease, or (d)
if Base Rent is increased, whether by agreement or operation of an escalation
clause herein, then, Lessor shall pay Brokers a fee in accordance with the
schedule of said Brokers in effect at the time of the execution of this Lease.

         15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.9, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue Interest. In addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts within ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker for the limited purpose of collecting any
brokerage fee owed.

         15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.

16. ESTOPPEL CERTIFICATES.

                  (a) Each Party (as " RESPONDING PARTY ") shall within ten (10)
         days after written notice from the other Party (the "REQUESTING PARTY")
         execute, acknowledge and deliver to the Requesting Party a statement in
         writing in form similar to the then most current "ESTOPPEL CERTIFICATE"
         form published by the American Industrial Real Estate Association, plus
         such additional information, confirmation and/or statements as may be
         reasonably requested by the Requesting Party.

                  (b) If the Responding Party shall fail to execute or deliver
         the Estoppel Certificate within such ten day period, the Requesting
         Party may execute an Estoppel Certificate stating that: (i) the Lease
         is in full force and effect without modification except as may be
         represented by the Requesting Party, (ii) there are no uncured defaults
         in the Requesting Party's performance, and (iii) if Lessor is the
         Requesting Party, not more than one month's Rent has been paid in
         advance. Prospective purchasers and encumbrancers may rely upon the
         Requesting Party's Estoppel Certificate, and the Responding Party shall
         be estopped from denying the truth of the facts contained in said
         Certificate.

                  (c) If Lessor desires to finance, refinance, or sell the
         Premises, or any part thereof, Lessee and all Guarantors shall deliver
         to any potential lender or purchaser designated by Lessor such
         financial statements as may be reasonably required by such lender or
         purchaser, including, but not limited to, Lessee's financial statements
         for the past three (3) years. All such financial statements shall be
         received by Lessor and such lender or purchaser in confidence and shall
         be used only for the purposes herein set forth.


                                      -21-


17. DEFINITION OF LESSOR. The term " LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined.

18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19. DAYS. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.

20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.

21. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.

23. NOTICES.

         23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by courier)
or may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.

         23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall be deemed given seventy-two (72) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantee next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the Postal Service or courier. Notices transmitted by
facsimile transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt, provided a copy is also delivered via delivery or mail.
If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed
received on the next business day.


                                      -22-


24. WAIVERS.

         (a) No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof by Lessee, shall
be deemed a waiver of any other term, covenant or condition hereof, or of any
subsequent Default or Breach by Lessee of the same or of any other term,
covenant or condition hereof. Lessor's consent to, or approval of, any act shall
not be deemed to render unnecessary to obtaining of Lessor's consent to, or
approval of, any subsequent or similar act by Lessee, or be construed as the
basis of an estoppel to enforce the provision or provisions of this Lease
requiring such consent.

         (b) The acceptance of Rent by Lessor shall not be a waiver of any
Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on
account of monies or damages due Lessor, notwithstanding any qualifying
statements or conditions made by Lessee in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of deposit of
such payment.

          (c) THE PARTIES AGREE THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH
REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY
PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUE IS INCONSISTENT WITH
THIS LEASE.

25. DISCLOSURES REGARDING THE NATURE OF A REAL ESTATE AGENCY RELATIONSHIP.

         (a) When entering into a discussion with a real estate agent regarding
a real estate transaction, a Lessor or Lessee should from the outset understand
what type of agency relationship or representation it has with the agent or
agents in the transaction. Lessor and Lessee acknowledge being advised by the
Brokers in this transaction, as follows:

                  (i) LESSOR'S AGENT. A Lessor's agent under a listing agreement
with the Lessor acts as the agent for the Lessor only. A Lessor's agent or
subagent has the following affirmative obligations: To the Lessor: A fiduciary
duty of utmost care, integrity, honesty, and loyalty in dealings with the
Lessor. To the Lessee and the Lessor: a. Diligent exercise of reasonable skills
and care in performance of the agent's duties. b. A duty of honest and fair
dealing and good faith. c. A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties. An
agent is not obligated to reveal to either Party any confidential information
obtained from the other Party which does not involve the affirmative duties set
forth above.

                  (ii) LESSEE'S AGENT. An agent can agree to act as agent for
the Lessee only. In these situations, the agent is not the Lessor's agent, even
if by agreement the agent may receive compensation for services rendered, either
in full or in part from the Lessor. An agent acting only for a Lessee has the
following affirmative obligations. To the Lessee: A fiduciary duty of utmost
care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee
and the Lessor: a. Diligent exercise of reasonable skills and care in
performance of the agent's duties. b. A duty of honest and fair dealing and good
faith. c. A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to
reveal to either Party any confidential information obtained from the other
Party which does not involve the affirmative duties set forth above.

                  (iii) AGENT REPRESENTING BOTH LESSOR AND LESSEE. A real estate
agent, either acting directly or through one or more associate licenses, can
legally be the agent of both the Lessor and the Lessee in a transaction, but
only with the knowledge and consent of both the Lessor and the Lessee. In a dual
agency situation, the agent has the following affirmative obligations to both
the Lessor and the Lessee. a. A fiduciary duty of utmost care, integrity,
honesty and loyalty in the dealings with either Lessor or the Lessee. b. Other
duties to the Lessor and the Lessee as stated above in subparagraphs (i) or
(ii). In representing both Lessor and Lessee, the agent may not without the
express permission of the respective Party, disclose to the other Party that the
Lessor will accept rent in an amount less than that indicated in the listing or
that the Lessee is willing to pay a higher rent than that offered. The above


                                      -23-


duties of the agent in a real estate transaction do not relieve a Lessor or
Lessee from the responsibility to protect their own interests. Lessor and Lessee
should carefully read all agreements to assure that they adequately express
their understanding of the transaction. A real estate agent is a person
qualified to advice about real estate. If legal or tax advice is desired,
consult a competent professional.

         (b) Brokers have no responsibility with respect to any default or
breach hereof by either Party. The Parties agree that no lawsuit or other legal
proceeding involving any breach of duty, error or omission relating to this
Lease may be brought against Broker more than one year after the Start Date and
that the liability (including court costs and attorney's fees), of any Broker
with respect to any such lawsuit and/or legal proceeding shall not exceed the
fee received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker's liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.

         (c) Lessor and Lessee agree to identify to Brokers as "Confidential"
any communication or information given to Brokers that is considered by such
Party to be Confidential.

26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.

27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
Parties only and shall not be considered a part of this Lease. Whenever required
by the context, the singular shall include the plural and vice versa. This Lease
shall not be construed as if prepared by one of the Parties, but rather
according to its fair meaning as a whole, as if both Parties had prepared it.

29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.

30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.

         30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, " SECURITY DEVICE "), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lessor's Lender") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease. Any Lender may elect
to have this Lease and/or any Option granted hereby superior to the lien of its
Security Device by giving written notice thereof to Lessee, whereupon this Lease
and such Options shall be deemed prior to such Security Device, notwithstanding
the relative dates of the documentation or recordation thereof.

         30.2 ATTORNMENT. In the event that Lessor transfers title to the
Premises, or the Premises are acquired by another upon the foreclosure or
termination of a Security Device to which this Lease is subordinated (i) Lessee
shall, subject to the non-disturbance provisions of Paragraph 30.3, Lessee
agrees to attorn to a such a new owner, and upon request, enter into a new
lease, containing all of the terms and provisions of this Lease, with such new
owner for the remainder of the term hereof, or, at the election of the new
owner, this Lease will automatically become a new lease between Lessee and such
new owner, and (ii) Lessor shall thereafter be relieved of any further
obligations hereunder and such new owner shall assume all of Lessor's


                                      -24-


obligations, except that such new owner shall not: (a) be liable for any act or
omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership; (b) be subject to any offsets or defenses which Lessee
might have against any prior lessor, (c) be bound by prepayment of more than one
(1) month's rent, or (d) be liable for the return of any security deposit paid
to any prior lessor which was not paid or credited to such new owner.

         30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a " NON-DISTURBANCE AGREEMENT ") from the Lender which
Non-Disturbance Agreement provides that Lessee's possession of the Premises, and
this Lease, including any options to extend the term hereof, will not be
disturbed so long as Lessee is not in Breach hereof and attorns to the record
owner of the Premises. Further, within sixty (60) days after the execution of
this Lease, Lessor shall use its commercially reasonable efforts to obtain a
Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises. In the event that Lessor is unable to provide
the Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.

         30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.

31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term, "
PREVAILING PARTY " shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be, whether
by compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fees award shall not be computed
in accordance with any court fee schedule, but shall be such as to fully
reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in the preparation and
service of notices of Default and consultations in connection therewith, whether
or not a legal action is subsequently commenced in connection with such Default
or resulting Breach ($200 is a reasonable minimum per occurrence for such
services and consultation).

32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or tenants, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary
or desirable and the erecting, using and maintaining of utilities, services,
pipes and conduits through the Premises and/or other premises as long as there
is no material adverse effect to Lessee's use of the Premises. All such
activities shall be without abatement of rent or liability to Lessee.

33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.

34. SIGNS. Lessor may place on the Premises ordinary "FOR SALE" signs at any
time and ordinary "FOR LEASE" signs during the last six (6) months of the term
hereof. Except for ordinary "for sublease" signs, Lessee shall not place any
sign upon the Premises without Lessor's prior written consent. All signs must
comply with all Applicable Requirements.

35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the


                                      -25-


Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.

36. CONSENTS. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including, but not limited to, architects', attorneys', engineers'
and other consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including, but not limited to,
consents to an assignment, a subletting or the presence or use of a Hazardous
Substance, shall be paid by Lessee upon receipt of an invoice and supporting
documentation therefor. Lessor's consent to any act, assignment or subletting
shall not constitute an acknowledgment that no Default or Breach by Lessee of
this Lease exists, nor shall such consent be deemed a waiver of any then
existing Default or Breach, except as may be otherwise specifically stated in
writing by Lessor at the time of such consent. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given. In the event that either Party disagrees with any determination made by
the other hereunder and reasonably requests the reasons for such determination,
the determining party shall furnish its reasons in writing and in reasonable
detail within ten (10) business days following such request.

37. GUARANTOR.

         37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty
in the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.

         37.2 DEFAULT. It shall constitute a Default of the Lessee if any
Guarantor fails or refuses, upon request to provide: (a) evidence of the
execution of the guaranty, including the authority of the party signing on
Guarantor's behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements, (c) a
Estoppel Certificate, or (d) written confirmation that the guaranty is still in
effect.

38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.

39. OPTIONS. If Lessee is granted an Option, as defined below, then the
following provisions shall apply:

         39.1 DEFINITION. "OPTION " shall mean: (a) the right to extend the term
of or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.

         39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.

         39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.

         39.4 EFFECT OF DEFAULT ON OPTIONS.


                                      -26-


                  (a) Lessee shall have no right to exercise an Option: (i)
         during the period commencing with the giving of any notice of Default
         and continuing until said Default is cured, (ii) during the period of
         time any Rent is unpaid (without regard to whether notice thereof is
         given Lessee), (iii) during the time Lessee is in Breach of this Lease,
         or (iv) in the event that Lessee has been given three (3) or more
         notices of separate Default, whether or not the Defaults are cured,
         during the twelve (12) month period immediately preceding the exercise
         of the Option.

                  (b) The period of time within which an Option may be exercised
         shall not be extended or enlarged by reason of Lessee's inability to
         exercise an Option because of the provisions of Paragraph 39.4(a).

                  (c) An Option shall terminate and be of no further force or
         effect, notwithstanding Lessee's due and timely exercise of the Option,
         if, after such exercise and prior to the commencement of the extended
         term or completion of the purchase, (i) Lessee fails to pay Rent for a
         period of thirty (30) days after such Rent becomes due (without any
         necessity of Lessor to give notice thereof), or (ii) Lessee commits a
         Breach of this Lease.

40. MULTIPLE BUILDINGS. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will observe all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including the care and cleanliness of the
grounds and including the parking, loading and unloading of vehicles, and to
cause its employees, suppliers, shippers, customers, contractors and invitees to
so abide and conform. Lessee also agrees to pay its fair share of common
expenses incurred in connection with such rules and regulations.

41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or jointer of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.

43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay. A Party who does not initiate
suit for the recovery of sums paid "under protest" with six (6) months shall be
deemed to have waived its right to protest such payment.

44. AUTHORITY; MULTIPLE PARTIES; EXECUTION

         (a) If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly authorized
to execute and deliver this Lease on its behalf. Each Party shall, within thirty
(30) days after request, deliver to the other Party satisfactory evidence of
such authority.

         (b) If this Lease is executed by more than one person or entity as
"Lessee", each such person or entity shall be jointly and severally liable
hereunder. It is agreed that any one of the named Lessees shall be empowered to
execute any amendment to this Lease, or other document ancillary thereto and
bind all of the named Lessees, and Lessor may rely on the same as if all of the
named Lessees had executed such document.


                                      -27-


         (c) This Lease may be executed by the Parties in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.

45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.

46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.

48. WAIVER OF JURY TRIAL. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT
OF THIS AGREEMENT.

49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease o IS IS NOT attached to this Lease.

50. AMERICANS WITH DISABILITIES ACT. Since compliance with the Americans with
Disabilities Act (ADA) is dependent upon Lessee's specific use of the Premises,
Lessor makes no warranty or representation as to whether or not the Premises
comply with ADA or any similar legislation. In the event that Lessee's use of
the Premises requires modifications or additions to the Premises in order to be
in ADA Compliance, Lessee agrees to make any such necessary modifications and/or
additions at Lessee's expense.


LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

1.    SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY
OF THE PREMISES FOR LESSEE'S INTENDED USE.

WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.


                                      -28-


The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

     

Executed at:   Irvine, CA                               Executed at:   Irvine,  CA


On:            September 13, 2007                       On:            September 13, 2007


By LESSOR:                                              By LESSEE:

Klein Investments Family Limited Partnership            Sionix Corporation

a California limited liability company                  a Nevada Corporation

By:            /s/ William Klein                        By:            /s/ James J. Houtz
               --------------------------------                        -------------------------------------

Name Printed:  William Klein                            Name Printed:  James J. Houtz

Title:         General Partner                          Title:         President and Chief Executive Officer

By:            /s/                                      By:            /s/ Robert E. McCray

Name Printed:  Carolyn Klein                            Name Printed:  Robert E. McCray

Title:         General Partner                          Title:         Chief Financial Officer

Address:       60 Linda Isle                            Address:       2082 Michelson Drive, #306
               Newport Beach, CA 92660                                 Irvine, CA 92612

Telephone:     (949) 640-2226                           Telephone:     (949) 752-7980

Facsimile:     (949) 640-2296                           Facsimile:     (760) 752-7998

Federal ID No:                                          Federal ID No: 87-0428526



NOTICE: These forms are often modified to meet the changing requirements of law
and industry needs. Always write or call to make sure you are utilizing the most
current form: Air Commercial Real Estate Association, 800 W 6th Street, Suite
800, Los Angeles, California 90017. Telephone No. (213) 687-8777. Fax No. (213)
687-8616.


                                      -29-

EX-10.10

EXHIBIT 10.10

                            SHARE EXCHANGE AGREEMENT

         THIS SHARE EXCHANGE AGREEMENT (the "Agreement") is made and entered
into as of the 7th day of November, 2007, and among Rodney L. Anderson, Joey M.
Anderson and Robert A. Hasson (the "Shareholders"), and Sionix Corporation, a
Nevada corporation ("Sionix").

                                    Recitals:
                                    ---------

         A. The Shareholders are all the Shareholders of RJ Metals, Inc., a
Nevada corporation engaged in the business of fabrication of precision metal
parts (the "Business");

         B. Sionix desires to acquire all of the outstanding shares of capital
stock of RJ (the "RJ Shares") from the Shareholders, and the Shareholders desire
to exchange all of the Shares with Sionix, solely in exchange for newly-issued
Common Stock of Sionix, on the terms and conditions set forth herein; and

         C. On February 28, 2002, Sionix entered into a letter of intent to
acquire RJ, and the parties desire to implement such letter of intent through
this Agreement.

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties agree as follows:

Section 1. EXCHANGE OF SHARES.

         1.1 Exchange. On the terms and subject to the conditions set forth in
this Agreement, at the Closing the Shareholders shall sell, convey, transfer and
assign to Sionix, and Sionix shall purchase and accept from the Shareholders,
all right, title and interest in and to the RJ Shares, in exchange for shares of
Common Stock of Sionix, as provided herein.

         1.2 Assets. As of the Closing, the assets of RJ shall consist of the
equipment, machinery, tooling, tools, molds, supplies, parts and other assets,
tangible and intangible, of RJ, wherever located, used or useful in the business
of RJ including, without limitation, the items identified on Exhibit A hereto
(collectively, the "Assets").

         1.3 Closing. The consummation of the transactions described herein
shall take place concurrently with the execution of this Agreement, at the
offices of Sionix, 2082 Michelson, Suite 306, Irvine, California or at such
other date, time and place or manner as may be agreed upon by the parties.

Section 2. PURCHASE PRICE.

         2.1 Purchase Price. In exchange for the RJ Shares, Sionix shall issue
3,400,000 shares of Common Stock of Sionix (the "Sionix Shares") to the
Shareholders, in proportion to the shares of Common Stock of RJ owned by them,
as follows:



         Shareholder                   RJ Shares            Sionix Shares
         -----------                   ---------            -------------

         Rodney L. Anderson            1,224,000              1,224,000

         Joey M. Anderson              1,326,000              1,326,000

         Robert A. Hasson                850,000                850,000

The Shareholders acknowledge that the Sionix Shares they receive will be
"restricted stock" as defined under the Securities Act of 1933 (the "Securities
Act"), and may be resold only if registered under the Securities Act or there is
an exemption from registration available.

         2.2 PIGGYBACK REGISTRATION RIGHTS.

                           (i) Each time after January 1, 2008 that Sionix
proposes for any reason to register any of its Common Stock under the Securities
Act in connection with the proposed offer and sale of its Common Stock, either
for its own account or on behalf of any other security holder ("Proposed
Registration"), other than pursuant to a registration statement on Forms S-4,
S-8 or any similar forms, Sionix shall promptly give written notice of such
Proposed Registration to the Shareholders, and shall offer to the Shareholders
the right to request inclusion of his Common Stock issued pursuant to the terms
of the Agreement in the Proposed Registration.

                           (ii) The Shareholders shall have 15 days from the
receipt of such notice to deliver to Sionix a written request specifying the
number of shares of Common Stock that Shareholders intends to sell in the
Proposed Registration, as well as information on such Shareholders intended
method of disposition.

                           (iii) If the Proposed Registration by Sionix is, in
whole or in part, an underwritten public offering, Sionix shall so advise
Shareholders and any request must specify that his Common Stock be included in
the underwriting on the same terms and conditions as the shares of Common Stock
otherwise being sold through underwriters under such registration.

                           (iv) Upon receipt of a written request Sionix shall
promptly use its best efforts to cause all such shares of Common Stock held by
Shareholders to be registered under the Securities Act (and included in any
related qualifications or registration under blue sky laws) , to the extent
required to permit sale or disposition as set forth in the Proposed
Registration.

                           (v) If the offering is to be an underwritten
offering, and Shareholders proposes to distribute its shares of Common Stock
through such underwritten offering, Shareholders agrees to enter into an
underwriting agreement with the underwriter or underwriters selected for such
underwriting by Sionix. The Shareholders may withdraw his Common Stock from such
offering at any time until the day prior to the effective date by written notice
to Sionix and the managing underwriter.


                                      -2-


Notwithstanding the foregoing, if in its good faith judgment the managing
underwriter determines and advises Sionix in writing that the inclusion of the
Common Stock issued to Shareholders pursuant to the Agreement in the
underwritten public offering, together with any Common Stock offered by Sionix,
would interfere with the successful marketing of such securities, the managing
underwriter may exclude the Common Stock owned by the Shareholders from the
Proposed Registration..

                  (vi) Preparation and Filing. If and whenever Sionix is under
an obligation pursuant to this Agreement to use its best efforts to effect the
registration of any shares of its Common Stock, Sionix shall, as expeditiously
as practicable:

                           (a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement for such securities, and
use its best efforts to cause such registration statement to become and remain
effective in accordance with Section 2(b) hereof;

                           (b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until the earlier of (A) the sale of all Common Stock
covered thereby or (B) three months after the effective date of the registration
statement, and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all Common Stock covered by such
registration statement;

                           (c) furnish to the Shareholders such number of copies
of any prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such holder may
reasonably request, to facilitate the public sale or other disposition of such
shares of Common Stock issued to Shareholders pursuant to this Agreement;

                           (d) at any time when a prospectus required to be
delivered under the Securities Act, notify Shareholders of the happening of any
event as a result of which the prospectus included in such registration, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and, at the
request of such holder, as promptly as practicable prepare, file and furnish to
such holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;

                           (e) if Sionix has delivered preliminary or final
prospectuses to Shareholders and after having done so the prospectus is amended
to comply with the requirements of the Securities Act, Sionix shall promptly
notify Shareholders and Shareholders , if requested, shall immediately cease
making offers of his Common Stock and return all prospectuses to Sionix. Sionix
shall promptly provide Shareholders with revised prospectuses and, following
receipt of the revised prospectuses, Shareholders shall be free to resume making
offers of the Common Stock.


                                      -3-


                  (vii) Expenses. Sionix shall pay all expenses incurred in
complying with this Section 2.2, including, without limitation, all registration
and filing fees (including all expenses incident to filing with the NASD
Regulation, Inc.), fees and expenses of complying with securities and blue sky
laws, printing expenses, and fees and disbursements of Sionix's counsel;
provided, however, that all underwriting discounts and selling commissions,
attorneys' fees of Shareholders, if any, and selling expenses applicable to the
Common Stock issued to Shareholders and covered by registration effected
pursuant to this Section 2.2 hereof, shall be borne by the Shareholders.

                 (viii) Expiration. The obligations of Sionix under this Section
2.2 shall expire on the third anniversary of the Effective Date.

Section 3. REPRESENTATIONS AND WARRANTIES.

         3.1 Shareholders' Representations and Warranties. The Shareholders
hereby jointly and severally represent and warrant to Sionix as follows, all of
which representations and warranties shall be true, complete, and correct in all
respects as of the date hereof and will be as of the Closing Date, as follows:

                  (a) Organization and Qualification. RJ is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. RJ has all requisite power and authority to
own those properties and conduct those businesses presently owned or conducted
by it, and is duly qualified to do business as it is now being conducted and is
in good standing as a foreign corporation in each other jurisdiction where the
property owned, leased or used by it or the conduct of its business makes such
qualification necessary. The copies of the articles of incorporation and bylaws
of RJ, which have been delivered to Sionix, are complete and correct and are in
full force and effect at the date hereof.

                  (b) Authorization; No Restrictions, Consents or Approvals. The
Shareholders have full power and authority to enter into and perform this
Agreement. This Agreement has been duly executed by the Shareholders and
constitutes the legal, valid, binding and enforceable obligation of the
Shareholders, enforceable against the Shareholders in accordance with its terms.
The execution and delivery of this Agreement, the exchange of Shares and the
consummation by RJ of the transactions contemplated herein, do not and will not
on the Closing Date (i) conflict with or violate any of the terms of the
articles of incorporation and bylaws of RJ or any applicable law relating to the
Shareholders or RJ, (ii) conflict with, or result in a breach of any of the
terms of, or result in the acceleration of any indebtedness or obligations
under, any agreement, obligation or instrument by which the Shareholders RJ is
bound or to which any property of the Shareholders or RJ is subject, or
constitute a default thereunder, (iii) result in the creation or imposition of
any lien on any of the assets of the Shareholders or RJ, (iv) constitute an
event permitting termination of any agreement or instrument to which the
Shareholders or RJ is a party or by which any property or asset of the
Shareholders or RJ is bound or affected, pursuant to the terms of such agreement
or instrument, or (v) conflict with, or result in or constitute a default under
or breach or violation of or grounds for termination of, any license, permit or
other governmental authorization to which the Shareholders or RJ is a party or
by which the Shareholders or RJ may be bound, or result in the violation by the


                                      -4-


Shareholders or RJ of any laws to which the Shareholders or RJ may be subject,
which would materially adversely affect the transactions contemplated herein. No
authorization, consent or approval of, notice to, or filing with, any public
body or governmental authority or any other person is necessary or required in
connection with the execution and delivery by the Shareholders of this Agreement
or the performance by the Shareholders of their respective obligations
hereunder.

                  (c) Capitalization. The authorized capitalization of RJ
consists of 7,500,000 shares of common stock, $ .01 par value, 3,400,000 of
which are issued and outstanding and owned by the Shareholders in the amounts
specified in Section 2.1 above. All of the issued and outstanding Shares are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. There are no (i) options, warrants, subscriptions or
commitments of any character relating to shares of Common Stock or other capital
stock of Sionix, (ii) outstanding securities or other instruments convertible
into or exchangeable for shares of Common Stock or other capital stock of RJ and
no commitments to issue such securities or instruments and (iii) rights of first
refusal, preemptive right, subscription right or similar right with respect to
any shares of Common Stock or other capital stock of RJ.

                  (d) Assets. RJ has good and marketable title to the Assets,
free and clear of any liens, claims or encumbrances. All personal property owned
by Sionix is in good operating condition and repair, subject only to ordinary
wear and tear, has been operated, serviced and maintained properly within the
recommendations and requirements (if any) of the manufacturers thereof and is
suitable and appropriate for the use thereof made by RJ in its business and
operations. Such Assets are not subject to any contracts or agreements other
than those listed on Exhibit B (the "Contracts").

                  (e) Employees. Exhibit C is a true and complete list of all
employees of RJ, together with details regarding annual, hourly and other
applicable rules of compensation, bonus entitlement, if any, and description of
any applicable benefits. Except as described, there are no contracts,
agreements, plans, arrangements, commitments or understandings pertaining to
terms of employment, compensation, bonuses, profit sharing, commissions or other
compensation. As of the Closing, there will be no amounts due to any of the
employees.

               (f) Intellectual Property. The conduct of the Business by RJ does
not violate the proprietary rights of any other person, and no claims have been
asserted by any person with respect to the use of the Assets or the conduct of
the Business by RJ.

               (g) Litigation. There is no (i) outstanding judgment, order,
decree, award, stipulation, injunction of any governmental entity or arbitrator
against or affecting any officer, director or employee of RJ, (ii) action or
proceeding pending or threatened against RJ or its properties, assets or
business, (iii) action or proceeding pending or threatened against the
Shareholders, or any of them.

               (h) Compliance with Law. RJ has not violated, has not conducted
its business or operations in violation of, and has not used or occupied its
properties or assets in violation of, any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any governmental entity.


                                      -5-


               (i) Investment Intent. The Shareholders will acquire the Sionix
Shares for their own account, for investment purposes only and not with a view
to their resale or distribution. Each of the Shareholders covenants that if the
Sionix Shares or any part thereof are sold or distributed in the future, he will
sell or distribute them pursuant to the requirements of the Securities Act and
applicable state securities laws. The Shareholders agree that Sionix may place a
restrictive legend on the certificates representing the Sionix Shares,
containing substantially the following language:

                  "The securities represented by this certificate have not been
         registered under the Securities Act of 1933, as amended, and have not
         been registered under any state securities laws. They may not be sold,
         offered for sale, or transferred in the absence of either an effective
         registration under the Securities Act of 1933, as amended, or an
         exemption from registration."

                  (j) Disclosure. No statement, representation or warranty by
the Shareholders in this Agreement, including the Exhibits, contains any untrue
statement of material fact, or omits to state a material fact, necessary to make
such statements, representations and warranties not misleading. There is no fact
known to the Shareholders which has specific application to the Assets, and, so
far as the Shareholders can reasonably foresee, materially threatens in the
future, the Assets which has not been set forth in this Agreement.

         3.2 REPRESENTATIONS AND WARRANTIES OF SIONIX. Sionix hereby represents
and warrants to the Shareholders as follows, all of which representations and
warranties are true, complete, and correct in all respects as of the date hereof
and will be as of the Closing Date:

                  (a) Organization and Qualification. Sionix is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Sionix has all requisite power and authority
to own those properties and conduct those businesses presently owned or
conducted by it, and is duly qualified to do business as it is now being
conducted and is in good standing as a foreign corporation in each other
jurisdiction where the property owned, leased or used by it or the conduct of
its business makes such qualification necessary, except in any case where a
failure so to qualify would not have a material adverse effect on Sionix.
The copies of the articles of incorporation and bylaws of Sionix, which have
been delivered to the Shareholders, are complete and correct and are in full
force and effect at the date hereof.

                  (b) Authorization; No Restrictions, Consents or Approvals.
Sionix has full power and authority to enter into and perform this Agreement and
all corporate action necessary to authorize the execution and delivery of this
Agreement and the performance its obligations hereunder has been duly taken.
This Agreement has been duly executed by Sionix and constitutes the legal,
valid, binding and enforceable obligation of Sionix, enforceable against Sionix
accordance with its terms.

                  (c) Disclosure. No statement by Sionix in the documents
described in the receipt attached hereto, contains any untrue statement of a
material fact, or omits to state any material fact, necessary to make such
statements, in the light of the circumstances under which they were made, not
misleading. Sionix knows of no material fact which specifically applies to
Sionix and (so far as Sionix can reasonably foresee) materially threatens Sionix
or its business, which has not been disclosed in such documents, or disclosed to
the Shareholders.


                                      -6-


Section 4. CERTAIN EXCLUDED MATTERS; ACTIONS PRIOR TO CLOSING.

         4.1 Distribution of Assets to Shareholders. Immediately prior to
Closing, RJ shall distribute to the Shareholders all of RJ's cash equivalents
and accounts receivable.

         4.2 Assumption of Payables. The Shareholders, jointly and severally,
agree to pay and discharge all trade payables, debts, liabilities, and
obligations, fixed or contingent, of whatever character, incurred prior to the
Closing, including without limitation, all contracts and agreements to which RJ
is a party, except for the Contracts identified on Exhibit B hereto.

Section 5 THE CLOSING

         5.1 The Shareholders' Closing Documents. At the Closing, each of the
Shareholders shall deliver to Sionix, in form and substance reasonably
satisfactory to Sionix, all appropriate documents to effect or evidence the
sale, conveyance, assignment and transfer to Sionix of the RJ Shares, including
the original stock certificates representing the RJ Shares, duly endorsed for
transfer or accompanied by a stock power or assignment separate from
certificate.

         5.2 Sionix Closing Documents. At the Closing, Sionix shall deliver to
the Shareholders a copy of an irrevocable instruction to the Transfer Agent for
the Sionix Common Stock, directing the Transfer Agent to issue the Sionix Shares
to the Shareholders, as described in Section 2.1 above.

Section 6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.

         6.1 Survival of Representations and Warranties and Covenants. The
representations, warranties, covenants, and obligations of Sionix and the
Shareholders set forth in this Agreement and in any certificate, agreement, or
instrument delivered in connection with the transactions contemplated hereby,
shall survive the Closing.

         6.2 Indemnification by the Shareholders. In addition to and not in
limitation of the Shareholders' indemnification obligations set forth elsewhere
in this Agreement, each of the Shareholders shall, defend, indemnify, and hold
harmless the Sionix, and its affiliates and respective officers, directors,
agents and employees (the "Sionix Indemnitees"), from and against any and all
claims, losses, deficiencies, liabilities, obligations, damages, penalties,
punitive damages, costs, and expenses (including, without limitation, reasonable
legal fees), whether or not resulting from third party claims (collectively,
"Losses"), suffered by a Sionix Indemnitee, which arise out of or result from:

                  (a) any inaccuracy or misrepresentation in or breach of any of
the representations, warranties, covenants or agreements made by the
Shareholders in this Agreement or in any document, certificate or affidavit
delivered by the Shareholders pursuant to the provisions of this Agreement;


                                      -7-


                  (b) any obligation, liability, debt or commitment of RJ
incurred prior to the Closing or relating to the conduct of the Business prior
to the Closing; and

                  (c) any other matter related to the use or ownership of the
Assets or the conduct of the Business prior to the Closing (including, but not
limited to, all acts, omissions and conditions existing or occurring prior to
the Closing for which any of the Company Indemnitees is alleged to be liable
pursuant to any successor or similar theory of liability).

         6.3 Indemnification By Sionix. Sionix shall defend, indemnify and hold
harmless, the Shareholders from and against any and all Losses, suffered by the
Shareholders, which arise out of or result from any inaccuracy or
misrepresentation in or breach of any of the representations, warranties,
covenants or agreements made by Sionix in this Agreement or in any document,
certificate or affidavit delivered by Sionix pursuant to the provisions of this
Agreement.

         6.4 Procedure for Third Party Claims.

                  (a) Notice to the indemnifying party shall be given promptly
after receipt by the Shareholders or Sionix Indemnitee of actual knowledge of
the commencement of any action or the assertion of any claim that will likely
result in a claim by it for indemnity pursuant to this Agreement. Such notice
shall set forth in reasonable detail the nature of such action or claim to the
extent known, and include copies of any written correspondence or pleadings from
the party asserting such claim or initiating such action. The indemnified party
shall be entitled, at its own expense, to assume or participate in the defense
of such action or claim. If the indemnifying party assumes the defense of such
action or claim, it shall be conducted by counsel chosen by such party and
approved by the party seeking indemnification, which approval shall not be
unreasonably withheld.

                  (b) For actions where the indemnifying party does not exercise
its right to assume the defense, the party seeking indemnification shall assume
and control the defense of and contest such action with counsel chosen by it and
approved by the indemnifying party, which approval shall not be unreasonably
withheld. The indemnifying party shall be entitled to participate in the defense
of such action, the cost of such participation to be at its own expense. The
indemnifying party shall pay the reasonable attorneys' fees and expenses of the
party seeking indemnification to the extent that such fees and expenses relate
to claims as to which indemnification is payable, as such expenses are incurred.

                  (c) Both the indemnifying party and the indemnified party
shall cooperate fully with one another in connection with the defense,
compromise, or settlement of any such claim or action, including, without
limitation, by making available to the other all pertinent information and
witnesses within its control.

                  (d) No indemnified party shall have the right to settle any
action brought against it without the consent of the indemnifying party. The
indemnifying party shall have the right to settle any action brought against an
indemnified party as long as the indemnified party has been delivered a complete
release as a condition of the settlement.


                                      -8-


         6.5 Remedies Cumulative. The remedies provided for herein shall be
cumulative and shall not preclude assertion by any party of any other rights or
the seeking of any other remedies against any other party.

        7. MISCELLANEOUS.

                  7.1 GOVERNING LAW. This Agreement shall be construed and
interpreted under the laws of the State of Nevada.

                  7.2 REMEDIES. The parties shall have all the remedies
available to them for breach of this Agreement at law or in equity. The parties
further agree that in addition to all other remedies available at law or in
equity, the parties will be entitled to specific performance of the obligations
of each party to this Agreement and immediate injunctive relief. The parties
also agree that if an action is brought in equity to enforce a party's
obligations, no party will assert as a defense that there is an adequate remedy
at law.

                  7.3 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.

                  7.4 BINDING ON SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon, and shall inure to the benefit of and be enforceable by the
parties hereto and their successors and assigns.

                  7.5 ATTORNEYS' FEES. In the event of any litigation concerning
this Agreement between the parties to this Agreement the prevailing party will
be entitled, in addition to any other relief that may be granted, to reasonable
attorneys' fees.


                                      -9-


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                          /S/ RODNEY L. ANDERSON
                                          --------------------------------------
                                          Rodney L/. Anderson

                                          /S/ JOEY M. ANDERSON
                                          --------------------------------------
                                          Joey M. Anderson

                                          /S/ ROBERT A. HASSON
                                          --------------------------------------
                                          Robert A. Hasson

                                                   (the "Shareholders")

                                          Sionix Corporation

                                          By: /S/ JAMES J. HOUTZ
                                          --------------------------------------
                                              PRESIDENT

                                                   ("Sionix")


                                      -10-

EX-23.1

EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS

         We consent to the use, in the registration statement on Form SB-2 of
Sionix Corporation, of our report dated January 2, 2007 on our audit of the
financial statements of Sionix Corporation as of September 30, 2006, and the
results of its operations and cash flows for the two years ended September 30,
2006, and the reference to us under the caption "Experts."



/s/ Kabani & Company, Inc.
Los Angeles, California
November 14, 2007