10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2010

¨ TRANSITION REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:

Commission file number: 002-95626-D 

SIONIX CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	87-0428526
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.
2801 Ocean Park Blvd., Suite 339 Santa Monica, California	90405
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number (847) 235-4566

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files).  Yes ¨  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filed,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer (Do not check if a smaller reporting company)	o	Smaller reporting company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes  þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of May 14, 2010 the number of shares of the registrant’s classes of common stock outstanding was 149,988,947.

Table of Contents

Part I - Financial Information	3
Item 1. Financial Statements	3
Balance Sheets (Unaudited) as of March 31, 2010 and September 30, 2009	3
Statements of Income (Unaudited) for the three and six months ended March 31, 2010 and March 31, 2009	4
Statements of Cash Flows (Unaudited) for the six months ended March 31, 2010 and March 31, 2009	5
Notes to unaudited condensed financial statements	6
Forward-Looking Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	17
Item 4(T). Controls and Procedures	17
Part II – Other Information	18
Item 1. Legal Proceedings	18
Item 1A. Risk Factors	18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Reserved	19
Item 5. Other Information	19
Item 6. Exhibits	19
Signatures	20

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PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

Sionix Corporation

Condensed Balance Sheets

(Unaudited)

	March 31, 2010			September 30, 2009
ASSETS
Current assets
Cash and cash equivalents	$	30,799		$	22,982
Other receivable		155,000		$	155,000
Inventory		-			1,069,460
Other current assets		11,990			40,698
Total current assets		197,789			1,288,140
Non-current assets:
Property and equipment, net		40,410			64,203
Deposits		4,945			28,495
Total assets	$	243,144		$	1,380,838
LIABILITIES AND STOCKHOLDERS'  DEFICIT
Current liabilities
Accounts payable	$	697,543		$	611,693
Accrued expenses		3,305,788			3,066,106
Customer deposits		-			1,620,000
Liquidated damages liability		78,750			78,750
Notes payable - related parties		107,000			107,000
Short-term promissory notes payable		-			390,000
Convertible notes, net of discount of $196,950 and $0 respectively		2,273,025			1,738,194
10% subordinated convertible notes		482,492			482,492
Warrant and option liability		-			7,937,620
Beneficial conversion liability		-			2,001,143
Total current liabilities		6,944,598			18,032,998
Convertible notes, non-current net of discount of $63,275		176,725			-
Stockholders' deficit
Preferred stock, $0.001 par value, 10,000,000 shares authorized at March 31, 2010		-			-
Common stock, $0.001 par value (600,000,000 and 150,000,000 shares authorized at March 31, 2010 and September 30, 2009, respectively; 149,557,046 shares issued and outstanding at March 31, 2010; 148,795,946 shares issued and 148,314,046 outstanding at September 30, 2009)		149,557			148,313
Additional paid-in capital		17,498,876			12,089,664
Shares to be issued		26,315			400
Accumulated deficit		(24,552,927	)		(28,890,537	)
Total stockholders' deficit		(6,878,179	)		(16,652,160	)
Total liabilities and stockholders'  deficit	$	243,144		$	1,380,838

The accompanying notes are an integral part of these unaudited condensed financial statements.

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Sionix Corporation

Condensed Statements of Income

(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2010			2009			2010			2009
Net revenues	$	-		$	-		$	1,620,000		$	-
Cost of sales		-			-			1,091,500			-
Gross profit		-			-			528,500			-
Operating expenses
General and administrative		498,965			314,055			751,720			964,891
Research and development		7,323			178,265			118,266			357,229
Depreciation and amortization		5,707			7,615			12,576			15,104
Total operating expenses		511,995			499,935			882,562			1,337,224
Loss from operations		(511,995	)		(499,935	)		(354,062	)		(1,337,224	)
Other income (expense)
Interest income		-			277			-			3,868
Interest expense and financing costs		(365,587	)		(63,758	)		(449,597	)		(158,523	)
Gain on change in fair value of:
Warrant and option liability		353,353			617,525			4,359,957			3,121,580
Beneficial conversion liability		93,595			907,549			959,985			4,768,622
Impairment of property and equipment		-			-			(11,217	)		-
Gain (loss) on settlement of debt		30,000			(16,184	)		30,000			(16,184	)
Loss on lease termination		-			-			(197,455	)		-
Total other income (expense)		111,361			1,445,409			4,691,673			7,719,363
Income (loss) before income taxes		(400,634	)		945,474			4,337,611			6,382,139
Income taxes		-			-			-			-
Net income (loss) available to common shareholders	$	(400,634	)	$	945,474		$	4,337,611		$	6,382,139
Basic income (loss) per share	$	(0.00	)	$	0.01		$	0.03		$	0.05
Diluted income (loss) per share	$	(0.00	)	$	0.01		$	0.03		$	0.05
Basic weighted average number of shares of common stock outstanding		149,055,621			136,973,884			148,682,785			136,277,277
Diluted weighted average number of shares of common stock outstanding		149,055,621			136,973,884			177,006,938			136,277,277

The accompanying notes are an integral part of these unaudited condensed financial statements.

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Sionix Corporation

Statements of Cash Flows

Six Months Ended March 31, 2010 and 2009

(Unaudited)

	2010			2009
Cash flows from operating activities
Net income	$	4,337,611		$	6,382,139
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation		12,576			15,104
Amortization of beneficial conversion feature and debt discounts		279,753			27,094
Stock based compensation expense - employee		196,367			116,241
Stock based compensation expense - consultant		111,203			248,752
Gain on change in fair value of:
Warrant and option liability		(4,359,957	)		(3,121,580	)
Beneficial conversion liability		(959,985	)		(4,768,622	)
(Gain) loss on settlement of debt		(30,000	)		16,184
Impairment of property and equipment		11,217			-
Loss on termination of lease		197,455			-
(Increase) decrease in:
Inventory		1,069,460			(608,565	)
Other current assets		28,708			12,230
Deposits		23,550			(150,400	)
Increase (decrease) in:
Accounts payable		85,850			92,508
Accrued expenses		224,009			200,000
Customer deposits		(1,620,000	)		344,486
Net cash used by operating activities		(392,183	)		(1,194,429	)
Cash flows from investing activities:
Purchase of property and equipment		-			(5,546	)
Cash flows from financing activities:
Proceeds from convertible notes payable		400,000			-
Common stock issued for cash		-			5,000
Net cash provided by financing activities		400,000			5,000
Net increase (decrease) in cash		7,817			(1,194,975	)
Cash, beginning of period		22,982			1,220,588
Cash, end of period	$	30,799		$	25,613
SUPPLEMENTARY CASH FLOW INFORMATION:
Income taxes paid	$	-		$	-
Interest paid	$	-		$	-

The accompanying notes are an integral part of these unaudited condensed financial statements.

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Sionix Corporation

Notes to Condensed Unaudited Financial Statements

Note 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 systems primarily for small water districts.

The Company 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.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the years ended September, 2009 and 2008.  The interim results for the period ended March 31, 2010 are not necessarily indicative of results for the full fiscal year.

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 collectability of accounts receivable, accounts payable, sales returns, and recoverability of long-term assets.

Accrued Derivative Liabilities

The Company applies ASC Topic 815, “Derivatives and Hedging,” which provides a two-step model to determine whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for equity treatment. Prior to the quarter ended March 31, 2010, liability accounting was triggered for the Company as there were insufficient shares to fulfill all potential conversions. The Company determines which instruments or embedded features require liability accounting and records the fair values as an accrued derivative liability. The changes in the values of the accrued derivative liabilities are shown in the accompanying statements of operations as “gain (loss) on change in fair value of warrant and option liability” and “gain (loss) on change in fair value of beneficial conversion liability.”

Fair Value Measurements

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts payable, accrued expenses and short-term debt, the carrying amounts approximate fair value due to their short maturities.  In addition, the Company has short-term debt with investors. The carrying amounts of the short-term liabilities approximate their fair value based on current rates for instruments with similar characteristics.

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.  The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

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·   Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

·   Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·   Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC Topic 480, “Distinguishing Liabilities from Equity,” and ASC Topic 815.

The Company’s warrant and option liability is carried at fair value totaling $0 and $7,937,620 as of March 31, 2010 and September 30, 2009, respectively.  The Company’s beneficial conversion liability is carried at fair value totaling $0 and $2,001,143 as of March 31, 2010 and September 30, 2009, respectively.  The Company used Level 2 inputs for its valuation methodology for the warrant and option liability and beneficial conversion liability as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions.

	Fair Value as of March 31, 2010 (Unaudited)		Fair Value Measurements at March 31, 2010 Using Fair Value Hierarchy
Liabilities			Level 1	Level 2		Level 3
Warrant and option liability	$	0		$	0
Conversion option liability		0			0
Total accrued derivative liabilities	$	0		$	0

	Fair Value as of September 30, 2009		Fair Value Measurements at September 30, 2009 Using Fair Value Hierarchy
Liabilities			Level 1		Level 2		Level 3
Warrant and option liability	$	7,937,620		-	$	7,937,620
Conversion option liability		2,001,143				2,001,143
Total accrued derivative liabilities	$	9,938,763			$	9,938,763

The Company recognized a gain on the fair value of the warrant and option liability of $353,353 and $617,525 for the three months ended March 31, 2010 and 2009, respectively, and $4,359,957 and $3,121,580 for the six months ended March 31, 2010 and 2009, respectively. The Company recognized a gain on the change in fair value of the beneficial conversion liability of $93,595 and $907,549 for the three months ended March 31, 2010 and 2009, respectively, and $959,985 and $4,768,622 for the six months ended March 31, 2010 and 2009, respectively.

As described in Notes 11 and 12, the warrant and option liability and the beneficial conversion liability were both eliminated during the quarter ended March 31, 2010 as the Company increased the numbers of shares of authorized common stock.

The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC Topic 825.

Revenue Recognition

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) collectability 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 ASC Topic 605, “Revenue Recognition,” which requires 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 earned no revenues for the three months ended March 31, 2010 and earned revenues of $1,620,000 for the six months ended March 31, 2010. The Company did not earn revenue for the three or six months ended March 31, 2009.

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Research and Development

The cost of research and development is expensed as incurred. Total research and development costs were $7,323 and $178,265 for the three months ended March 31, 2010 and 2009, respectively and $118,266 and $357,229 for the six months ended March 31, 2010 and 2009, respectively.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation - Stock Compensation.”  ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. Under ASC Topic 718, the Company’s volatility is based on the historical volatility of the Company’s stock or the expected volatility of similar companies. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The Company uses the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of options. Option-pricing models require the input of highly complex and subjective variables including the expected life of options granted and the Company’s expected stock price volatility over a period equal to or greater than the expected life of the options. Because changes in the subjective assumptions can materially affect the estimated value of the Company’s employee stock options, it is management’s opinion that the Black-Scholes option-pricing model may not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair value of employee stock options is determined in accordance with ASC Topic 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

Earnings Per Share

Earnings per share is calculated in accordance with the ASC Topic 260, “Earnings Per Share.”  Basic net income or loss per share is computed by dividing the net income or loss available to common stock holders by 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 and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants that are deemed “in the money” 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. Also, under this method, convertible notes are treated as if they were converted at the beginning of the period.  The following is a reconciliation of the income (numerator) and number of shares (denominator) used in the basic and diluted earnings per share computations for the six months ended March 31, 2010. There was no difference between the basic and diluted weighted average shares or earnings for any other periods presented.

	For the Six Months Ended March 31, 2010
			Weighted Average
	Income		Number of Shares		Amount per
	(Numerator)		(Denominator)		Share
Basic Earnings Per Share
Income available to common stockholders	$	4,337,611		148,682,785	$	0.03
Effect of Dilutive Securities
Adjustment - gain on debt conversions and interest, net		125,059		28,324,153
Diluted earnings per share
Adjusted income available to common stockholders	$	4,462,670		177,006,938	$	0.03

Recently Issued Accounting Pronouncements

In September 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (ASU 2009-13). It updates the existing multiple-element revenue arrangements guidance currently included under ASC 605-25, which originated primarily from the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently assessing the future impact of this new accounting update to its financial statements.

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In October 2009, the FASB issued ASU No. 2009-14, Software (Topic 985) – Certain Revenue Arrangements That Include Software Element, a Consensus of the FASB Emerging Issues Task Force, to address concerns relating to the accounting for revenue arrangements that contain tangible products and software. It requires a vendor to use vendor-specific objective evidence of selling price to separate deliverables in a multiple-element arrangement. The update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on January 1, 2011. We are currently evaluating the impact, if any, of adopting the update.

In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 amends ASC 820, “Fair Value Measurements” ("ASC 820") to require a number of additional disclosures regarding fair value measurements. The amended guidance requires entities to disclose the amounts of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers, the reasons for any transfers in or out of Level 3, and information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. The ASU also clarifies the requirement for entit ies to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. The amended guidance was effective for financial periods beginning after December 15, 2009, except the requirement to disclose Level 3 transactions on a gross basis, which becomes effective for financial periods beginning after December 15, 2010. ASU 2010-06 did not have a significant effect on the Company’s consolidated financial position or results of operations.

In April 2010, The FASB issued ASU No. 2010-17, Revenue Recognition – Milestone Method (Topic 605), to provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. The amendments in the update are effective on a prospective basis for milestones achieved for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted.  The Company is currently assessing the future impact of this new accounting update to its financial statements. 

Note 3 – Other Receivable

Other receivables, amounting to $155,000 at both March 31, 2010 and September 30, 2009, represent amounts due from a former officer.

Note 4 – Property and Equipment

Property and equipment consisted of the following at:

	March 31,			September 30,
	2010			2009
Machinery and equipment	$	115,010		$	271,972
Furniture and fixtures		12,597			41,176
Leasehold improvement		-			1,695
TOTAL PROPERTY AND EQUIPMENT		127,607			314,843
Less accumulated depreciation		(87,197	)		(250,640	)
NET PROPERTY AND EQUIPMENT	$	40,410		$	64,203

Depreciation expense for the three months ended March 31, 2010 and 2009 were $5,707 and $7,615, respectively, and for the six months ended March 31, 2010 and 2009 were $12,576 and $15,104, respectively.

Note 5 – Accrued Expenses

Accrued expenses consisted of the following at:

	March 31,		September 30,
	2010		2009
Accrued salaries	$	1,841,989	$	1,652,174
Advisory board compensation		576,000		576,000
Auto allowance accruals		104,785		104,785
Interest payable		395,067		407,005
Accrued lease liability		171,505		-
Other accruals		216,442		326,142
TOTAL ACCRUED EXPENSES	$	3,305,788	$	3,066,106

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Note 6 – Customer Deposits

In May 2008, the Company received an order for two water filtration systems, which required a deposit. As of December 31, 2009, the Company had completed its design and manufacturing phase for one of the two filtration systems and has recognized the customer deposits into revenue during the three months ended December 31, 2009. No deposits have been received for the second unit as of the filing date. As of March 31, 2010 and September 30, 2009, customer deposits were $0 and $1,620,000, respectively.

Note 7 – 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 bear interest at rates up to 10% and are due on demand. As of March 31, 2010 and September 30, 2009, notes payable amounted to $107,000. Accrued interest on the notes amounted to $89,388 and $84,016 at March 31, 2010 and September 30, 2009, respectively, and is included in accrued expenses. Interest expense on these notes for the three months ended March 31, 2010 and 2009 amounted to $2,675 and $2,886, respectively. For the six months ended March 31, 2010 and 2009, interest expense amounted to $5,371 and $5,872, respectively.

No demand for payment has been made as of March 31, 2010.

Note 8 – Short-Term Promissory Notes Payable

At September 30, 2009, short term promissory notes payable amounted to $390,000. The notes bear interest at 10% per annum and are unsecured. During the six months ended March 31, 2010, such notes have been reclassified as convertible notes due to amendments made during the period.

Note 9 – Convertible Notes

At March 31, 2010 and September 30, 2009, current convertible notes payable amounted to $2,273,025 and $1,738,194, respectively, net of discounts of $196,950 and $0, respectively. The notes bear interest at 10% - 12% per annum, and are convertible into common stock of the Company at $0.15 - $0.25 per share. The notes are due at various dates through August 31, 2010 and are unsecured.

At March 31, 2010, non -current convertible notes payable amounted to $176,725, net of discounts of $63,275. Such notes bear interest at the rate of 10% per annum, are convertible into common stock of the Company at $0.15 per share, and are due at various dates through July 15, 2011 and are unsecured.

Subsequent to the period ending March 31, 2010 one note holder with a balance of $53,073 noticed the Company of its conversion of the outstanding principal and accrued interest into restricted common stock.

During the six months ended March 31, 2010, the Company issued $400,000 of convertible debentures that included warrants to purchase 2,266,667 shares of common stock at $0.25- $0.30 per share. The Company determined that the fair value of the warrants, using the method described in Note 11, amounted to $391,504 which was recorded as a debt discount. For certain notes, the Company also determined that there was a beneficial conversion feature that should be recognized, and recorded a related debt discount of $55,161 for the six months ended March 31, 2010. The discounts are being amortized over the extended term of the related notes.

During the six months ended March 31, 2010, the Company issued 440,000 shares of common stock valued at $129,800 in connection with the extension of the due dates for short-term promissory notes, and also has agreed to issue an additional 259,144 shares valued at $25,914. Such shares are shown as ‘shares to be issued’ in the accompanying condensed balance sheet. The issued and to be issued shares have been recorded as a debt discount and are being amortized over the extended term of the related notes.

The debt discounts described above are being amortized over the extended term of the related notes.

Note 10 – 10% Subordinated Notes

At both March 31, 2010 and September 30, 2009, subordinated notes amounted to $482,492. Such Subordinated Debentures (which are unsecured) matured on December 31, 2008, and bear interest at the rate of 10% per annum, and are subordinated to certain notes described in Note 9, above. 

The Company is seeking to renegotiate the terms of these notes. The Company has not received any demand for payment on these notes.

Note 11 – Warrant and Option Liability

The Company issued warrants as part of debt issuances, stock issuances, and services.  The warrants and options qualify as derivative instruments with the fair value of the warrants and options being $0 and $7,937,620 at March 31, 2010 and September 30, 2009, respectively.  The fair value was determined using the Black-Scholes option pricing model under the following assumptions: 

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	September 30,
	2009
Risk free rate of return	0.40% to 2.31%
Volatility	155% to 230%
Dividend yield		0	%
Expected Term	1.45 to 4.73 years

During the three months ended March 31, 2010, the Company received shareholder approval to increase the authorized number of commons shares which had the effect of eliminating the derivative liability.

 Note 12 – Beneficial Conversion Features Liability

Between October 17, 2006 and February 27, 2007, the Company issued 25 secured convertible promissory notes for total proceeds to the Company of $750,000 (“Convertible Notes 1”). Convertible Notes 1 could be converted into shares of the Company’s common stock at a conversion price of $0.05 per share. Convertible Notes 1 contained a provision that would automatically adjust the conversion price if equity securities or instruments convertible into equity securities were issued at a conversion price of less than $0.05.

On June 6, 2007, the Company issued 5 convertible promissory notes for a total of $86,000 (“Convertible Notes 2”).  No warrants were issued in connection with Convertible Notes 2. Convertible Notes 2 mature on December 31, 2008 and are convertible into common stock at $0.01 per share.

As a result of the issuance of Convertible Notes 2, the conversion price for Convertible Notes 1 was adjusted down from $0.05 to $0.01.  The decrease in the conversion price increased the potential dilutive shares from 15,000,000 to 75,000,000, and this subsequently increased the total outstanding and potential dilutive shares over the authorized common share limit of 150,000,000.  Because there were insufficient authorized shares to fulfill all potential conversions, the Company classified all embedded conversion options as liabilities. On August 13, 2009, the holders agreed to forever waive any reduction of the conversion price that would have occurred as a result of the issuance of Convertible Notes 2.  Therefore, the conversion rate was increased to $0.04.

As of September 30, 2009, the Company had $893,571 convertible notes and interest, respectively, which could be converted into 16,527,565 shares of common stock.  The Company determined the fair value of the beneficial conversion option to be $2,001,143 at September 30, 2009, using the Black-Scholes model with the following assumptions:

	September 30,
	2009
Risk free rate of return		0.14	%
Volatility		132	%
Dividend yield		0	%
Expected Term	0.25 Years

During the three months ended March 31, 2010, the Company received shareholder approval to increase the authorized number of commons shares which had the effect of eliminating the derivative liability.

Note 13 – Income Taxes

Through September 30, 2009, the Company incurred net operating losses for tax purposes of approximately $24,605,000. The net operating loss for federal and state purposes may used to reduce taxable income through the year 2029. For the six months ended March 31, 2010 and 2009, the accompanying Condensed Statements of Income reflect net income that is largely comprised of items that do not represent taxable income. As a result, the provision for income taxes is zero in all periods presented.

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Note 14 – Stockholders’ Equity

Common Stock

The Company has 600,000,000 authorized shares of common stock, par value $0.001 per share. In March, 2010, the Company received shareholder approval to increase the number of common shares authorized, from 150,000,000.  As of March 31, 2010 and September 30, 2009, the Company had 149,557,046 and 148,795,946 shares of common stock issued, respectively. As of September 30, 2009, there were 481,900 shares of common stock subject to cancellation.

During the six months ended March 31, 2010, the Company issued 1,243,000 shares of common stock, valued at $129,602 based on closing market prices, for services and for the extension of due dates for debt described in Notes 8 through 10. The Company also agreed to issue 259,144 shares of common stock for extending notes payable, which is shown as 'Shares to be issued' in the accompanying Condensed Balance Sheet as of March 31, 2010.

Stock Options

A summary of the Company’s stock option activities:

							Weighted
			Weighted				Average
			Average		Aggregate		Remaining
	Number		Exercise		Intrinsic		Contractual
	of Options		Price		Value		Life
Outstanding at October 1, 2009		19,301,336	$	0.18	$	287,356		3.02
Granted		1,600,000		0.15
Expired		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at March 31, 2010		20,901,336	$	0.17	$	-		2.51
Exercisable at March 31, 2010		20,422,106	$	0.17	$	-		2.48

Options outstanding and exercisable as of March 31, 2010:

				Weighted				Weighted
				Average				Average
				Remaining				Remaining
Exercise		Options		Contractual		Options		Contractual
Price		Outstanding		Life		Exercisable		Life
$	0.15		15,967,790		2.58		15,488,580		2.53
$	0.25		4,933,526		2.71		4,933,526		2.71
			20,901,316		2.51		20,422,106		2.48

During December 2009 and January 2010, the Company granted a total of 1,600,000 options to its new Chief Executive Officer and Chief Financial Officer in connection with their employment agreements. The options vested immediately upon grant and have a term of five years. The weighted average grant-date fair value of these options was $149,396.   The fair value of these options was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

·   risk free rate of return of 2.35%;

·   volatility of 218 – 219%;

·   dividend yield of 0%; and

·   expected term of 5 years.

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Stock Warrants

A summary of the Company’s warrant activities:

			Weighted
			Average		Aggregate
	Number		Exercise		Intrinsic
	of Warrants		Price		Value
Outstanding at October 1, 2009		39,699,099	$	0.18	$	850,320
Granted		2,266,667		0.20
Expired		-		-
Forfeited		-		-
Exercised		-		-
Outstanding as of March 31, 2010		41,965,766	$	0.20	$	-
Exercisable as of March 31, 2010		41,965,766	$	0.20	$	-

Warrants outstanding and exercisable as of March 31, 2010:

						Weighted
						Average
						Remaining		Weighted Average
Exercise		Warrants		Warrants		Contractual		Exercise Price
Price		Outstanding		Exercisable		Life		Outstanding		Exercisable
$	0.10		11,850,000		11,850,000		1.39	$	0.10	$	0.10
$	0.15		2,107,667		2,107,667		4.58	$	0.15	$	0.15
$	0.18		850,000		850,000		2.79	$	0.18	$	0.18
$	0.25		21,029,312		21,029,312		2.88	$	0.25	$	0.25
$	0.30		6,128,787		6,128,787		2.84	$	0.30	$	0.30

During the six months ended March 31, 2010, the Company completed offerings of $400,000 in principal amount of convertible debentures to a group of institutional and accredited investors.  As part of the above offering, the Company issued warrants to purchase 2,266,667 shares of common stock at exercise prices of $0.15 to $0.25 per share, which expire five years from date of grant.

Note 15 – Commitments

Operating Lease

As of August 1, 2008, the Company entered into a 36 month lease for an industrial site consisting of approximately 12,000 square feet of administrative offices and a manufacturing facility.  Monthly lease payments for the period from August 1, 2008 through July 31, 2009 are $8,650 plus common area maintenance charges; monthly lease payments for the period from August 1, 2009 through July 31, 2010 are $8,995 plus common area maintenance charges and monthly lease payments for the period from August 1, 2010 through July 31, 2011 are $9,355 plus common area maintenance charges.  The lease agreement includes an option to extend the lease for an additional 36 months. If the option is exercised, monthly payments over the three year term would be $9,730 plus common area maintenance charges from August 1, 2011 through July 3 1, 2012, $10,118 plus common area maintenance charges from August 1, 2012 through July 31, 2012, and $10,523 plus common area maintenance charges from August 1, 2013 through July 31, 2014. 

On December 22, 2009, the Company vacated the administrative offices and manufacturing facility. No formal agreement has been reached by the Company with the lessor relating to the future aggregate minimum annual lease payments arising from this lease agreement. As of March 31, 2010, the Company has recorded the future minimum rental and common area maintenance charges under the lease agreement totaling $197,455 and is included in the accompanying statement of operations as “loss on lease termination” in the other income (expense) section.

Total rent expense under this operating lease was $30,495 and $29,460 for the three months ended March 31, 2010 and 2009, respectively. 

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Note 16 – 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 March 31, 2010, the Company has incurred cumulative losses of $24,552,927 including net income for the six months ended March 31, 2010 of $4,337,611. As the Company has no cash flow from operations, its ability to transition from a development stage company to an operating company is entirely dependent upon obtaining adequate cash to finance its overhead, research and development activities, and acquisition of production equipment. It is unknown when, if ever, the Company will achieve a level of revenues adequate to support its costs and expenses. In order for the Company to meet its basic financial obligations, including salaries, debt service and normal operating expenses, it plans to sell additional units of its water treatment system, and to seek additional equity or debt financing. Because of the Company’s history and current debt levels, there is considerable doubt that the Company will be able to obtain financing. The Company’s ability to meet its cash requirements for the next twelve months depends on its ability to obtain such financing. Even if financing is obtained, any such financing will likely involve additional fees and debt service requirements which may significantly reduce the amount of cash we will have for our operations. Accordingly, there is no assurance that the Company will be able to implement its plans.

As mentioned in Notes 7, 8, and 9, the Company has short-term promissory notes, convertible notes, and subordinated debentures that have matured. The Company is in the process of renegotiating the terms of the notes with the note holders to extend the maturity date. If the Company is unsuccessful in extending the maturity date, the Company may not be able to continue as a going concern. The Company is continuing its efforts to obtain customers for its ELIXIR product, expanding its sales efforts worldwide as well as expanding the industries it targets for possible customers. The Company also has future plans for additional products, and revisions to its current products. In support of this the Company plans to hire additional personnel who have the industry experience and the training so that they can be immediately effective in the bui lding of the Company. The Company is also considering alternatives related to its manufacturing capabilities and believes that it can effectively outsource most if not all of its production to contract manufacturers. This would reduce costs and improve the quality of its products. It is also continuing to seek additional investment capital in the form of debt or equity to sustain continued operations, and considering certain changes to its capital structure to become more attractive to potential investors and business partners. Last, to manage these activities the Company has hired new senior management who have the manufacturing, finance and public company experience necessary to manage the Company.

Note 17 – Supplemental Cash Flow Information

Supplemental information of non-cash financing and investing activities:

Accrued interest of $181,782 relating to convertible notes was reclassified to principal pursuant to note amendments during the six months ended March 31, 2010.

During the six months ending March 31, 2010, the Company issued 600,000 shares of common stock, valued at $60,000, to settle an outstanding accounts payable balance of $90,000. As a result, the Company recognized a gain of $30,000 on the settlement.

On October 26, 2009, a short-term promissory note of $50,000 was amended that allowed the note to be convertible into shares of the Company’s common stock at $0.15 per share.

Note 18 – Related Party Transaction

A director of the Company loaned $25,000 to the Company as part of the completion of its 10% Convertible Debentures offering. See Note 9 under "10% Convertible Debentures.”

During December 2009, impaired production machinery and equipment was sold to a director of the Company for $10. Upon the sale of the machinery and equipment, the responsibility of the removal and cost of the removal of the property from the Company’s former operating headquarters rested with the director. The machinery and equipment was removed by the director prior to December 31, 2009.

Note 19 – Subsequent Events

Subsequent to March 31, 2010 the Company entered into a Convertible Promissory Note in the amount of $75,000 which expires on January 28, 2011 and bears an interest rate of 8% per year. The note is convertible into shares of common stock, at the request and discretion of the lender, after a period of 120 days from the date of issuance, at 55% of the average of the 3 lowest closing prices during the 10 trading days prior to the notice of conversion by the noteholder.  The note cannot be prepaid by the borrower prior to its maturity.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The information in this quarterly report on Form 10-Q contains forward-looking statements.  These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations.  Any statements contained in this report that are not statements of historical facts may be deemed to be forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as may, will, should, expect, plan, intend, anticipate, believe, estimate, predict, potential or continue, the negative of such terms or other comparable terminology.  Actual events or results may differ materially from those events or results included in the forward-looking statements.  In evaluating these statements, you should conside r various factors, including the risks outlined from time to time in the reports we file with the Securities and Exchange Commission.  Some, but not all, of these risks include, among other things:

· our inability to obtain the financing we need to continue our operations;

· changes in regulatory requirements that adversely affect our business;

· loss of our key personnel; and

· risks over which we have no control, such as the general global downturn in the economy which may adversely affect spending by government agencies.

We do not intend to update forward-looking statements.  You should refer to and carefully review the information in future documents we file with the Securities and Exchange Commission.

Overview

Plan of Operation

During the next fiscal year we plan to continue marketing and selling our DAF and ELIXIR water treatment system to potential domestic and international customers. We believe that the operation of the units at Villa Park Dam ("VPD") and Arkansas will position us to aggressively market the Sionix products to oil and gas drillers, mining operators, global disaster and emergency relief organizations, third world countries, domestic public water utilities, private companies requiring water treatment, and other potential customers.  The projects at VPD and Arkansas will serve as a sales tool for possible applications and installations. Once we obtain sufficient financing, we plan to engage in substantial promotional activities in connection with the sales of the Sionix units, including media exposure and access to other publi c agencies and potential private customers. We have demonstrated the unit at the VPD to numerous prospective clients over several years and are considering different alternative uses for this unit.

We intend to contract with outside manufacturers to begin production of the Sionix products. We anticipate that most of our capital needs will need to be funded by equity financing or debt funding until such time that we have received orders for, and deposits with respect to, our products.

Results of Operations

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Revenues for the three months ended March 31, 2010 and 2009 were $0 with no new sales during either of these periods.

Our total operating expenses were $511,995 during the three months ended March 31, 2010, an increase of $12,060 or 2.4%, as compared to $499,935 for the three months ended March 31, 2009.  General and administrative expenses were $498,965 during the three months ended March 31, 2010, an increase of $184,910 or 58.9%, as compared to $314,055 for the three months ended March 31, 2009.  The increase in general and administrative expenses was due to increased wage accruals related to new management personnel. Research and development expenses were $7,323 during the three months ended March 31, 2010, a decrease of $170,942 or 95.9%, as compared to $178,265 for the three months ended March 31, 2009.  The substantial decrease is due to the lack of cash available for normal operations. We also incurred interest c osts related to our various notes in the amount of $365,587; this is an increase of $301,829 from the prior period when we reported interest costs of $63,758. Our normal operations were severely limited by the lack of available cash.

Six Months Ended March 31, 2010 Compared to Six Months Ended March 31, 2009

Revenues for the six months ended March 31, 2010 and 2009 were $1,620,000 and $0, respectively.  As of March 31, 2010, we completed the delivery of the filtration systems and recognized the contract into revenue during the six months ended March 31, 2010. As of March 31, 2009, revenue from this order had not been recognized because the units were not completed and delivered. Our costs associated with the delivery of this unit were $832,749 for Product Costs, or 51.4% of revenue, and $258,751 or 16.0% of revenue for Warranty costs which included on-site modification and repair of the unit based on the unexpected demanding environment which the unit is being used. We achieved a Gross Profit from normal operations of $528,500 or 32.6% of revenue.

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Our total operating expenses were $882,562 during the six months ended March 31, 2010, a decrease of $454,662 or 34.0%, as compared to $1,337,224 for the six months ended March 31, 2009.  General and administrative expenses were $751,720 during the six months ended March 31, 2010, a decrease of $213,171 or 22.1%, as compared to $964,891 for the six months ended March 31, 2009.  The decrease in general and administrative expenses is due to a decrease in officer wages for the comparative periods, and the reduction in rent costs associated with the closure of the Anaheim facility. Research and development expenses were $118,266 during the six months ended March 31, 2010, a decrease of $238,963 or 66.9%, as compared to $357,229 for the six months ended March 31, 2009.  This decrease reflects the completion of the development of the operating unit that was installed in Arkansas, as well as the continued lack of available cash resources for continued development. Overall expenses were down due to limited capital available for spending, and the reduction of overhead costs.

Liquidity and Capital Resources

The Company had cash of $30,799 and $22,982 and at March 31, 2010 and September 30, 2009, respectively. The Company’s source of liquidity has been the sale of its securities and deposits received from orders for one water treatment system. The Company expects to receive additional orders for water treatment systems but if it does not receive additional orders or if these orders do not satisfy its capital needs, the Company expects to sell its securities or obtain loans to meet its capital requirements.  The Company has no binding commitments for financing and, with the exception of the orders it received during the 2008 fiscal year, no additional orders for the sale of water treatment systems.  There can be no assurance that sales of the Company’s securities or of its water treatment systems, if such sa les occur, will provide sufficient capital for its operations or that the Company will not encounter unforeseen difficulties that may deplete its capital resources more rapidly than anticipated. As of March 31, 2010, approximately $3,117,791 in principal and interest of certain promissory notes issued by the Company were due or will be coming due on or before August 31, 2010, which is the latest maturity date of its existing notes.  

During the six months ended March 31, 2010, the Company used $392,183 of cash in operating activities. Non-cash adjustments included $12,576 for depreciation, $279,753 for the amortization of beneficial conversion feature and debt discounts, $307,570 for share-based payments to consultants and employees, $11,217 for the impairment of property and equipment, and $197,455 for loss on the termination of a lease. Cash provided by operating activities included $1,069,460 in inventory, $28,708 in other current assets, $23,550 in deposits, $85,850 in accounts payable, and $421,464 in accrued expenses. Cash used in operating activities included $1,620,000 in customer deposits, $30,000 for gain on settlement of debt, $4,359,957 for warrant and option liability, and $959,985 in beneficial conversion liability.

During the six months ended March 31, 2009, the Company used $1,194,429 of cash in operating activities.  Non-cash adjustments included $15,104 for depreciation, $27,094 for the amortization of beneficial conversion feature and debt discounts, $364,993 for share-based payments to consultants and employees, and $16,184 for the loss on settlement of debt. Cash provided by operating activities included $12,230 in other current assets, $92,508 in accounts payable, $200,000 in accrued expenses, and $344,486 in customer deposits. Cash used in operating activities included $608,565 for inventory, $150,400 for deposits, $3,121,580 for warrant and option liability, and $4,768,622 for beneficial conversion feature liability.

Investing Activities

During the six months ended March 31, 2010, the Company acquired property and equipment totaling $0, as compared to $5,546 during the six months ended March 31, 2009.

Financing Activities

Financing activities provided $400,000 to the Company during the six months ended March 31, 2010 and related to proceeds received from convertible debentures.  During the six months ended March 31, 2009, cash of $5,000 was provided by financing activities from the sale of common stock..

As of March 31, 2010, the Company had an accumulated deficit of $24,552,927. Management anticipates that 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.

Material Trends, Events or Uncertainties

We are not certain how the current economic downturn may affect our business.  Because of the global recession, government agencies and private industry may not have the funds to purchase our water treatment systems.  It may also be more difficult for us to raise capital in the current economic environment. Other than as discussed herein, the Company does not know of any material trends, events or uncertainties that may impact its operations in the future.

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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 March 31, 2010, the Company has incurred cumulative losses of $24,552,927 including net income for the six months ended March 31, 2010 of $4,337,611. As the Company has no cash flow from operations, its ability to transition from a development stage company to an operating company is entirely dependent upon obtaining adequate cash to finance its overhead, research and development activities, and acquisition of production equipment. It is unknown when, if ever, the Company will achieve a level of revenues adequate to support its costs and expenses. In order for the Company to meet its basic financial obligations, including rent, salaries, debt service and operations, it plans to seek additional equity or debt financing. Because of the Company’s history and current debt levels, there is considerable doubt that the Company will be able to obtain financing. The Company’s ability to meet its cash requirements for the next twelve months depends on its ability to obtain such financing. Even if financing is obtained, any such financing will likely involve additional fees and debt service requirements which may significantly reduce the amount of cash we will have for our operations. Accordingly, there is no assurance that the Company will be able to implement its plans.

The Company expects to continue to incur substantial operating losses for the foreseeable future, and it cannot predict the extent of the future losses or when it may become profitable, if ever. The Company expects to incur increasing sales and marketing, research and development and general and administrative expenses. Also, the Company has a substantial amount of short-term debt, which will need to be repaid or refinanced, unless it is converted into equity. As a result, if the Company begins to generate revenues from operations, those revenues will need to be significant in order to cover current and anticipated expenses. These factors raise substantial doubt about the Company's ability to continue as a going concern unless it is able to obtain substantial additional financing in the short term and generate revenues over the long t erm. If the Company is unable to obtain financing, it would likely discontinue its operations.

As mentioned in Notes 7, 8 and 9, the Company has convertible notes and subordinated notes payable that have matured. The Company is in the process of renegotiating the terms of the notes with the note holders to extend the maturity date. If the Company is unsuccessful in extending the maturity date, the Company may not be able to continue as a going concern.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimat es under different assumptions or conditions. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2009.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we are not required to provide this disclosure.

ITEM 4(T).  CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 require public companies to maintain “disclosure controls and procedures,” which are defined to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the period covered by this report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2010, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  Management has identified the following three material weaknesses in our disclosure controls and procedures:

17

1.           We do not have written documentation of our internal control policies and procedures.  Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act.  Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.           We do not have sufficient segregation of duties within accounting functions, which is a basic internal control.  Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.  Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

3.           We do not have review and supervision procedures for financial reporting functions. The review and supervision function of internal control relates to the accuracy of financial information reported. The failure to review and supervise could allow the reporting of inaccurate or incomplete financial information. Due to our size and nature, review and supervision may not always be possible or economically feasible.  Management evaluated the impact of our significant number of audit adjustments and has concluded that the control deficiency that resulted represented a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

(b) Changes in internal control over financial reporting

During the three months ended March 31, 2010, the Company has not made any changes to internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

There have been no material developments during the quarter ended March 31, 2010 in any material pending legal proceedings to which the Company is a party or of which any of our property is the subject.

 ITEM 1A.  RISK FACTORS.

As a smaller reporting company we are not required to provide this information.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the six months ended March 31, 2010 we issued 440,000 shares of common stock to various noteholders in return for their agreement to extend the expiration of their notes. We relied on Section 4(2) of the Securities Act, and Regulation D promulgated thereunder, as providing an exemption from registering the sale of these shares of common stock under the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4.  RESERVED.

ITEM 5.  OTHER INFORMATION.

(a) None.

(b) There were no changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6.  EXHIBITS.

Exhibit No.	Description of Exhibit
3.1	Articles of Incorporation (1)
3.2	Bylaws (1)
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

* Filed herewith.

(1) Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2003 as file number 002-95626-D.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 24, 2010

SIONIX CORPORATION

/s/ David R. Wells

David R. Wells

President, Chief Financial Officer, Secretary/Treasurer, and
Principal Financial and Accounting Officer

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13A-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, James R. Currier, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sionix Corporation;  

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;  

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:  

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;  

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;  

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and  

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  

(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):  

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and  

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 24, 2010

/s/ James R. Currier

James R. Currier

Chairman, Chief Executive Officer, and
Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13A-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, David R. Wells, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sionix Corporation;  

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;  

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:  

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;  

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;  

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and  

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):  

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and  

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 24, 2010

/s/ David R. Wells

David R. Wells

President, Chief Financial Officer,
Secretary/Treasurer, and
Principal Financial and Accounting Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 (AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002)

In connection with the Quarterly Report of Sionix Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James R. Currier, Chief Executive Officer of the Company, certify to my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,  

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: May 24, 2010

/s/ James R. Currier

James R. Currier

Chairman, Chief Executive Officer, and
Principal Executive Officer

A certification furnished pursuant to this Item will not be deemed “filed” for purposes of section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 (AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002)

In connection with Quarterly Report of Sionix Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David R. Wells, Chief Financial Officer of the Company, certify to my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,  

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: May 24, 2010

/s/ David R. Wells

David R. Wells

President, Chief Financial Officer,
Secretary/Treasurer, and
Principal Financial and Accounting Officer

A certification furnished pursuant to this Item will not be deemed “filed” for purposes of section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.