XML 35 R11.htm IDEA: XBRL DOCUMENT

Note 6 - Convertible Notes

9 Months Ended

Jun. 30, 2012

At June 30, 2012 and September 30, 2011, convertible notes payable amounted to $1,054,427 and $934,567, respectively, net of discounts of $281,011 and $143,871, respectively. The notes bear interest at 6% - 12% per annum, and are convertible into common stock of the Company at $0.15 - $0.25 per share (as well as variable conversion rates as described below). The notes are due at various dates through October 2013 and are unsecured.

Unsecured Convertible Notes:

Through June 30, 2012, the Company issued $645,000 of convertible debentures (of which $115,000 is outstanding at June 30, 2012) that are convertible into common stock of the Company at variable conversion rates that provide a fixed rate of return to the note-holder. Under the terms of the notes, however, the Company could be required to issue additional shares of common stock in the event of default. The Company applied the provisions of ASC Topic 815, “Derivatives and Hedging” and determined that the conversion option should be bifurcated from the notes and valued separately. This conversion option has been recorded as a derivative liability, is being amortized over the terms of the related notes, and is carried at fair value in the accompanying balance sheet. During the nine months ended June 30, 2012 and 2011, the change in fair value of this derivative liability amounted to $35,538 and $(25,075), respectively.

During the nine months ended June 30, 2012, holders of convertible debentures elected to convert $403,000 of their debt plus accrued interest into 13,026,887 shares of common stock.

6% Convertible Redeemable Note:

On November 23, 2011 Sionix issued a 6% Convertible Redeemable Note in the principal amount $100,000 maturing on November 23, 2012. Sionix has an optional right of redemption prior to maturity upon a five (5) day notice and payment of a 40% premium on the unpaid principal amount of the loan. Sionix paid fees of $15,000 in connection with the funding of this loan. In addition, the Company received a commitment in the form of a promissory note from the lender pursuant to which the lender will provide the Company with funding of up to an additional $300,000 at the Company's discretion beginning on June 1, 2012, at which time $100,000 will become available, on each of June 1, 2012, July 1, 2012 and August 1, 2012 (the "Additional Financing"). In conjunction with obtaining the Additional Financing, the Company issued 500,000 shares of common stock to the lender (the "Lender's Shares"). If the Company fails to draw down all of the funds made available by the Additional Financing between June 1, 2012 and August 1, 2012, the lender will be entitled to keep the Lender's Shares. If the Company draws down all of the funds made available by the Additional Financing between June 1, 2012 and August 1, 2012, the lender will use the Lender's Shares toward the conversion of the outstanding principal amount on the 6% Convertible Redeemable Note into shares of the Company's common stock. The conversion price for each share of common stock will be equal to 70% of the lowest closing bid price of the common stock for a period of five trading days, but no lower than $0.001 per share.

On June 1, 2012, Sionix borrowed an additional $100,000 in connection with the Additional Financing described above.

8% Convertible Debentures:

In April, 2012 the Company entered into an agreement with Ascendiant Capital Group, LLC ("Ascendiant") for the sale of $550,000 of unsecured Convertible Debentures (the “Primary Debentures”) to accredited investors (the “Debenture Holders”) which bear an interest rate of 8% and are due to be repaid 18 months from the closing date. The Debenture Holders will receive guaranteed interest on the original principal amount for a twelve-month period, even if the Primary Debentures are repaid within that period. As of June 30, 2012 Ascendiant has placed $200,000 of the Primary Debentures. Subsequent to June 30, 2012 the Company terminated the offering.

The Primary Debentures are convertible into the Company’s common stock during the forty-five days following the issue date at a floor price of $0.08, and from the issue date until September 28, 2012 at a conversion price of no more than $0.13, based on the average of the three lowest closing bid prices for the common stock during the ten consecutive trading days immediately preceding the conversion request. After this period the conversion price will be 75% of the average of the three lowest closing bid prices for the common stock during the ten consecutive trading days immediately preceding the conversion request. The Company has the right to demand immediate conversion of the Primary Debentures or some part of them if, at any time prior to the maturity date, the Company’s common stock has, for any twenty consecutive trading-day period, reported a closing bid price of $0.40 per share or greater and reported daily trading volume of 300,000 shares or more.

As of June 30, 2012 the Company issued a total of 2,700,000 warrants to the holders of the Primary Debentures, which can be exercised for a period of 3 years from the closing date at an exercise price of $0.10. Using the Black-Scholes method, the warrants were valued at $93,731, which was recorded as a debt discount and is being amortized over the term of the Primary Debentures. The following weighted-average assumptions were used in the Black-Scholes calculation.

●	risk free rate of return of 1.030%;
●	volatility of 170%

●	dividend yield of 0%; and
●	expected term of 5 years.

The Company has agreed to register the common stock into which the Primary Debentures may be converted, any shares of common stock that may be issued as payment of principal or interest, the common stock underlying the warrants and any additional shares of common stock that may be issued in connection with any anti-dilution provisions included in the Primary Debentures as well as any shares of common stock that may be issued as a result of any stock split, dividend or other distribution. The Company has agreed to file the registration statement within 30 days of the closing date.

During the 45 day period following the closing, the Debenture Holders may exercise a right to purchase additional debentures (the “Additional Debentures”) in amounts equal to their initial investments. During the 90 days following the date of issuance of the Additional Debentures, the floor price for their conversion will be $0.13, with a maximum price of $0.20. After that period, the conversion price will equal 90% of the lowest three bid prices over the previous ten trading days. Also, the interest rate on the Additional Debentures will be 6%, there will be no guaranteed interest, and the warrant exercise price will be $0.20. All other terms and conditions will be identical to the Primary Debentures, including the registration right. Subsequent to June 30, 2012 the 45 day period expired and the Debenture Holders did not exercise their right to purchase Additional Debentures.

At the closing of the sale of the Primary Debentures, the Company paid a cash placement fee to Ascendiant Capital Markets of 10% of the gross proceeds of the Primary Debentures, and 10% warrant coverage on the same terms as the warrants issued to the Debenture Holders.