SIONIX CORP - FORM 10-Q

Attached files

file	filename
EX-31.1 - CERTIFICATION - SIONIX CORP	sinx_ex321.htm
EX-31.2 - CERTIFICATION - SIONIX CORP	sinx_ex312.htm
EX-31.1 - CERTIFICATION - SIONIX CORP	sinx_ex311.htm
EX-32.2 - CERTIFICATION - SIONIX CORP	sinx_ex322.htm

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, 2011

¨	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.

914 Westwood Blvd., Box 801 Los Angeles, California		90024
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number (704) 971-8400

2801 Ocean Park Blvd., Suite 339, Santa Monica, California, 90405

(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	o	Smaller reporting company	þ
(Do not check if a smaller reporting company)

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 3, 2011 the number of shares of the registrant’s classes of common stock outstanding was 267,596,973.

Table of Contents

Part I - Financial Information		3

Item 1.	Financial Statements	3

	Balance Sheets (Unaudited) as of March 31, 2011 and September 30, 2010	3

	Statements of Operations (Unaudited) for the three and six months ended March 31, 2011 and 2010	4

	Statements of Cash Flows (Unaudited) for the six months ended March 31, 2011 and 2010	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	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

Part II – Other Information		15

Item 1.	Legal Proceedings	15

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	16

Item 4.	Reserved	17

Item 5.	Other Information	17

Item 6.	Exhibits	17

Signatures		18

PART I, ITEM 1. FINANCIAL STATEMENTS.

Sionix Corporation

Balance Sheets

(Unaudited)

		As of March 31,			As of September 30,
		2011			2010

ASSETS
Current assets:
Cash and cash equivalents		$	3,757		$	23,084
Other receivable			-			1,500
Inventory			638,865			579,160
Other current assets			54,343			11,750
	Total current assets		696,965			615,494
Non-current assets:
Property and equipment, net			36,492			38,599

	Total assets	$	733,457		$	654,093

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable		$	308,084		$	215,842
Accrued expenses			968,153			943,485
Deferred revenue			-			300,000
Notes payable - related parties			37,000			27,000
Convertible notes, net of debt discount			1,459,527			1,470,776
10% subordinated convertible notes			56,615			56,615
Shares to be issued			4,800			-
Derivative liability			125,233			137,053
	Total current liabilities		2,959,412			3,150,771

Stockholders' deficit:
Preferred stock, $0.001 par value, 10,000,000 shares authorized at March 31, 2011			-			-
Common stock, $0.001 par value (600,000,000 shares authorized; 244,088,755 and 217,154,741 shares issued and outstanding at March 31, 2011 and September 30, 2010, respectively)			244,089			217,155
Additional paid-in capital			25,049,194			22,885,234
Accumulated deficit			(27,519,238	)		(25,599,067	)
	Total stockholders' deficit		(2,225,955	)		(2,496,678	)

	Total liabilities and stockholders' deficit	$	733,457		$	654,093

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

Sionix Corporation

Statements of Operations

(Unaudited)

	Three Months Ended March 31,						Six Months Ended March 31,
	2011			2010			2011			2010

Net revenues	$	-		$	-		$	-		$	1,620,000

Cost of sales		-			-			-			1,091,500

Gross profit		-			-			-			528,500

Operating expenses
General and administrative		827,584			498,965			1,477,194			751,720
Sales and marketing		120,237			-			204,507			-
Research and development		92,579			7,323			174,206			118,266
Depreciation and amortization		3,430			5,707			5,234			12,576
Total operating expenses		1,043,830			511,995			1,861,141			882,562

(Loss) income from operations		(1,043,830	)		(511,995	)		(1,861,141	)		(354,062	)

Other income (expense)
Interest expense and financing costs		(90,421	)		(365,587	)		(195,613	)		(449,597	)
Gain (loss) on change in fair value of:
Derivative liability		(16,900	)		-			(22,457	)		-
Warrant and option liability		-			353,353			-			4,359,957
Beneficial conversion liability		-			93,595			-			959,985
Other income		470,132			-			470,132			-
Legal settlements		-			-			(236,821	)		-
Gain (loss) on settlement of debt		(8,561	)		30,000			(74,271	)		30,000
Loss on lease termination		-			-			-			(197,455	)
Loss on asset disposition		-			-			-			(11,217	)
Total other income (expense)		354,250			111,361			(59,030	)		4,691,673

(Loss) income before income taxes		(689,580	)		(400,634	)		(1,920,171	)		4,337,611
Income taxes		-			-			-			-
Net (loss) income attributable to common shareholders	$	(689,580	)	$	(400,634	)	$	(1,920,171	)	$	4,337,611

Basic (loss) income per share	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	0.03
Diluted (loss) income per share	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	0.03

Basic weighted average number of shares of common stock outstanding		242,087,740			149,055,621			234,246,823			148,682,785
Diluted weighted average number of shares of common stock outstanding		242,087,740			149,055,621			234,246,823			177,006,938

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

Sionix Corporation

Statements of Cash Flows

(Unaudited)

	Six Months Ended March 31,
	2011			2010

Cash flows from operating activities
Net (loss) income	$	(1,920,171	)	$	4,337,611
Adjustments to reconcile net (loss) income to net cash used by operating activities:
Depreciation		5,234			12,576
Amortization of beneficial conversion feature and debt discounts		103,081			279,753
Share based payments		533,193			196,367
Common stock issued for services		511,462			111,203
(Gain) loss on change in fair value of:
Derivative liability		22,457			-
Warrant and option liability		-			(4,359,957	)
Beneficial conversion liability		-			(959,985	)
(Gain) loss on settlement of debt		74,271			(30,000	)
Loss on termination of lease		-			197,455
Impairment of property and equipment		-			11,217
(Increase) decrease in:
Inventory		(59,705	)		1,069,460
Other current assets		(45,999	)		28,708
Other assets		-			23,550
Increase (decrease) in:
Accounts payable		354,909			85,850
Accrued expenses		29,068			224,009
Deferred revenue		(300,000	)		(1,620,000	)
Net cash used by operating activities		(692,200	)		(392,183	)

Cash flows from investing activities:
Purchase of property and equipment		(3,127	)		-
Cash flows from financing activities:
Borrowings		115,000			400,000
Common stock issued for cash		561,000			-
Net cash provided by financing activities		676,000			400,000

Net (decrease) increase in cash and cash equivalents		(19,327	)		7,817
Cash and cash equivalents, beginning of period		23,084			22,982
Cash and cash equivalents, end of period	$	3,757		$	30,799

SUPPLEMENTARY CASH FLOW INFORMATION:
Income taxes paid	$	2,569		$	-
Interest paid	$	-		$	-
Non-cash	$	470,132		$	470,132

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

Sionix Corporation

Notes to Condensed Unaudited Financial Statements

Note 1 – Organization and Description of Business

Sionix Corporation (the "Company") was incorporated in Utah in 1996. 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.

The Company designs, develops, markets and sells both turnkey and stand-alone water management and treatment systems intended for use in several industries including oil & gas mining, agriculture, commercial, municipalities (both potable and wastewater), industry (both make-up water and wastewater), energy production and emergency response. Our executive offices are located at 914 Westwood Blvd., Box 801, Los Angeles, California 90024. Our telephone number is (704) 971-8400, and our website is www.sionix.com.

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 30, 2010 and 2009. The interim results for the period ended March 31, 2011 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.

Derivatives

Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

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.

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 or six months ended March 31, 2011 and earned revenues of $1,620,000 for the six months ended March 31, 2010. For the three months ended March 31, 2011, the Company recognized $470,132 of other income in connection with the cancellation of a sales contract.

Research and Development

The cost of research and development is expensed as incurred. Total research and development costs were $92,579 and $7,323 for the three months ended March 31, 2011 and 2010, respectively and $174,206 and $118,266 for the six months ended March 31, 2011 and 2010, respectively.

Stock-Based Compensation

The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

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 the three or six months ended March 31, 2011.

	For the Six Months Ended March 31, 2010
	Income (Numerator)		Weighted Average Number of Shares (Denominator)		Amount per Share

Basic Earnings Per Share
Income common stockholders	$	4,337,611		148,682,785	$	0.03

Effect of Dilutive Securities
Adjustment - gain on "in the money" warrants		-		-
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 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 entities 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 July 2010, the FASB issued an accounting update to provide guidance to enhance disclosures related to the credit quality of a company's financing receivables portfolio and the associated allowance for credit losses. Pursuant to this accounting update, a company is required to provide a greater level of disaggregated information about its allowance for credit loss with the objective of facilitating a users' evaluation of the nature of credit risk inherent in the company's portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. The revised disclosures as of the end of the reporting period are effective for the Company beginning in the second quarter of fiscal 2011, and the revised discourses related to activities during the reporting period are effective for the Company beginning in the third quarter of fiscal 2011. The Company is currently evaluating the impact of this accounting update on its financial disclosures.

Note 3 – Property and Equipment

Property and equipment consisted of the following at:

	March 31,			September 30,
	2011			2010

Machinery and equipment	$	41,726		$	38,599
Less accumulated depreciation		(5,234	)		-

Property and equipment, net	$	36,492		$	38,599

Depreciation expense for the three months ended March 31, 2011 and 2010 was $3,430 and $5,707, respectively. For the six months ended March 31, 2011 and 2010, depreciation expense amounted to $5,234 and $12,576, respectively.

Note 4 – Accrued Expenses

Accrued expenses consisted of the following at:

	March 31,		September 30,
	2011		2010

Accrued salaries	$	282,028	$	77,000
Interest payable		344,905		256,777
Claims payable		82,811		290,000
Other accrued expenses		258,409		319,708

Total accrued expenses	$	968,153	$	943,485

During the six months ended March 31, 2011, common stock valued at $290,000 was issued in settlement of certain claims payable, and $4,400 of accrued interest was included in the conversion of notes payable into common stock described in Note 7.

Note 5 – Deferred Revenue

In June 2010, the Company received an order for a Mobile Water Treatment System (“MWTS”), which required a deposit. As of December 31, 2010, the Company had completed its design and manufacture of the system and has put the unit in place, and as of December 31, 2010 and September 30, 2010, customer deposits were $648,000 and $300,000, respectively. These deposits were classified as deferred revenue and reported net of related deferred costs of $28,168 and $0 at December 31, 2010 and September 30, 2010, respectively.

In March 2011, the Company entered into a settlement agreement with the MWTS customer, which included return of the MWTS unit to the Company, forfeiture of customer deposits, and re-pricing of a warrant previously issued to the customer. Other income of $470,132 was recognized in the three months ended March 31, 2011, representing the net impact of the above items.

Note 6 – Notes Payable – Related Parties

The Company has received advances in the form of unsecured promissory notes from stockholders. The original date of these advances was November 2009 and March 2011. These notes bear interest at rates up to 10% and are due on demand. As of March 31, 2011 and September 30, 2010, such notes payable amounted to $37,000 and $27,000, respectively. Accrued interest on the notes amounted to $16,851 and $15,486 at March 31, 2011 and September 30, 2010, respectively, and is included in accrued expenses. Interest expense on these notes for the three months ended March 31, 2011 and 2010 amounted to $675 and $2,675, respectively. Interest expense on these notes for the six months ended March 31, 2011 and 2010 amounted to $1,365 and $5,371, respectively. No demand for payment has been made as of March 31, 2011.

Note 7 – Convertible Notes

At March 31, 2011 and September 30, 2010, convertible notes payable amounted to $1,459,527 and $1,470,776, respectively, net of discounts of $88,057 and $111,808, 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 (as well as variable conversion rates as described below). The notes are due at various dates through December, 2011, and are unsecured.

Through March 31, 2011, the Company issued $250,000 of convertible debentures (of which $110,000 is outstanding at March 31, 2011) 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 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 three and six months ended March 31, 2011, the change in fair value of this derivative liability amounted to $16,900 and $22,457, respectively.

During the six months ended March 31, 2011, convertible note-holders owed $144,400 (including interest) elected to convert their debt into 5,584,277 shares of common stock.

Note 8 – 10% Subordinated Notes

At both March 31, 2011 and September 30, 2010, subordinated notes amounted to $56,615. Such Subordinated Debentures (which are unsecured) matured on December 31, 2008, bear interest at the rate of 10% per annum, and are subordinated to certain notes described in Note 7, above. The Company has not received any demand for payment on these notes.

Note 9 – Income Taxes

For the three months and six months ended March 31, 2011, the accompanying Condensed Statement of Income reflect net income that is largely comprised of items that do not represent taxable income.

Note 10 – Stockholders’ Equity

Common Stock

The Company has 600,000,000 authorized shares of common stock, par value $0.001 per share. As of March 31, 2011 and September 30, 2010, the Company had 244,088,755 and 217,154,741 shares of common stock issued, respectively.

During the six months ended March 31, 2011, the Company issued 5,199,736 shares of common stock (valued at $511,462 based on closing market prices), for services. The Company also issued 5,584,277 shares of common stock for conversion of debt in the amount of $144,400 (including interest), and issued 5,800,000 shares of common stock in settlement of an accounts payable balance in the amount of $290,000.

During the six months ended March 31, 2011, the Company issued 10,350,000 shares of common stock together with warrants to purchase 5,174,998 shares of common stock, for gross proceeds of $621,000 ($0.06 per share). The Company paid finders’ fees of $60,000 in connection with this investment. The warrants issued are exercisable at $0.17 per share and expire five years from the date of issuance.

Employee Stock Options and Warrants

A summary of the Company’s activity for employee stock options and warrants:

							Weighted
			Weighted				Average
			Average		Aggregate		Remaining
	Number		Exercise		Intrinsic		Contractual
	of Options		Price		Value		Life

Outstanding at October 1, 2010		24,501,316	$	0.13	$	-		2.55
Granted		10,290,000		0.10
Expired		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at March 31, 2011		34,791,316	$	0.12	$	-		3.38

Exercisable at March 31, 2011		34,791,316	$	0.12	$	-		3.38

Outstanding and exercisable as of March 31, 2011:

				Weighted				Weighted
				Average				Average
				Remaining				Remaining
Exercise		Options		Contractual		Options		Contractual
Price		Outstanding		Life		Exercisable		Life
$	0.06		5,990,000		4.22		5,990,000		4.22
$	0.07		2,000,000		4.76		2,000,000		4.76
$	0.09		2,000,000		4.76		2,000,000		4.76
$	0.10		6,416,850		2.74		6,416,850		2.74
$	0.12		8,450,940		2.82		8,450,940		3.03
$	0.15		7,000,000		3.56		7,000,000		3.56
$	0.25		2,933,526		1.72		2,933,526		1.72
			34,791,316		3.24		34,791,316		3.38

During the six months ended March 31, 2011, the Company granted a total of 10,290,000 options and warrants to certain officers and employees. The warrants vested immediately upon grant and have a term of five years. The weighted average grant-date fair value of these warrants was $496,651. The fair value of these warrants 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 1.26 – 2.01%;

·	volatility of 184 – 190%

·	dividend yield of 0%; and

·	expected term of 5 years.

During the six months ended March 31, 2011, the Company amended the terms of 1,583,200 options granted to former officers. The officers’ options had original exercise prices of $0.15 - $0.25 per share, and were re-priced to $0.10 per share. The Company compared the fair value of the options immediately before and immediately after the amendments, and determined that the excess fair value of $36,542 should be recognized as compensation expense.

Stock Warrants

A summary of the Company’s warrant activity with non-employees:

			Weighted
			Average		Aggregate
	Number		Exercise		Intrinsic
	of Warrants		Price		Value
Outstanding at October 1, 2010		65,238,820	$	0.18	$	-
Granted		12,216,665		0.15
Expired		-		-
Forfeited		-		-
Exercised		-		-
Outstanding as of March 31, 2011		77,455,485	$	0.17	$	-

Exercisable as of March 31, 2011		77,455,485	$	0.17	$	-

Warrants outstanding and exercisable as of March 31, 2011:

						Weighted
						Average
						Remaining		Weighted Average
Exercise		Warrants		Warrants		Contractual		Exercise Price
Price		Outstanding		Exercisable		Life		Outstanding		Exercisable

$	0.06		1,000,000		1,000,000		4.37	$	0.06	$	0.06
$	0.07		8,333,333		8,333,333		4.13	$	0.07	$	0.07
$	0.10		14,904,722		14,904,722		1.23	$	0.10	$	0.10
$	0.12		5,760,000		5,760,000		2.48	$	0.12	$	0.12
$	0.14		5,000,000		5,000,000		4.56	$	0.14	$	0.14
$	0.15		2,107,667		2,107,667		3.58	$	0.15	$	0.15
$	0.17		12,341,664		12,341,664		4.55	$	0.17	$	0.17
$	0.18		850,000		850,000		1.79	$	0.18	$	0.18
$	0.25		21,029,312		21,029,312		1.88	$	0.25	$	0.25
$	0.30		6,128,787		6,128,787		1.84	$	0.30	$	0.30

			77,455,485		77,455,485

Note 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 March 31, 2011, the Company has incurred cumulative losses of $27,519,238 including a net loss for the six months ended March 31, 2011 of $1,920,171. As the Company has limited cash flow from operations, its ability to maintain normal operations 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 6, 7, and 8, the Company has related party notes, convertible notes, and subordinated debentures that have matured. The Company is continuing its efforts to obtain customers for its products, 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 building of the Company. The Company has also made changes to its manufacturing capabilities and believes that it can effectively outsource most if not all of its engineering, design, production and service to contract manufacturers and other professional firms. 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 is 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 12 – Subsequent Events

On April 6, 2011, the Company completed a private placement in which it sold and issued 21,191,685 units of its securities to twenty-two (22) accredited investors at a purchase price of $0.06 per unit, for aggregate gross proceeds of $1,271,501 (the “Private Placement”). The Private Placement was made pursuant to a Securities Purchase Agreement between Sionix and each investor. Each unit consisted of one (1) share of common stock and included fifty percent (50%) warrant coverage such that each investor received a warrant to purchase a number of shares of common stock equal to fifty percent (50%) of the number of units purchased by the investor, for a total of 10,595,843 shares of common stock issuable upon exercise of the investor warrants. The warrants are valid for a period of five (5) years from the closing date and are exercisable at a price of $0.17 per share. The investors in the Private Placement were existing shareholders of Sionix prior to the Private Placement or otherwise had a pre-existing relationship with Sionix prior to the Private Placement. In connection with the Private Placement, Sionix issued to its finder, a five (5)-year warrant for the purchase of up to 1,637,500 shares of common stock at an exercise price of $0.06 per share, and a placement fee in the amount of $100,000 in cash.

PART I, 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 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 consider 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.

Results of Operations

Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010

Revenues for the three months ended March 31, 2011 and 2010 were $0.

The Company’s total operating expenses were $1,043,830 during the three months ended March 31, 2011, an increase of $531,835 or 104%, as compared to $511,995 for the three months ended March 31, 2010. General and administrative expenses were $827,584 during the three months ended March 31, 2011, an increase of $328,619 or 66%, as compared to $498,965 for the three months ended March 31, 2010. The increase in general and administrative expenses was due to increased wages and stock-related compensation related to new management personnel. Sales and marketing expenses of $120,237 for the three months ended March 31, 2011 (compared to zero for the prior period) are related to payments made to certain vendors for sales support, as well as travel and related expenses. Research and development expenses were $92,579 during the three months ended March 31, 2011, an increase of $85,256 or 26.4%, as compared to $7,323 for the three months ended March 31, 2010. The increase is due to research related to the recently filed patent related to the evaporator technology, and additional improvements on the DAF design. The Company also incurred interest costs related to our various notes in the amount of $90,421; a decrease of $275,166 from the prior period when we reported interest costs of $365,587. Normal operations were limited by the lack of available cash.

Six Months Ended March 31, 2011 Compared to Six Months Ended March 31, 2010

Revenues for the six months ended March 31, 2011 were $0, compared to $1,620,000 for the six months ended March 31, 2010.

The Company’s total operating expenses were $1,861,141 during the six months ended March 31, 2011, an increase of $978,579 or 111%, as compared to $882,562 for the six months ended March 31, 2010. General and administrative expenses were $1,477,194 during the six months ended March 31, 2011, an increase of $725,474 or 97%, as compared to $751,720 for the six months ended March 31, 2010. The increase in general and administrative expenses was due to increased wages and stock-related compensation related to new management personnel. Sales and marketing expenses of $204,507 for the six months ended March 31, 2011 (compared to zero for the prior period) are related to payments made to certain vendors for sales support, as well as travel and related expenses. Research and development expenses were $174,206 during the six months ended March 31, 2011, an increase of $55,940 or 47%, as compared to $118,266 for the six months ended March 31, 2010. The increase is due to research related to the recently filed patent related to the evaporator technology, and additional improvements on the DAF design. The Company also incurred interest costs related to our various notes in the amount of $195,613; a decrease of $253,984 from the prior period when we reported interest costs of $449,597. Normal operations were limited by the lack of available cash.

Liquidity and Capital Resources

The Company had cash of $3,757 and $23,084 at March 31, 2011 and September 30, 2010, respectively. The Company’s source of liquidity has been the sale of its securities and deposits received from orders for its water treatment systems. The Company has received a memorandum of understanding for the purchase of up to 30 new units related to a disaster relief effort in Japan, and expects to receive additional orders for water treatment systems in its core commercial business segments. 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 memorandum of understanding noted above, no additional orders for the sale of water treatment systems currently exist. There can be no assurance that sales of the Company’s securities or of its water treatment systems, if such sales 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, 2011, approximately $1,986,000 in principal and interest of certain promissory notes issued by the Company were due or will be coming due on or before December 31, 2011, which is the latest maturity date of its existing notes.

During the six months ended March 31, 2011, the Company used $692,200 of cash in operating activities. Non-cash adjustments included $5,234 for depreciation, $103,081 for the amortization of beneficial conversion feature and debt discounts, $1,044,655 for share-based payments to consultants and employees, and $74,271 for a loss on settlement of debt. Cash provided by operating activities included $354,909 in accounts payable and $29,068 in accrued expenses. Cash used in operating activities included $59,705 in inventory, $45,999 in other current assets, and $300,000 in deferred revenue.

Investing Activities

During the six months ended March 31, 2011, the Company acquired property and equipment totaling $3,127, as compared to $0 during the six months ended March 31, 2010.

Financing Activities

Financing activities provided $676,000 to the Company during the six months ended March 31, 2011 including $561,000 from net proceeds from the sale of common stock and $115,000 from borrowings. During the six months ended March 31, 2010, cash of $400,000 was provided by financing activities from borrowings.

As of March 31, 2011, the Company had an accumulated deficit of $27,519,238. 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

The Company is not certain how the current economic downturn may affect its business. Because of the global recession, government agencies and private industry may not have the funds to purchase its water treatment systems. It may also be more difficult for the Company 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.

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, 2011, the Company has incurred cumulative losses of $27,519,238 including a net loss for the six months ended March 31, 2011 of $1,920,171. 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 term. If the Company is unable to obtain financing, it would likely discontinue its operations.

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 estimates 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, 2010.

PART I, ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

PART I, ITEM 4. 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, 2011, our disclosure controls and procedures were effective.

(b) Changes in internal control over financial reporting

During the three months ended March 31, 2011, 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, ITEM 1. LEGAL PROCEEDINGS.

During the period ended December 31, 2010, Ascendiant Capital Group, LLC (the “Claim Holder”) sued the Company in Orange County Superior Court (the “Litigation”) for failure to repay approximately $1,892,352 in debt owed by the Company to the Claim Holder. This action was settled on December 17, 2010. For a more complete description of this matter, please see our Quarterly Report on Form 10-Q for the period ended December 31, 2010 which was filed with the Securities and Exchange Commission on February 14, 2011.

On January 20, 2011 the Company settled all claims with an attorney who previously represented Sionix, Robert J. Zepfel of Haddan & Zepfel, who filed a Complaint in the Superior Court of California, County of Orange (assigned Case No. 30-2010-00333941). Mr. Zepfel alleged claims for breach of contract and sought money damages. Mr. Zepfel's Complaint focused upon a fee agreement entered into July 2003. Mr. Zepfel claimed that as of the filing date $96,896 was due in fees, interest and penalties for non-payment. The Company and Mr. Zepfel settled the claim for $82,811 to be paid out over a period of approximately 10 months from the date of settlement.

PART II, ITEM 1A. RISK FACTORS.

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

PART II, ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the six months ended March 31, 2011, we:

Issued 5,584,277 shares of common stock for conversion of debt in the amount of $144,400 (including interest). 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.

Issued 10,350,000 shares of common stock together with warrants to purchase 5,174,998 shares of common stock, for gross proceeds of $621,000 ($0.06 per share). 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.

PART II, ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

PART II, ITEM 4. RESERVED.

PART II, 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.

PART II, 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.

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.

	SIONIX CORPORATION

Date: May 10, 2011	By:	/s/David R. Wells
		David R. Wells
		President, Chief Financial Officer, Secretary/Treasurer, and Principal Financial and Accounting Officer

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