Convertible Notes

6 Months Ended

Mar. 31, 2013

Convertible Notes, 12 Secured Promissory Note and Long Term Debt [Abstract]

Convertible Notes

Note 6 – Convertible Notes

At March 31, 2013 and December 31, 2012, convertible notes payable amounted to $2,231,849 and $1,983,358, respectively, net of discounts of $202,789 and $355,680 respectively. The notes bear interest at 6% - 12% per annum, and are convertible into common stock of the Company at $0.02 - $0.15 per share (as well as variable conversion rates as described below). The notes are due at various dates through September 2014 and are unsecured.

Unsecured Convertible Notes:

Through December 31, 2012, the Company issued $700,000 of convertible debentures (of which $87,500 is outstanding at December 31, 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 three months ended December 31, 2012 and 2011, the change in fair value of this derivative liability amounted to $78,191 and $325, respectively.

During the three months ended December 31, 2012, holders of convertible debentures elected to convert $82,500 of their debt plus accrued interest into 8,569,317 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. In addition, the Company received a commitment in the form of a promissory note from the lender pursuant to which the lender provided the Company with funding of up to an additional $300,000 beginning on June 1, 2012, at which time $100,000 became available, on each of June 1, 2012, July 1, 2012 and August 1, 2012 (the "Additional Financing"). All funds were advanced as agreed for a total of $400,000. Sionix paid fees of $45,000 in connection with the funding of these loans. 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.

For the period ending December 31, 2012 there was $36,600 outstanding on these Notes.

On September 21, 2012 Sionix issued a 6% Convertible Redeemable Note in the principal amount $100,000 to GEL Properties.  The note matures on September 21, 2013.  The Company has an optional right of redemption prior to maturity upon a five-day notice and payment of a 50% premium on the unpaid principal amount of the loan.  The Company paid fees of $6,000 in connection with the funding of this loan. In addition, the Company received a commitment in the form of a promissory note from GEL Properties pursuant to which it will provide Sionix with funding of an additional $300,000, $100,000 of which will become available on each of July 1, 2013, August 15, 2013 and October 1, 2013.  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.

For the period ending December 31, 2012 there was $100,000 outstanding on these Notes.

10% Convertible Debentures:

On September 29, 2012 the Company entered into a securities purchase agreement dated September 25, 2012 with several accredited investors (“Holders”) for the purchase and sale of $1,025,000 of its convertible notes (“Notes”) and warrants.    The Notes bear interest at the rate of 10% per annum beginning as of September 25, 2012, and mature on June 25, 2013.  On the closing date, the Company paid and the Holders received nine months of pre-paid interest on the original principal amount of the Notes (based on the agreed nine-month term of the Notes).

The Notes are convertible at any time at the option of the Holders into the Company’s common stock at a conversion price based on 80% of the average of the three lowest closing prices for the common stock during the ten consecutive trading days immediately preceding the conversion request, however the conversion price may not exceed $0.04, and may not be lower than $0.02 per share.  The Notes may be redeemed by the Company at any time prior to maturity with ten days’ prior notice to the Holders, and payment of a premium of 25% on the unpaid principal amount of the Notes.  In addition the Notes and related securities purchase agreement contain representations, warranties and covenants that are customary for financings of this type.

The Company issued warrants to the Holders for the purchase of up to 23,125,000 shares of Company common stock, pro rata in proportion to the amount invested, which can be exercised for a period of five years from the closing date, with a fixed exercise price of $0.08 per share.

The Company agreed to register the common stock into which the Notes may be converted, any shares of common stock that may be issued as payment of principal or interest, and the common stock underlying the warrants, 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 agreed to file an initial registration statement within 30 days of the date of the registration rights agreement.  If the Company fails to file a registration statement within this 30 day period, or to have it declared effective within 90 days after the date of the registration rights agreement, or to maintain its effectiveness (in addition to other events described in the full text of the registration rights agreement), the Company will be obligated to pay the investors liquidated damages equal to 2% of the principal amount of the Notes per month until the event is cured, for up to one year, and 1% per month thereafter if the event continues uncured

The offering was made with the services of a placement agent.  At the closing of the sale and issuance of the Notes, the Company paid a cash fee to the placement agent in the amount of $87,535 or 8.54% of the gross proceeds of the offering.

January Convertible Notes:

On January 25, 2013 the Company entered into securities purchase agreements (the “January SPAs”) with two (2) accredited investors (the “January Holders”) for the purchase and sale of $140,000 of convertible notes (the “January 2013 Notes”) convertible into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a conversion price equal to 80% of the average of the three (3) lowest closing prices for the Common Stock during the ten (10) consecutive trading days immediately preceding the conversion request, however the conversion price may not exceed $0.04 and may not be lower than $0.02 per share.   The January 2013 Notes bear interest at the rate of 10% per annum and mature on September 30, 2014.  The January 2013 Notes are convertible at any time at the option of the January Holders (subject to an increase in the Company’s authorized Common Stock, or a reverse split of its existing outstanding Common Stock with no change to its authorized Common Stock).  The Company may redeem the January 2013 Notes at any time prior to maturity with twenty (20) days’ prior notice to the January Holders and payment of a premium of 20% on the unpaid principal amount. 

In addition, the January 2013 Notes and January SPAs provide the January Holders with registration rights for the shares of Common Stock underlying the January 2013 Notes. If the Company fails to file a registration statement with the SEC covering such shares within thirty (30) days from the date of the January Notes, the Company shall pay to the January Holders an amount in cash, as partial liquidated damages, equal to 2% of the aggregate purchase price paid by the January Holders pursuant to the January SPAs until the first anniversary of the issue date and 1% of the same per month thereafter, not to exceed 10% of the principal amount in the aggregate.

March Convertible Notes:

On March 13, 2013 the Company entered into securities purchase agreements  (the “March SPAs”) with five (5) accredited investors (the “March Holders”) for the purchase and sale of $60,000 of convertible notes (the “March 2013 Notes”) convertible into shares of the Company’s Common Stock at a fixed conversion price of $0.02 per share.   The March 2013 Notes bear interest at the rate of 10% per annum and mature on September 30, 2014.  The March 2013 Notes are convertible at any time at the option of the March Holders (subject to an increase in the Company’s authorized Common Stock, or a reverse split of its existing outstanding Common Stock with no change to its authorized Common Stock).  The Company may redeem the March 2013 Notes at any time prior to maturity with twenty (20) days’ prior notice to the March Holders and payment of a premium of 20% on the unpaid principal amount.