================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                 ---------------
                                   FORM 10-QSB/A
                                 ---------------
                              (Amendment Number 1)


           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2007

                        Commission File Number 2-95626-D

                                 ---------------
                               Sionix Corporation
        (Exact name of small business issuer as specified in its charter)
                                 ---------------

              NEVADA                                    87-0428526
              ------                                    ----------
     State or other jurisdiction                       (IRS Employer
  of incorporation or organization)                 Identification No.)


        2801 OCEAN PARK BLVD., SUITE 339, SANTA MONICA, CALIFORNIA 90405

                  (Address of principal executive offices)


                                 (714) 678-1000

                          (Issuer's telephone number)


                 3880 E. Eagle Drive, Anaheim, California 92807


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

Check whether the issuer: (1) 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 for
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]

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


As of July 31, 2007, there were 106,635,201 shares of Common Stock of the
issuer outstanding.


Transitional Small Business Disclosure Format (check one)  [ ] Yes;  [X] No

================================================================================

<PAGE>

                                EXPLANATORY NOTE

Between October 17, 2006 and February 27, 2007 the Sionix Corporation issued
twenty-five (25) secured convertible promissory notes for total proceeds to the
Company of $750,000 ("Convertible Notes 1"). Convertible Notes 1 had a
conversion price of $0.05 into common stock. 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 less than $0.05.

On June 6, 2007, the Company issued five (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 matures on or about December 31,
2008, and is convertible into common stock at $0.01.

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 should have classified all potentially dilutive securities as
derivative liabilities as of June 6, 2007. The Company researched its debt and
equity instruments and determined that the potentially dilutive securities are
as follows:

     o    2001 Executive Officers Stock Option Plan
     o    Advisory Board Compensation
     o    Warrants Related to 2004 Stock Purchase Agreement
     o    Convertible Notes 1
     o    Convertible Notes 2
     o    Subordinated Convertible Notes 3
     o    Warrants related to Subordinated Convertible Notes 3

As a result of these transactions, we filed amendment number 1 ("Amendment 1")
to our Form 10-QSB (the "Original Report") that was originally filed with the
Securities and Exchange Commission (the "SEC") on August 14, 2007 for the period
ended June 30, 2007.

The primary purpose of the Amendment is to disclose the restatement of our
financial statements for the three and nine months ended June 30, 2007 and
cumulative inception to date operations for June 30, 2007. A complete discussion
of the restatement is included in the section of the Amendment 1 titled
"Management's Discussion and Analysis or Plan of Operation" and in note 10 to
our financial statements for the periods ended June 30, 2007.

This Amendment 1 includes all of the information contained in the Original
Report, and we have made no attempt in this Amendment to modify or update the
disclosures presented in the Original Report, except as identified.

The disclosures in this Amendment continue to speak as of the date of the
Original Report, and do not reflect events occurring after the filing of the
Original Report. Accordingly, this Amendment should be read in conjunction with
our other filings made with the SEC subsequent to the filing of the Original
Report, including any amendments to those filings. The filing of this Amendment
shall not be deemed to be an admission that the Original Report, when made,
included any untrue statement of a material fact or omitted to state a material
fact necessary to make a statement not misleading.

The following adjustments were made to our financial statements for the periods
ended June 30, 2007:

<PAGE>

<TABLE>
<CAPTION>
                                                                          AS          BENFICIAL        WARRANTS       AS RESTATED
                                                                      PREVIOUSLY      CONVERSION         AND            JUNE 30,
                                                                        STATED         FEATURES        OPTIONS           2007
                                                                     ------------    ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>             <C>

BALANCE SHEET
Accrued expenses                                                     $  1,525,397    $    576,000    $         --    $  2,101,397
Warrant and option liability                                                   --              --       2,379,561       2,379,561
Beneficial conversion liability                                                --      26,269,071              --      26,269,071
Additional paid in capital                                             13,969,888        (595,147)     (2,561,339)     10,813,402
Deficit accumulated during developmental stage                        (16,400,573)    (26,249,924)        181,778     (42,468,719)

STATEMENT OF OPERATIONS (FOR THE THREE MONTHS ENDED JUNE 30, 2007)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                         444,544       3,661,741              --       4,106,285
Interest expense and financing costs                                      (74,307)    (29,958,427)       (511,021)    (30,543,755)

STATEMENT OF OPERATIONS (FOR THE NINE MONTHS ENDED JUNE 30, 2007)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                         932,668       3,661,741              --       4,594,409
Interest expense and financing costs                                     (144,895)    (29,958,427)       (511,021)    (30,614,343)

STATEMENT OF OPERATIONS (SINCE INCEPTION)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                      12,661,991       4,215,298              --      16,877,289
Interest expense and financing costs                                     (379,581)    (29,958,427)       (511,021)    (30,849,029)

STATEMENT OF CASH FLOWS (FOR THE NINE MONTHS ENDED JUNE 30, 2007)
Net (loss) gain                                                      $ (1,101,520    $(25,696,367)   $    181,778    $(26,616,109)
Gain on change in fair value of warrant and option liability                   --              --        (692,799)       (692,799)
Gain on change in fair value of beneficial conversion liability                --      (7,923,801)             --      (7,923,801)
Change in accrued expenses                                                319,558          96,000              --         415,558
Non-cash compensation expense                                                  --       3,565,741              --       3,565,741
Non-cash financing costs                                                       --      29,958,427         511,021      30,469,448

STATEMENT OF CASH FLOWS (SINCE INCEPTION)
Net (loss) gain                                                      $(16,400,573)   $(26,249,924)  $     181,778   $ (42,468,719)
Gain on change in fair value of warrant and option liability                   --              --        (692,799)       (692,799)
Gain on change in fair value of beneficial conversion liability                --      (7,923,801)             --      (7,923,801)
Change in accrued expenses                                              1,387,473         576,000              --       1,963,473
Non-cash compensation expense                                                  --       3,639,298              --       3,639,298
Non-cash financing costs                                                       --      29,958,427         511,021      30,469,448
</TABLE>


<PAGE>

             CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

We desire to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. This Report on Form 10-QSB contains a
number of forward-looking statements that reflect management's current views and
expectations with respect to our business, strategies, products, future results
and events and financial performance. All statements made in this Report other
than statements of historical fact, including statements that address operating
performance, events or developments that management expects or anticipates will
or may occur in the future, including statements related to distributor
channels, volume growth, revenues, profitability, new products, acquisitions,
adequacy of funds from operations, statements expressing general optimism about
future operating results and non-historical information, are forward-looking
statements. In particular, the words "believe," "expect," "intend,"
"anticipate," "estimate," "may," "will," variations of such words, and similar
expressions identify forward-looking statements, but are not the exclusive means
of identifying such statements and their absence does not mean that the
statement is not forward-looking. These forward-looking statements are subject
to certain risks and uncertainties, including those discussed below. Our actual
results, performance or achievements could differ materially from historical
results as well as those expressed in, anticipated or implied by these
statements. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

Readers should not place undue reliance on these forward-looking statements,
which are based on management's current expectations and projections about
future events, are not guarantees of future performance, are subject to risks,
uncertainties and assumptions (including those described below) and apply only
as of the date of this Report. Our actual results, performance or achievements
could differ materially from the results expressed in, or implied by, these
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below "Management's
Discussion and Analysis and Plan of Operation," as well as those discussed
elsewhere in this Report, and the risks discussed in our most recently filed
Annual Report on Form 10-KSB and in the press releases and other communications
to shareholders issued by us from time to time which attempt to advise
interested parties of the risks and factors that may affect our business.

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               SIONIX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                               AS OF JUNE 30, 2007
                                   (UNAUDITED)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                               AS RESTATED
                                                                              ------------
<S>                                                                           <C>

CURRENT ASSETS:
  Cash & cash equivalents                                                     $    455,563

PROPERTY AND EQUIPMENT, NET                                                         46,399
DEPOSITS                                                                             4,600

                                                                              ------------
    Total assets                                                              $    506,562
                                                                              ============


                   LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable                                                            $    204,805
  Accrued expenses                                                               2,101,397
  Notes payable - related parties                                                  129,000
  Note payable - officers                                                           32,860
  Convertible notes, net of debt discounts of $543,686                             792,314
  Equity line of credit                                                            102,336
                                                                              ------------
  Warrant and option liability                                                   2,379,561
  Beneficial conversion liability                                               26,269,071
                                                                              ------------
    Total current liabilities                                                   32,011,344
                                                                              ------------


STOCKHOLDERS' DEFICIT
  Common stock, $0.001 par value ;150,000,000 shares authorized;
  107,117,101 shares issued and 106,635,201 shares outstanding                     106,635
  Additional paid-in capital                                                    10,813,402
  Shares to be issued                                                               43,900
  Deficit accumulated during development stage                                 (42,468,719)
                                                                              ------------
    Total stockholders' deficit                                                (31,504,782)
                                                                              ------------
    Total liabilities & stockholders' deficit                                 $    506,562
                                                                              ============
</TABLE>
              The accompanying notes form an integral part of these
                    unaudited condensed financial statements

<PAGE>
                               SIONIX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                    CUMULATIVE
                                                                                                                  FROM INCEPTION
                                                                                              NINE MONTH PERIODS    (OCTOBER 3,
                                                    THREE MONTH PERIODS ENDED                       ENDED            1994) TO
                                                             JUNE 30,                               JUNE 30,         JUNE 30,
                                                  2007              2006            2007             2006             2007
                                              (AS RESTATED)                     (AS RESTATED)                     (AS RESTATED)
                                              -------------    -------------    -------------    -------------    -------------
<S>                                           <C>              <C>              <C>              <C>              <C>
NET SALES                                     $          --    $          --    $          --    $          --    $          --
OPERATING EXPENSES:

General and administrative                        4,106,285          242,236        4,594,409          447,247       16,877,289
Research and development                                 --               --               --               --        1,449,475
Impairment of intangible assets                          --               --               --               --        1,267,278
Inventory obsolescence                                   --               --               --               --          365,078
Depreciation and amortization                         7,936            7,745           23,723           23,486          524,129
                                              -------------    -------------    -------------    -------------    -------------
     Total operating expenses                     4,114,221          249,981        4,618,132          470,733       20,483,249
                                              -------------    -------------    -------------    -------------    -------------
LOSS FROM OPERATIONS                             (4,114,221)        (249,981)      (4,618,132)        (470,733)      20,483,249)

OTHER INCOME (EXPENSES)
Interest income                                          56              666               --           54,324
Interest expense and financing costs            (30,543,755)          (2,406)     (30,614,343)          (7,218)      30,849,029)
Gain on change in fair value of warrant and

    option liability                                692,799               --          692,799               --          692,799
Gain on change in fair value of beneficial
    conversion liability                          7,923,801               --        7,923,801               --        7,923,801
Loss on settlement of debts                              --               --               --          (94,221)        (230,268)
Loss on legal settlement                                 --               --               --               --          434,603

                                              -------------    -------------    -------------    -------------    -------------
     Total other expenses                       (21,927,099)          (2,406)     (21,997,077)        (101,439)     (21,973,770)
                                              -------------    -------------    -------------    -------------    -------------

LOSS BEFORE INCOME TAXES                        (26,041,320)        (252,387)     (26,615,209)        (572,172)     (42,457,019)

   Income taxes                                         900               --              900               --           11,700

                                              -------------    -------------    -------------    -------------    -------------
NET LOSS                                      $ (26,042,220)   $    (252,387)   $ (26,616,109)   $    (572,172)   $ (42,468,719)
                                              =============    =============    =============    =============    =============

BASIC AND DILUTED LOSS PER SHARE              $       (0.25)   $       (0.00)   $       (0.25)   $       (0.01)
                                              =============    =============    =============    =============

*BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
   OF COMMON STOCK OUTSTANDING                  106,431,387      102,524,186      105,901,243      102,524,186
                                              =============    =============    =============    =============
</TABLE>
------------
*    Weighted average number of shares used to compute basic and diluted loss
     per share is the same as the effect of dilutive securities is anti-dilutive

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

<PAGE>

                               SIONIX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                 CUMULATIVE FROM
                                                                                                    INCEPTION
                                                                                                   (OCTOBER 3,
                                                                 FOR THE NINE MONTH PERIODS         1994) TO
                                                                       ENDED JUNE 30,               JUNE 30,
                                                                     2007                            2007
                                                                (AS RESTATED)       2006        (AS RESTATED)
                                                                ------------    ------------    ------------
<S>                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                        $(26,616,109)   $   (572,172)   $(42,468,7193)
Adjustments to reconcile net loss to net cash used in
operating activities:
   Depreciation and amortization                                      23,723          23,486         611,046
   Amortization of consulting fees                                        --              --          13,075
   Amortization of debt discount on convertible notes                 75,827              --          75,827
   Issuance of common stock for compensation                              --              --       1,835,957
   Issuance of common stock for services & prepaid consulting
      fees                                                            84,929              --       2,181,217
   Gain on change in fair value of warrant and option
      liability                                                     (692,799)             --        (692,799)
   Gain on change in fair value of beneficial conversion
   liability                                                      (7,923,801)             --      (7,923,801)
   Impairment of assets                                                   --              --         514,755
   Write-down of obsolete assets                                          --              --          38,862
   Impairment of intangible assets                                        --              --       1,117,601
   Loss on settlement of debts                                            --          94,221         130,268
   Non-cash financing costs                                       30,469,448              --      30,469,448
   Non-cash compensation costs                                     3,565,741              --       3,639,298
   Other                                                                  --              --          40,370
   Changes in assets and liabilities:

      Increase in other current assets                                    --              --        (510,727)
      Decrease in other receivable                                        --              --           3,000
      Increase in deposits                                            (4,600)             --          (4,600)
      Increase (decrease) in accounts payable                        (67,806)          7,713         274,804
      Increase in accrued interest                                    69,068           7,218         137,749
      Increase in accrued expenses                                   415,558         422,139       1,963,743
                                                                ------------    ------------    ------------
       Total adjustments                                          26,015,288         554,777      33,915,093
                                                                ------------    ------------    ------------
Net cash used in operating activities                               (600,821)        (17,395)     (8,553,626
                                                                ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of patents                                                    --              --        (154,061)
   Purchase of equipment                                             (25,360)             --        (405,535)
                                                                ------------    ------------    ------------
     Net cash used in investing activities                           (25,360)             --        (559,596)
                                                                ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of notes                                 1,336,000          47,780       1,793,433
   Proceeds from (payment for) notes payable under equity
      line of credit                                                (225,000)             --         531,000
   Payment of notes payable - officers                               (33,800)        (30,340)       (185,642)
   Issuance of common stock for cash                                      --              --       7,376,094
   Receipt of cash for stock to be issued                                 --              --          53,900
                                                                ------------    ------------    ------------
     Net cash provided by financing activities                     1,077,200          17,440       9,568,785
                                                                ------------    ------------    ------------
Net increase in cash & cash equivalents                              451,019              45         455,563

CASH & CASH EQUIVALENTS, BEGINNING                                     4,544             343              --
                                                                ------------    ------------    ------------
CASH & CASH EQUIVALENTS, ENDING                                      455,563    $        388    $    455,563
                                                                ============    ============    ============
SUPPLEMENTAL INFORMATION:
   Cash and cash equivalents paid for:
           Taxes                                                $         --    $         --
                                                                ============    ============
           Interest expense                                     $         --    $         --
                                                                ============    ============
</TABLE>

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

<PAGE>

                               SIONIX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                FROM INCEPTION (OCTOBER 3, 1994) TO JUNE 30, 2007
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                                         TOTAL
                        COMMON STOCK                                                                         DEFICIT     STOCK-
                    --------------------      ADDITIONAL     STOCK      STOCK         STOCK   UNAMORTIZED ACCUMULATED   HOLDERS'
                    NUMBER OF                  PAID-IN       TO BE   SUBSCRIPTION     TO BE    CONSULTING    FROM        EQUITY
                     SHARES       AMOUNT       CAPITAL       ISSUED   RECEIVABLE    CANCELLED     FEES      INCEPTION   (DEFICIT)
                   ----------- ------------   -----------    ------   -----------   ---------   --------  -----------   ---------
<S>                <C>         <C>            <C>            <C>      <C>            <C>        <C>      <C>            <C>

Stock issued
for cash,
October 3, 1994       10,000    $       10    $        90    $   --   $        --    $     --   $   --   $        --    $       100
Net loss                  --            --             --        --            --          --       --        (1,521)        (1,521)

Balance at
December 31, 1994     10,000            10             90        --            --          --       --        (1,521)        (1,421)
Shares issued
for assignment
rights             1,990,000         1,990         (1,990)       --            --          --       --            --             --
Shares issued
for services         572,473           572        135,046        --            --          --       --            --        135,618
Shares issued
for debt           1,038,640         1,038      1,164,915        --            --          --       --            --      1,165,953

Shares issued
for cash             232,557           233      1,119,027        --            --          --       --            --      1,119,260

Shares issued
for subscription
receivable           414,200           414      1,652,658        --    (1,656,800)         --       --            --         (3,728)
Shares issued
for productions
costs                112,500           113        674,887        --      (675,000)         --       --            --             --
Net loss                  --            --             --        --            --          --       --      (914,279)      (914,279)

Balance at
December 31, 1995  4,370,370         4,370      4,744,633        --    (2,331,800)         --       --      (915,800)     1,501,403
Shares issued
for
reorganization    18,632,612        18,633        (58,033)       --            --          --       --            --        (39,400)
Shares issued
for cash             572,407           573        571,834        --            --          --       --            --        572,407

Shares issued
for services          24,307            24         24,283        --            --          --       --            --         24,307
Net loss                  --            --             --        --            --          --       --      (922,717)      (922,717)

Balance at
September 30,
1996              23,599,696        23,600      5,282,717        --    (2,331,800)         --       --    (1,838,517)     1,136,000
Shares issued
for cash             722,733           723        365,857        --            --          --       --            --        366,580

Shares issued
for services         274,299           274         54,586        --            --          --       --            --         54,860
Cancellation
of shares           (542,138)         (542)      (674,458)       --       675,000          --       --            --             --
Net loss                  --            --             --        --            --          --       --      (858,915)      (858,915)

Balance at
September 30,
1997              24,054,590        24,055      5,028,702        --    (1,656,800)         --       --    (2,697,432)       698,525
Shares issued
for cash           2,810,000         2,810        278,190        --            --          --       --            --        281,000

Shares issued
for services         895,455           895         88,651        --            --          --       --            --         89,546
Shares issued
for compensation   2,200,000         2,200        217,800        --            --          --       --            --        220,000
Cancellation of
shares            (2,538,170)       (2,538)    (1,534,262)       --     1,656,800          --       --            --        120,000
Net loss                  --            --             --        --            --          --       --    (1,898,376)    (1,898,376)

Balance at
September 30,
1998                27,421,875       27,422     4,079,081        --            --          --       --    (4,595,808)      (489,305)
Shares issued
for compensation     3,847,742       3,847        389,078        --            --          --       --            --        392,925
</TABLE>
<PAGE>

                             SIONIX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                FROM INCEPTION (OCTOBER 3, 1994) TO JUNE 30, 2007
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                                           TOTAL
                        COMMON STOCK                                                                           DEFICIT     STOCK-
                    --------------------       ADDITIONAL     STOCK        STOCK         STOCK   UNAMORTIZED ACCUMULATED  HOLDERS'
                    NUMBER OF                   PAID-IN       TO BE     SUBSCRIPTION     TO BE    CONSULTING    FROM       EQUITY
                     SHARES        AMOUNT       CAPITAL       ISSUED     RECEIVABLE    CANCELLED     FEES     INCEPTION   (DEFICIT)
                   -----------   ----------   -----------    ---------   -----------    --------   --------  -----------  ----------
<S>                <C>            <C>          <C>            <C>         <C>            <C>        <C>       <C>        <C>
Share issued
for service            705,746          706       215,329           --            --          --         --          --     216,035
Share issued
for cash             9,383,000        9,383       928,917           --            --          --         --          --     938,300
Net loss                    --           --            --           --            --          --         --  (1,158,755) (1,158,755)
                   -----------   ----------   -----------    ---------   -----------    --------   --------  ----------  -----------
Balance
September 30, 1999  41,358,363       41,358     5,612,405           --            --          --         --  (5,754,563)   (100,800)
Share issued
for cash            10,358,500       10,304     1,020,046           --            --          --         --          --   1,030,350
Shares issued
for compensation     1,517,615        1,518     1,218,598           --            --          --         --          --   1,220,116
Shares issued
for service            986,844          986       253,301           --            --          --         --          --     254,287
Net loss                    --           --            --           --            --          --         --  (2,414,188) (2,414,188)
                   -----------   ----------   -----------    ---------   -----------    --------   --------  ----------  -----------
Balance
September 30, 2000  54,166,322       54,166     8,104,350           --            --          --         --  (8,168,751)    (10,235)
Shares issued for
service              2,517,376        2,517       530,368           --            --          --   (141,318)         --     391,567
Share issued
for cash             6,005,000        6,005       594,495           --            --          --         --          --     600,500
Shares to be
issued for cash
(100,000 shares)            --           --            --       10,000            --          --         --          --      10,000
Shares to issued
for debt (639,509
shares)                     --           --            --      103,295            --          --        --           --     103,295
Net loss                    --           --            --           --            --          --        --   (1,353,429) (1,353,429)
</TABLE>
<PAGE>

                               SIONIX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                FROM INCEPTION (OCTOBER 3, 1994) TO JUNE 30, 2007
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                            TOTAL
                        COMMON STOCK                                                                            DEFICIT     STOCK-
                    --------------------        ADDITIONAL      STOCK       STOCK         STOCK   UNAMORTIZED ACCUMULATED  HOLDERS'
                    NUMBER OF                    PAID-IN        TO BE    SUBSCRIPTION     TO BE    CONSULTING    FROM       EQUITY
                     SHARES        AMOUNT        CAPITAL       ISSUED     RECEIVABLE    CANCELLED    FEES      INCEPTION   (DEFICIT)
                   -----------  ----------   -----------    ---------    -----------    --------  --------   ----------  -----------
<S>                <C>          <C>          <C>            <C>          <C>            <C>       <C>        <C>         <C>
Balance
September 30, 2001  62,688,698       62,688     9,229,213      113,295            --          --  (141,318)  (9,522,180)   (258,302)
Shares issued
for services         1,111,710        1,112       361,603           --            --          --    54,400           --     417,115
Shares issued as
contribution           100,000          100        11,200           --            --          --        --           --      11,300
Shares issued
for compensation        18,838           19         2,897           --            --          --        --           --       2,916
Share issued for
cash                16,815,357       16,815     1,560,782      (10,000)           --          --        --           --   1,567,597
Shares issued
for debt             1,339,509        1,340       208,639     (103,295)           --          --        --           --     106,684
Shares to be
issued related
to equity
financing (967,742
shares)                     --           --      (300,000)     300,000            --          --        --           --          --
Cancellation of
shares              (7,533,701)      (7,534)           --           --            --          --        --           --      (7,534)

Net loss                    --           --            --           --            --          --        --   (1,243,309) (1,243,309)
                   -----------  ----------   -----------    ---------    -----------    --------  --------   ----------  -----------
Balance
September 30, 2002  74,540,411       74,540    11,074,334      300,000            --          --   (86,918) (10,765,489)    596,467
Shares issued
for services         2,467,742        2,468       651,757     (300,000)           --          --        --           --     354,225
Shares issued
for capital
equity line          8,154,317        8,154       891,846           --            --          --        --           --     900,000
Amortization of
consulting fees             --           --            --           --            --          --    86,918           --      86,918
Cancellation of
shares                 (50,000)         (50)           50           --            --          --        --           --          --
Shares to be
cancelled                   --           --         7,349           --        (7,349)         --        --           --          --
</TABLE>
<PAGE>
                               SIONIX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                FROM INCEPTION (OCTOBER 3, 1994) TO JUNE 30, 2007
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                           TOTAL
                        COMMON STOCK                                                                         DEFICIT       STOCK-
                    --------------------     ADDITIONAL     STOCK       STOCK         STOCK   UNAMORTIZED  ACCUMULATED    HOLDERS'
                    NUMBER OF                 PAID-IN       TO BE    SUBSCRIPTION     TO BE    CONSULTING     FROM        EQUITY
                     SHARES       AMOUNT      CAPITAL       ISSUED    RECEIVABLE    CANCELLED    FEES       INCEPTION    (DEFICIT)
                   -----------  ----------  -----------   ---------   -----------    --------  --------    ----------   -----------
<S>                <C>          <C>         <C>           <C>         <C>            <C>       <C>         <C>          <C>

Net loss                    --          --           --          --            --          --        --    (1,721,991)   (1,721,991)
                   -----------  ----------  -----------   ---------   -----------    --------  --------    ----------   -----------
Balance
September 30, 2003  85,112,470      85,112   12,625,336          --            --      (7,349)       --   (12,487,480)      215,619
Shares issued for
capital equity
line                19,179,016      19,179      447,706          --            --          --        --            --       466,885
Shares issued for
services             5,100,004       5,100      196,997          --            --          --   (13,075)           --        189,022
Shares to be
issued for cash
(963,336 shares)            --          --           --      28,900            --          --        --            --        28,900
Shares to be
issued for debt
(500,000 shares)            --          --           --      15,000            --          --        --            --        15,000
Cancelled of
shares              (7,349,204)     (7,349)          --          --            --       7,349        --            --            --
Issuance of
warrants related
to 2004 stock
purchase                    --          --       24,366          --            --          --        --            --        24,366
Net loss                    --          --           --          --            --          --        --    (1,593,135)   (1,593,135)
                   -----------  ----------  -----------   ---------   -----------    --------  --------    ----------   -----------

Balance
September 30, 2004
restated           102,042,286     102,042   13,294,405      43,900            --          --   (13,075)  (14,080,615)     (653,343)
Amortization of
consuting fees              --          --           --          --            --          --    13,075            --        13,075
Net loss                    --          --           --          --            --          --        --      (722,676)     (722,676)
                   -----------  ----------  -----------   ---------   -----------    --------  --------    ----------   -----------
Balance
September 30, 2005
restated           102,042,286     102,042   13,294,405      43,900            --          --        --   (14,803,291)   (1,362,944)
Net loss                    --          --           --          --            --          --        --    (1,049,319)   (1,049,319)
                   -----------  ----------  -----------   ---------   -----------    --------  --------    ----------   -----------
Balance
September 30, 2006 102,042,286     102,042   13,294,405      43,900            --          --        --   (15,852,610)   (2,412,263)
Stock issued for
consulting           4,592,915       4,593       80,336          --            --          --        --            --        84,929
Reclassification
to warrant and
option liability            --          --   (2,561,339)         --            --          --        --            --    (2,561,339)
Net loss                    --          --           --          --            --          --        --   (26,616,109)  (26,616,109)
                   -----------  ----------  -----------   ---------   -----------    --------  --------    ----------   -----------
Balance June 30,
2007 unaudited,
restated           106,635,201  $  106,635  $10,813,402   $  43,900   $        --    $     --  $     --  $(42,468,719) $(31,504,782)
                   ===========  ==========  ===========   =========   ===========    ========  ========  ============  ============
</TABLE>
                  The accompanying notes form an integral part
                of these unaudited condensed financial statements
<PAGE>

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 system
primarily for small water districts.

The Company has completed its reincorporation as a Nevada corporation, effective
July 1, 2003. The reincorporation was completed pursuant to an Agreement and
Plan of Merger between Sionix Corporation, a Utah corporation ("Sionix Utah")
and its wholly-owned Nevada subsidiary, Sionix Corporation ("Sionix Nevada").
Under the merger agreement, Sionix Utah merged with and into Sionix Nevada, and
each share of Sionix Utah's common stock was automatically converted into one
share of common stock, par value $0.001 per share, of Sionix Nevada. The merger
was effected by the filing of Articles of Merger, along with the Agreement and
Plan of Merger, with the Secretary of State of Nevada.

The Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7 "Accounting and Reporting by Development
Stage Enterprises." The Company is in the development stage and its efforts have
been principally devoted to research and development, organizational activities,
and raising capital. All losses accumulated since inception has been considered
as part of the Company's development stage activities.

Note 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION


The unaudited financial statements have been prepared by the Company, pursuant
to the rules and regulations of the Securities and Exchange Commission. The
information furnished in these condensed consolidated financial statements
reflects all adjustments (consisting of normal recurring accruals and
adjustments) which are, in the opinion of management, necessary to fairly
present the operating results for the respective periods. Certain information
and footnote disclosures normally present in annual financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted pursuant to such rules and
regulations. The results of the nine month periods ended June 30, 2007 are not
necessarily indicative of the results to be expected for the full year ending
September 30, 2007.

REVENUE RECOGNITION

The Company's policy to recognize revenues is in accordance with SEC Staff
Accounting Bulletin No. 101, or other specific authoritative literature, as
applicable. Accordingly, revenues from products sales are recorded when all four
of the following criteria are met: (i) persuasive evidence of an arrangement
exists; (ii) delivery has occurred or services have been rendered; ( iii) the
Company's price to the buyer is fixed or determinable; and (iv) collectibility
is reasonably assured. The Company's policy is to report its sales levels on a
net revenue basis, with net revenues being computed by deducting from gross
revenues the amount of actual sales returns and the amount of reserves
established for anticipated sales returns.

The Company's policy for shipping and handling costs, billed to customers, is to
include it in revenue in accordance with Emerging Issues Task Force ("EITF")
issue No. 00-10, "Accounting for Shipping and Handling Revenues and
Costs." The purpose of this issue was to clarify the classification of shipping
and handling revenues and costs. The consensus reached was that all shipping and
handling billed to customers should be recorded as revenue. Accordingly, the
Company records its shipping and handling amounts within net sales and operating
expenses.

The Company has not earned any revenue since its inception to the date of this
report.

<PAGE>

STOCK-BASED COMPENSATION

Effective October 1, 2006, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123-R, "Share-Based Payment" ("SFAS 123-R"), which requires
the measurement and recognition of compensation expense for all share-based
payment awards made to employees and directors, including stock options based on
their fair values. SFAS 123-R supersedes Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), which the Company
previously followed in accounting for stock-based awards. In March 2005, the SEC
issued Staff Accounting Bulletin No. 107 ("SAB 107") to provide guidance on SFAS
123-R. The Company has applied SAB 107 in its adoption of SFAS 123-R.

NET LOSS PER SHARE

Net loss per share is calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." Basic net loss per
share is based upon the weighted average number of common shares outstanding.
Diluted net loss per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period.

ESTIMATES

The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates ADVERTISING

The cost of advertising is expensed as incurred. Total advertising costs were
$3,385 and $3,310 for the nine month periods ended June 30, 2007 and 2006,
respectively.

RECLASSIFICATION

For comparative purposes, prior period's consolidated financial statements have
been reclassified to conform to report classifications of the current period.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This
statement clarifies the definition of fair value, establishes a framework for
measuring fair value and expands the disclosures on fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.
Company management is currently evaluating the effect of this pronouncement on
financial statements.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans--an amendment of FASB
Statements No. 87, 88, 106, and 123(R)." One objective of this standard is to
make it easier for investors, employees, retirees and other parties to
understand and assess an employer's financial position and its ability to
fulfill the obligations under its benefit plans. SFAS No. 158 requires employers
to fully recognize in their financial statements the obligations associated with
single-employer defined benefit pension plans, retiree healthcare plans, and
other postretirement plans. SFAS No. 158 requires an employer to fully recognize
in its statement of financial position the overfunded or underfunded status of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability and to recognize changes in that funded status in

<PAGE>

the year in which the changes occur through comprehensive income. This Statement
also requires an employer to measure the funded status of a plan as of the date
of its year-end statement of financial position, with limited exceptions. SFAS
No. 158 (ASC 715) requires an entity to recognize as a component of other
comprehensive income, net of tax, the gains or losses and prior service costs or
credits that arise during the period but are not recognized as components of net
periodic benefit cost pursuant to SFAS No. 87. This Statement requires
an entity to disclose in the notes to financial statements additional
information about certain effects on net periodic benefit cost for the next
fiscal year that arise from delayed recognition of the gains or losses, prior
service costs or credits, and transition asset or obligation. The Company is
required to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures for fiscal years
ending after December 15, 2006. Company management is currently evaluating the
effect of this pronouncement on financial statements.

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. SFAS No. 159 (ASC 825) is effective for fiscal
years beginning after November 15, 2007. Early adoption is permitted subject to
specific requirements outlined in the new Statement. Therefore, calendar-year
companies may be able to adopt SFAS No. 159 for their first quarter 2007
financial statements.

The new Statement allows entities to choose, at specified election dates, to
measure eligible financial assets and liabilities at fair value that are not
otherwise required to be measured at fair value. If a company elects the fair
value option for an eligible item, changes in that item's fair value in
subsequent reporting periods must be recognized in current earnings. SFAS No.
159 also establishes presentation and disclosure requirements designed
to draw comparison between entities that elect different measurement attributes
for similar assets and liabilities.


Note 3.  PROPERTY AND EQUIPMENT

           Equipment and machinery                 $   213,166
           Furniture and fixtures                       22,183
                                                   -----------

                                                       235,349
           Less accumulated depreciation              (188,950)
                                                   -----------
                                                   $    46,399
                                                   ===========

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

Note 4.  ACCRUED EXPENSES (RESTATED)




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

   Accrued advisory board compensation               $  576,000
   Payroll taxes                                        142,672
   Accrued salaries                                   1,098,182
   Interest payable                                     120,767
   Other accruals                                       163,776
                                                     ----------
          Total                                      $2,101,397
                                                     ==========

<PAGE>

Note 5.  NOTES PAYABLE

RELATED PARTIES

The Company has received advances in the form of unsecured promissory notes from
stockholders in order to pay ongoing operating expenses. These notes are at
interest rates up to 13% and are due on demand. As of June 30, 2007, notes
payable amounted to $129,000. The Company recorded $27,315 interest expense for
the nine month period ended June 30, 2007.

OFFICERS

Notes payables to officers are unsecured, interest free and due on demand.
Proceeds from these notes payable were used to pay ongoing operating expense.
The balance at June 30, 2007 was $32,860.

Note 6.  NOTES PAYABLE UNDER EQUITY LINE OF CREDIT

During the year ended September 30, 2003, the Company received $1,307,500
proceeds from promissory notes to Cornell Capital Partners, LP, net of 4% fee of
$56,000 and $36,500 for escrow and other fees. The Company has settled $900,000
by issuing shares of common stock during the year ended September 30, 2003 (note
7). The notes payable outstanding at September 30, 2003, amounted to $500,000.
The balance for the notes payable outstanding at September 30, 2004 and 2005
were $233,115 and $233,115, respectively. In 2006, Company has entered into a
settlement agreement with Cornell Capital Partner to pay the total amount of
$327,336; $50,000 shall be paid on or before November 15, 2006, $25,000 payable
per month on the 15th day of each month commencing December 15, 2006, with the
balance of $27,336 due and payable on or before October 15, 2007. The Company
recorded loss on settlement of debt of $94,221 for the year ended September 30,
2006.

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

Note 7.  CONVERTIBLE NOTES

During the nine month period ended June 30, 2007, the Company entered into
various debenture agreements (the "Bridge Notes") with several investors. Under
the terms of the agreements, the notes bear interest at the rate of 10% per
annum. The notes will automatically mature and the entire outstanding principal
amount, together with all unpaid and accrued interest, shall become due and
payable after the earlier of (i) the eighteen (18) month anniversary of the date
of issuance (ii) an event of default or (iii) the closing of any equity related
financing by the Company in which the gross proceeds to the Company are at least
$2,500,000, unless, prior to such time, the notes have been converted into
shares of the Company's common stock.

The notes are convertible into shares of Common stock of the Company at $0.05
per share or shares of any equity security issued by the Company at a conversion
price equal to the price at which such security is sold to any other party.

The conversion price is adjustable as per the terms of the agreement for the
subsequent issuances of equity security at a price different than the conversion
price.

The conversion price is also adjustable if a registration statement covering the
underlying shares is not declared effective within 180 days after the closing,
but in no case the conversion price to be reduced below $0.04 per share.

As of June 30, 2007 the Company had received $836,000 under the Bridge Notes.

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

<PAGE>

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

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

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

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

Note 8.  STOCKHOLDERS' EQUITY

COMMON STOCK

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


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


STOCK OPTIONS

2001 Executive Officers Stock Option Plan

In October of 2000, the company entered into amendments to the employment
agreements with each of the executive officers, eliminating the provisions of
stock bonuses. In lieu of the bonus provision, the Company adopted the 2001
Executive Officers Stock option Plan. The Company reserved 7,576,680 shares for
issuance under the plan.

         Options outstanding:
<TABLE>
<CAPTION>
                                      WEIGHTED AVERAGE      NUMBER OF OUTSTANDING   AGGREGATE INTRINSIC
                                       EXERCISE PRICE              OPTIONS                 VALUE
----------------------------------------------------------------------------------------------------------
   <S>                                      <C>                   <C>                     <C>
   Outstanding as of                        $0.15                 7,343,032               $       --
   September 30, 2006
----------------------------------------------------------------------------------------------------------
   Granted
----------------------------------------------------------------------------------------------------------
   Forfeited
----------------------------------------------------------------------------------------------------------
   Exercised
----------------------------------------------------------------------------------------------------------
   Outstanding as of                        $0.15                 7,343,032               $  881,165
   June 30, 2007
----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

         A summary of the Company's option activity is listed below:
<TABLE>
<CAPTION>

                                                                                              WEIGHTED-             WEIGHTED-
                                                                       WEIGHTED-              AVERAGE               AVERAGE
                                                                       AVERAGE                EXERCISE              EXERCISE
                           STOCK                 STOCK                 REMAINING              PRICE OF              PRICE OF
EXERCISE                   OPTIONS               OPTIONS               CONTRACTUAL            OPTIONS               OPTIONS
PRICE                      OUTSTANDING           EXERCISABLE           LIFE                   OUTSTANDING           EXERCISABLE
-------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                   <C>                   <C>                    <C>                   <C>

$0.15                        7,343,032             7,343,032             3 years              $ 0.15                $ 0.15
</TABLE>

The fair value of the options was calculated using the Black-Scholes option
valuation model with the following weighted-average assumptions: Dividend yields
of 0%; risk free interest rates of 6%; expected volatility of 100% and expected
lives of 4.9 years.


All options were vested prior to September 30, 2006. No options are vested
during the nine month period ended June 30, 2007.

Note 9.  GOING CONCERN (RESTATED)

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of business. Through June 30, 2007, the Company had incurred
cumulative losses of $42,468,719 including a current loss for the nine months
ended June 30, 2007 of $26,616,109. The Company's successful transition from a
development stage company to attaining profitable operations is dependent upon
obtaining financing adequate to fulfill its research and development activities,
production of its equipment and achieving a level of revenues adequate to
support the Company's cost structure. Management's plan of operations
anticipates that the cash requirements for the next twelve months will be met by
obtaining capital contributions through the sale of common stock and cash flow
from operations. However, there is no assurance that the Company will be able to
implement its plan.

Note 10.  RESTATEMENT

The Company issued twenty-five (25) secured convertible promissory notes between
October 17, 2006 and February 27, 2007 for total proceeds to the Company of
$750,000 ("Convertible Notes 1"). Convertible Notes 1 had a conversion price of
$0.05 into common stock. 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 less than
$0.05.

On June 6, 2007, the Company issued five (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 matures on or about December 31,
2008, and is convertible into common stock at $0.01.

<PAGE>

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 should have classified all potentially dilutive securities as
derivative liabilities as of June 6, 2007. The Company researched its debt and
equity instruments and determined that the potentially dilutive securities are
as follows:

     o    2001 Executive Officers Stock Option Plan
     o    Advisory Board Compensation
     o    Warrants Related to 2004 Stock Purchase Agreement
     o    Convertible Notes 1
     o    Convertible Notes 2
     o    Subordinated Convertible Notes 3
     o    Warrants related to Subordinated Convertible Notes 3

The Company analyzed the effect of the recalculation on the balance sheet and
the statements of operations and cash flows as of June 30, 2007. The analysis
and results were as follows:

2001 EXECUTIVE OFFICERS STOCK OPTION PLAN

In October 2000, the Company amended the employment agreements with its
executive officers. In conjunction with the amendments, the Company adopted the
2001 Executive Officers Stock Option Plan ("Plan"). The Plan has reserved
7,576,680 shares of common stock and has issued options for the purchase of
7,034,140 shares of common stock. The options vest over five (5) years and
expire ten (10) years from the date of issuance.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available the embedded conversion feature met the definition of a derivative
based on the SFAS No.133, "Accounting for Derivatives and Hedging Activities,"
as of June 6, 2007.


The Company determined the fair value of the stock options to be $2,454,597
using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 5.03%;
     o    volatility of 285%;
     o    dividend yield of 0%; and
     o    expected term of 3.87 years.

Therefore, at June 6, 2007 the Company will record on the accompanying balance
sheet a liability of $2,454,597 for the fair value of the options and a
reduction to additional paid in capital ("APIC") of $2,454,597.

The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.

At June 30, 2007, the Company determined the fair value of the options to be
$1,892,508 using the Black Sholes model with the following assumptions:

     o    risk free rate of return of 4.89%;
     o    volatility of 286%;
     o    dividend yield of 0%; and
     o    expected term of 3.81 years.

<PAGE>

The decrease of $562,089 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

At June 30, 2007, the Company will record $562,089 as a change in accrued
derivative liability in the accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the change in fair
value of the liability of $562,089.

ADVISORY BOARD COMPENSATION

On October 1, 2004, the Company formed an advisory board consisting of four
members. In exchange for their services, each member was to receive $5,000
monthly from October 1, 2004 to February 22, 2007, for a total of $576,000 to be
paid to all members. Each member, in his sole discretion, was entitled to
convert some or all of the cash amount owed to him into shares of common stock
at a rate of $0.05 per share. If all of the members of the advisory board
converted the total amount of cash compensation due to them into shares of
common stock, the Company would be required to issue 11,520,000 shares. The
Company determined that the accrued expense, embedded beneficial conversion
features, embedded beneficial conversion feature discount, and related
amortization expense were not recorded at the date of issuance or prior to the
restatement. No payments have been made to any advisory board members and there
has been no conversion by any advisory board members of the accrued liability
into shares of common stock.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available, the embedded conversion feature met the definition of a derivative
based on SFAS No. 133 as of June 6, 2007.


The Company determined the fair value of the embedded conversion feature to be
$3,614,932 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 4.99%;
     o    volatility  between  186% and 277%;
     o    dividend  yield of 0%;  and
     o    an expected term of 0.52 years to 1.30 years.

Therefore, at June 6, 2007, the Company will record on the accompanying balance
sheet an accrued liability of $576,000 for the accrued compensation and an
embedded conversion derivative liability of $3,614,932.


The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value, with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.


At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $2,680,539 using the Black Sholes model with the
following assumptions:

     o    risk free rate of return between 4.91% and 4.99%;
     o    volatility  between  167% and  279%;
     o    dividend yield of 0%; and
     o    expected term of 0.45 years to 1.24 years.

The decrease of $934,393 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

<PAGE>

STATEMENT OF OPERATIONS


The Company will record an adjustment of $3,661,741 to compensation expense
which is the the fair value of the embedded derivative.


At June 30, 2007, the Company will record $934,393 as a change in accrued
derivative liability in the accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the advisory board
compensation accrued expense of $96,000, additional compensation expense for
beneficial conversion features liability of $3,614,932, and change in fair value
of the liability of $934,393.

WARRANTS RELATED TO 2004 STOCK PURCHASE AGREEMENT

Under the terms of a 2004 Stock Purchase Agreement, the Company issued warrants
to purchase 1,463,336 shares of common stock at an exercise price of $0.03,
which expired between February 9, 2007 and August 25, 2007. The Company
determined that the warrants and related expense were not recorded at the date
of issuance or prior to the restatement and there has been no exercise of the
warrants into shares of common stock. As of June 6, 2007, only 333,335 warrants
remained outstanding as all of the others had expired.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available, the warrants met the definition of a derivative based on SFAS No. 133
as of June 6, 2007.


The Company calculated the fair value of the 333,335 warrants to be $106,742 at
June 6, 2007 using the Black Sholes model with the following assumptions:

     o    risk free rate of return of 5.06%;
     o    volatility of 144%;
     o    dividend yield of 0%; and

     o    expected term between 0.01 years and 0.22 years.

The Company will record an accrued warrant derivative liability of $106,742 and
a reduction to its additional paid in capital of $106,742 on the accompanying
balance sheet.


The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value, with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.


At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $56,042 using the Black Sholes model with the following
assumptions:

     o    risk free rate of return of 4.28%;
     o    volatility of 167%;
     o    dividend yield of 0%; and
     o    expected term of 0.10 years to .15 years.

The decrease of $50,700 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The decrease of $50,700 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

<PAGE>

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the change in fair
value of the warrants of $50,700 on the statement of operations.

CONVERTIBLE NOTES 1

As of June 6, 2007, the Company had Convertible Notes 1 outstanding totaling
$750,000 that were issued between October 17, 2006 and February 27, 2007.
Convertible Notes 1 included an embedded beneficial conversion feature that
allowed the holders to convert the Convertible Notes 1 into common stock at an
initial rate of $0.05. Convertible Notes 1 matures between April 2008 and August
2008, accrues interest at 10%, and any accrued but unpaid interest is also
convertible into common stock at $0.05. Because of the price protection offered
holders of Convertible Notes 1 and the subsequent issuance of Convertible Note,
2, the conversion price was decreased from $0.05 to $0.01.

BALANCE SHEET

The Company determined that because there were not sufficient authorized shares
available, the embedded conversion feature met the definition of a derivative
based on SFAS No. 133 as of June 6, 2007.

The Company determined the fair value of the embedded conversion feature to be
$27,057,645 using the Black Sholes model with the following assumptions:

     o    risk free rate of return of 4.99%;
     o    volatility  between  186% and  277%;
     o    dividend yield of 0%; and
     o    expected term of 0.87 years to 1.23 years.

Therefore, at June 6, 2007, the Company will record on the accompanying balance
sheet an accrued embedded conversion derivative liability of $27,057,645, a
reduction to additional paid in capital of $619,513 (the amount that had been
previously recorded to APIC) and financing costs of $26,438,132.

At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $20,841,459 using the Black Sholes model with the
following assumptions:

     o    risk free rate of return of 4.91%;
     o    volatility  between  197% and  279%;
     o    dividend yield of 0%; and
     o    expected term of 0.80 years to 1.17 years.

The decrease of $6,216,186 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The Company will record the $26,438,132 as financing costs and record the
decrease of $6,216,186 as a change in accrued derivative liability in the
accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $26,438,132 and the $6,216,186 change in accrued derivative liability.

CONVERTIBLE NOTES 2

On June 6, 2007, the Company issued five (5) convertible promissory notes for a
total of $86,000. No warrants were issued in connection with Convertible Notes
2. The Convertible Notes 2 matures on or about December 31, 2008, accrues
interest at 10% and is convertible at $0.01.

<PAGE>

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available that the embedded conversion feature met the definition of a
derivative based on SFAS No. 133 as of June 6, 2007.


The Company determined the fair value of the embedded conversion feature to be
$2,982,540 using the Black Sholes model with the following assumptions:



     o    risk free rate of return of 4.99%;
     o    volatility of 277%;
     o    dividend yield of 0%; and
     o    expected term of 1.57 years.

Therefore, at June 6, 2007, the Company will record on the accompanying balance
sheet an accrued embedded conversion derivative liability of $2,982,540 and
financing costs of $2,982,540.

At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $2,310,505 using the Black Sholes model with the
following assumptions:

     o    risk free rate of return of 4.87%;
     o    volatility of 279%;
     o    dividend yield of 0%; and
     o    expected term of 1.51 years.

The decrease of $672,035 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The Company will record the $2,982,540 as financing costs and the decrease of
$672,035 as a change in accrued derivative liability in the accompanying
statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $2,982,540 and the $672,035 change in accrued derivative liability.

SUBORDINATED CONVERTIBLE NOTES 3

On June 21, 2007, the Company issued two subordinated convertible promissory
notes ("Subordinated Convertible Notes 3") for a total of $500,000. The Company
issued to the investors 1,136,364 five year warrants with an exercise price of
$0.50. In addition, the Company issued 465,908 warrants as a placement fee which
have the same terms as the warrants issued to the investors. The Subordinated
Convertible Notes 3 mature on June 20, 2008, accrues interest at 8% and is
convertible at $0.22.

<PAGE>

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available that the embedded conversion feature met the definition of a
derivative based on SFAS No. 133 as of June 6, 2007.


The Company determined the fair value of the embedded conversion feature to be
$537,755 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 4.96%;
     o    volatility of 196%;
     o    dividend yield of 0%; and
     o    expected term of 1 year.

Therefore, at June 21, 2007, the Company will record in the accompanying balance
sheet an accrued embedded conversion derivative liability of $537,755 and
financing costs of $537,755.

At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $436,568 using the Black Sholes model with the
following assumptions:


     o    risk free rate of return of 4.91%;
     o    volatility of 197%;
     o    dividend yield of 0%; and
     o    expected term of 0.98 years.

The decrease of $101,187 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The Company will record the $537,755 as financing costs and will record the
decrease of $101,187 as a change in accrued derivative liability in the
accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $537,775 and change in accrued derivative liability of $101,187.

WARRANTS RELATED TO SUBORDINATED CONVERTIBLE NOTES 3

On June 21, 2007, the Company issued to the investors 1,136,364 five year
warrants with an exercise price of $0.50. In addition, the Company issued
465,908 warrants as a placement fee, which have the same terms as the warrants
issued to the investors.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available that the warrants met the definition of a derivative based on SFAS No.
133 as of June 6, 2007.


The Company calculated the fair value of the 1,136,364 and 465,908 warrants to
be $362,426 and $148,595, respectively, at June 21, 2007 using the Black Sholes
model with the following assumptions:

     o    risk free rate of return of 5.06%;
     o    volatility of 265%;
     o    dividend yield of 0%; and
     o    expected term of 5 years.

The Company will record an accrued warrant derivative liability of $511,021 and
financing costs of $511,021.


The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value, with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.


<PAGE>

At June 30, 2007, the Company determined the fair value of the warrants to be
$431,011 using the Black Sholes model with the following assumptions:

     o    risk free rate of return of 4.92%;
     o    volatility of 265%;
     o    dividend yield of 0%; and
     o    expected term of 4.98 years.

The decrease of $80,010 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The Company will record as financing costs $511,021 and will record the decrease
of $80,010 as a change in accrued derivative liability in the accompanying
statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $511,021 and a change in accrued derivative liability of $80,010.

The following table shows the effect of each of the changes discussed above on
the Company's balance sheet, statement of operation, and statement of cash flows
for the three and nine months ended June 30, 2007.

<TABLE>
<CAPTION>

                                                                                                                          AS
                                                                          AS        BENEFICIAL        WARRANTS         RESTATED
                                                                      PREVIOUSLY     CONVERSION          AND            JUNE 30,
                                                                       STATED          FEATURES        OPTIONS           2007
                                                                     ------------    ------------    -----------     ------------
<S>                                                                  <C>             <C>             <C>             <C>
BALANCE SHEET
Accrued expenses                                                     $  1,525,397    $    576,000    $         --    $  2,101,397
Warrant and option liability                                                   --              --       2,379,561       2,379,561
Beneficial conversion liability                                                --      26,269,071              --      26,269,071
Additional paid in capital                                             13,969,888        (595,147)     (2,561,339)     10,813,402
Deficit accumulated during developmental stage                        (16,400,573)    (26,249,924)        181,778     (42,468,719)

STATEMENT OF OPERATIONS (FOR THE THREE MONTHS ENDED JUNE 30, 2007)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                         444,544       3,661,741              --       4,106,285
Interest expense and financing costs                                      (74,307)    (29,958,427)       (511,021)    (30,543,755)

STATEMENT OF OPERATIONS (FOR THE NINE MONTHS ENDED JUNE 30, 2007)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                         932,668       3,661,741              --       4,594,409
Interest expense and financing costs                                     (144,895)    (29,958,427)       (511,021)    (30,614,343)

STATEMENT OF OPERATIONS (SINCE INCEPTION)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                      12,661,991       4,215,298              --      16,877,289
Interest expense and financing costs                                     (379,581)    (29,958,427)       (511,021)    (30,849,029)

STATEMENT OF CASH FLOWS (FOR THE NINE MONTHS ENDED JUNE 30, 2007)
Net (loss) gain                                                      $ (1,101,520    $(25,696,367)   $    181,778    $(26,616,109)
Gain on change in fair value of warrant and option liability                   --              --        (692,799)       (692,799)
Gain on change in fair value of beneficial conversion liability                --      (7,923,801)             --      (7,923,801)
Change in accrued expenses                                                319,558          96,000              --         415,558
Non-cash compensation expense                                                  --       3,565,741              --       3,565,741
Non-cash financing costs                                                       --      29,958,427         511,021      30,469,448

STATEMENT OF CASH FLOWS (SINCE INCEPTION)
Net (loss) gain                                                      $(16,400,573)   $(26,249,924)  $     181,778   $ (42,468,719)
Gain on change in fair value of warrant and option liability                   --              --        (692,799)       (692,799)
Gain on change in fair value of beneficial conversion liability                --      (7,923,801)             --      (7,923,801)
Change in accrued expenses                                              1,387,473         576,000              --       1,963,473
Non-cash compensation expense                                                  --       3,639,298              --       3,639,298
Non-cash financing costs                                                       --      29,958,427         511,021      30,469,448
</TABLE>

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL. The following discussion and analysis should be read in conjunction
with our Financial Statements and Notes thereto, included elsewhere in this
Quarterly Report on Form 10-QSB. Except for the historical information contained
in this report, the following discussion contains certain forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. The cautionary statements made
in our most recent Annual Report on Form 10-KSB should be read as being
applicable to all related forward-looking statements wherever they appear in
this Report. Our actual results may differ materially from the results discussed
in the forward-looking statements, as a result of certain factors including, but
not limited to, those discussed elsewhere herein and in our most recent Annual
Report on Form 10-KSB.

RESTATEMENT OF PRIOR PERIOD. The Company issued twenty-five (25) secured
convertible promissory notes between October 17, 2006 and February 27, 2007 for
total proceeds to the Company of $750,000 ("Convertible Notes 1"). Convertible
Notes 1 had a conversion price of $0.05 into common stock. 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 less than $0.05.

On June 6, 2007, the Company issued five (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 matures on or about December 31,
2008, and is convertible into common stock at $0.01.

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 should have classified all potentially dilutive securities as
derivative liabilities as of June 6, 2007. The Company researched its debt and
equity instruments and determined that the potentially dilutive securities are
as follows:

     o    2001 Executive Officers Stock Option Plan
     o    Advisory Board Compensation
     o    Warrants Related to 2004 Stock Purchase Agreement
     o    Convertible Notes 1
     o    Convertible Notes 2
     o    Subordinated Convertible Notes 3
     o    Warrants related to Subordinated Convertible Notes 3

The Company analyzed the effect of the recalculation on the balance sheet and
the statements of operations and cash flows as of June 30, 2007. The analysis
and results were as follows:

2001 EXECUTIVE OFFICERS STOCK OPTION PLAN

In October 2000, the Company amended the employment agreements with its
executive officers. In conjunction with the amendments, the Company adopted the
2001 Executive Officers Stock Option Plan ("Plan"). The Plan has reserved
7,576,680 shares of common stock and has issued options for the purchase of
7,034,140 shares of common stock. The options vest over five (5) years and
expire ten (10) years from the date of issuance.

BALANCE SHEET

The Company determined that because there were not sufficient authorized shares
available the embedded conversion feature met the definition of a derivative
based on the SFAS No. 133 as of June 6, 2007.

<PAGE>

The Company determined the fair value of the stock options to be $2,454,597
using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 5.03%;
     o    volatility of 285%;
     o    dividend yield of 0%; and
     o    expected term of 3.87 years.


Therefore, at June 6, 2007 the Company will record on the accompanying balance
sheet a liability of $2,454,597 for the fair value of the options and a
reduction to additional paid in capital ("APIC") of $2,454,597.


The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.


At June 30, 2007, the Company determined the fair value of the options to be
$1,892,508 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 4.89%;
     o    volatility of 286%;
     o    dividend yield of 0%; and
     o    expected term of 3.81 years.


The decrease of $562,089 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

At June 30, 2007, the Company will record $562,089 as a change in accrued
derivative liability in the accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the change in fair
value of the liability of $562,089.

ADVISORY BOARD COMPENSATION

On October 1, 2004, the Company formed an advisory board consisting of four
members. In exchange for their services, each member was to receive $5,000
monthly from October 1, 2004 to February 22, 2007, for a total of $576,000 to be
paid to all members. Each member, in his sole discretion, was entitled to
convert some or all of the cash amount owed to him into shares of common stock
at a rate of $0.05 per share. If all of the members of the advisory board
converted the total amount of cash compensation due to them into shares of
common stock, the Company would be required to issue 11,520,000 shares. The
Company determined that the accrued expense, embedded beneficial conversion
features, embedded beneficial conversion feature discount, and related
amortization expense were not recorded at the date of issuance or prior to the
restatement. No payments have been made to any advisory board members and there
has been no conversion by any advisory board members of the accrued liability
into shares of common stock.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available, the embedded conversion feature met the definition of a derivative
based on SFAS No. 133 as of June 6, 2007.


<PAGE>

The Company determined the fair value of the embedded conversion feature to be
$3,614,932 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 4.99%;
     o    volatility  between  186%  and  277%;
     o    dividend yield of 0%; and
     o    an expected term of 0.52 years to 1.30 years.


Therefore, at June 6, 2007, the Company will record on the accompanying balance
sheet an accrued liability of $576,000 for the accrued compensation and an
embedded conversion derivative liability of $3,614,932.


The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value, with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.


At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $2,680,539 using the Black Sholes model with the
following assumptions:


     o    risk free rate of return between 4.91% and 4.99%;
     o    volatility  between 167% and 279%;
     o    dividend  yield of 0%; and
     o    expected term of 0.45 years to 1.24 years.


The  decrease  of $934,393  will be  recorded as a change in accrued  derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS


The Company will record an adjustment of $3,661,741 to compensation expense
which is the accrued advisory board compensation related to the fiscal year
ended September 30, 2006 plus the fair value of the embedded derivative.


At June 30, 2007, the Company will record $934,393 as a change in accrued
derivative liability in the accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the advisory board
compensation accrued expense of $96,000, additional compensation expense for
beneficial conversion features liability of $3,614,932, and change in fair value
of the liability of $934,393.

WARRANTS RELATED TO 2004 STOCK PURCHASE AGREEMENT

Under the terms of a 2004 Stock Purchase Agreement, the Company issued warrants
to purchase 1,463,336 shares of common stock at an exercise price of $0.03,
which expired between February 9, 2007 and August 25, 2007. The Company
determined that the warrants and related expense were not recorded at the date
of issuance or prior to the restatement and there has been no exercise of the
warrants into shares of common stock. As of June 6, 2007, only 333,335 warrants
remained outstanding as all of the others had expired.

<PAGE>

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available, the warrants met the definition of a derivative based on SFAS No. 133
as of June 6, 2007.


The Company calculated the fair value of the 333,335 warrants to be $106,742 at
June 6, 2007 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 5.06%;
     o    volatility of 144%;
     o    dividend yield of 0%; and
     o    expected term between 0.01 years and 0.22 years.


The Company will record an accrued warrant derivative liability of $106,742 and
a reduction to its additional paid in capital of $106,742 on the accompanying
balance sheet.


The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value, with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.


At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $56,042 using the Black Sholes model with the following
assumptions:


     o    risk free rate of return of 4.28%;
     o    volatility of 167%;
     o    dividend yield of 0%; and
     o    expected term of 0.10 years to .15 years.


The decrease of $50,700 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The decrease of $50,700 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the change in fair
value of the warrants of $50,700 on the statement of operations.

CONVERTIBLE NOTES 1

As of June 6, 2007, the Company had Convertible Notes 1 outstanding totaling
$750,000 that were issued between October 17, 2006 and February 27, 2007.
Convertible Notes 1 included an embedded beneficial conversion feature that
allowed the holders to convert the Convertible Notes 1 into common stock at an
initial rate of $0.05. Convertible Notes 1 matures between April 2008 and August
2008, accrues interest at 10%, and any accrued but unpaid interest is also
convertible into common stock at $0.05. Because of the price protection offered
holders of Convertible Notes 1 and the subsequent issuance of Convertible Note,
2, the conversion price was decreased from $0.05 to $0.01.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available, the embedded conversion feature met the definition of a derivative
based on SFAS No. 133 as of June 6, 2007.


The Company determined the fair value of the embedded conversion feature to be
$27,057,645 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 4.99%;
     o    volatility  between 186% and 277%;
     o    dividend yield of 0%; and
     o    expected term of 0.87 years to 1.23 years.


<PAGE>

Therefore, at June 6, 2007, the Company will record on the accompanying balance
sheet an accrued embedded conversion derivative liability of $27,057,645, a
reduction to additional paid in capital of $619,513 (the amount that had been
previously recorded to APIC) and financing costs of $26,438,132.

At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $20,841,459 using the Black Sholes model with the
following assumptions:


     o    risk free rate of return of 4.91%;
     o    volatility  between 197% and 279%;
     o    dividend yield of 0%; and
     o    expected term of 0.80 years to 1.17 years.


The decrease of $6,216,186 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The Company will record the $26,438,132 as financing costs and record the
decrease of $6,216,186 as a change in accrued derivative liability in the
accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $26,438,132 and the $6,216,186 change in accrued derivative liability.

CONVERTIBLE NOTES 2

On June 6, 2007, the Company issued five (5) convertible promissory notes for a
total of $86,000. No warrants were issued in connection with Convertible Notes
2. The Convertible Notes 2 matures on or about December 31, 2008, accrues
interest at 10% and is convertible at $0.01.

BALANCE SHEET

The Company determined that because there were not sufficient authorized shares
available that the embedded conversion feature met the definition of a
derivative based on SFAS No. 133 as of June 6, 2007.

The Company determined the fair value of the embedded conversion feature to be
$2,982,540 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 4.99%;
     o    volatility of 277%;
     o    dividend yield of 0%; and
     o    expected term of 1.57 years.


Therefore, at June 6, 2007, the Company will record on the accompanying balance
sheet an accrued embedded conversion derivative liability of $2,982,540 and
financing costs of $2,982,540.

At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $2,310,505 using the Black Sholes model with the
following assumptions:


     o    risk free rate of return of 4.87%;
     o    volatility of 279%;
     o    dividend yield of 0%; and
     o    expected term of 1.51 years.


The decrease of $672,035 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

<PAGE>

STATEMENT OF OPERATIONS

The Company will record the $2,982,540 as financing costs and the decrease of
$672,035 as a change in accrued derivative liability in the accompanying
statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $2,982,540 and the $672,035 change in accrued derivative liability.

SUBORDINATED CONVERTIBLE NOTES 3

On June 21, 2007, the Company issued two subordinated convertible promissory
notes ("Subordinated Convertible Notes 3") for a total of $500,000. The Company
issued to the investors 1,136,364 five year warrants with an exercise price of
$0.50. In addition, the Company issued 465,908 warrants as a placement fee which
have the same terms as the warrants issued to the investors. The Subordinated
Convertible Notes 3 mature on June 20, 2008, accrues interest at 8% and is
convertible at $0.22.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available that the embedded conversion feature met the definition of a
derivative based on SFAS No. 133 as of June 6, 2007.


The Company determined the fair value of the embedded conversion feature to be
$537,755 using the Black Sholes model with the following assumptions:


     o    risk free rate of return of 4.96%;
     o    volatility of 196%;
     o    dividend yield of 0%; and
     o    expected term of 1 year.


Therefore, at June 21, 2007, the Company will record in the accompanying balance
sheet an accrued embedded conversion derivative liability of $537,755 and
financing costs of $537,755.

At June 30, 2007, the Company determined the fair value of the embedded
conversion feature to be $436,568 using the Black Sholes model with the
following assumptions:


     o    risk free rate of return of 4.91%;
     o    volatility of 197%;
     o    dividend yield of 0%; and
     o    expected term of 0.98 years.


The decrease of $101,187 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

<PAGE>

STATEMENT OF OPERATIONS

The Company will record the $537,755 as financing costs and will record the
decrease of $101,187 as a change in accrued derivative liability in the
accompanying statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $537,775 and change in accrued derivative liability of $101,187.

WARRANTS RELATED TO SUBORDINATED CONVERTIBLE NOTES 3

On June 21, 2007, the Company issued to the investors 1,136,364 five year
warrants with an exercise price of $0.50. In addition, the Company issued
465,908 warrants as a placement fee, which have the same terms as the warrants
issued to the investors.

BALANCE SHEET


The Company determined that because there were not sufficient authorized shares
available that the warrants met the definition of a derivative based on SFAS No.
133 as of June 6, 2007.


The Company calculated the fair value of the 1,136,364 and 465,908 warrants to
be $362,426 and $148,595, respectively, at June 21, 2007 using the Black Sholes
model with the following assumptions:


     o    risk free rate of return of 5.06%;
     o    volatility of 265%;
     o    dividend yield of 0%; and
     o    expected term of 5 years.


The Company will record an accrued warrant derivative liability of $511,021 and
financing costs of $511,021.


The Company followed the guidance of SFAS No. 133, which requires all contracts
classified as liabilities to be measured at fair value, with changes in fair
value reported in earnings as long as the contracts remain classified as
liabilities.

At June 30, 2007, the Company determined the fair value of the warrants to be
$431,011 using the Black Sholes model with the following assumptions:

     o    risk free rate of return of 4.92%;
     o    volatility of 265%;
     o    dividend yield of 0%; and
     o    expected term of 4.98 years.

The decrease of $80,010 will be recorded as a change in accrued derivative
liability in the accompanying statement of operations.

STATEMENT OF OPERATIONS

The Company will record as financing costs $511,021 and will record the decrease
of $80,010 as a change in accrued derivative liability in the accompanying
statement of operations.

STATEMENT OF CASH FLOWS

Changes in the statement of cash flows were the result of the non cash financing
charge of $511,021 and a change in accrued derivative liability of $80,010.

<PAGE>

The following table shows the effect of each of the changes discussed above on
the Company's balance sheet, statement of operation, and statement of cash flows
for the three and nine months ended June 30, 2007.
<TABLE>
<CAPTION>
                                                                         AS           BENFICIAL        WARRANTS           AS
                                                                      PREVIOUSLY     CONVERSION          AND           RESTATED
                                                                        STATED        FEATURES         OPTIONS         JUNE 30,
                                                                                                                         2007
                                                                     -------------   -----------     -----------     ------------
<S>                                                                  <C>             <C>             <C>             <C>
BALANCE SHEET
Accrued expenses                                                     $  1,525,397    $    576,000    $         --    $  2,101,397
Warrant and option liability                                                   --              --       2,379,561       2,379,561
Beneficial conversion liability                                                --      26,269,071              --      26,269,071
Additional paid in capital                                             13,969,888        (595,147)     (2,561,339)     10,813,402
Deficit accumulated during developmental stage                        (16,400,573)    (26,249,924)        181,778     (42,468,719)

STATEMENT OF OPERATIONS (FOR THE THREE MONTHS ENDED JUNE 30, 2007)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                         444,544       3,661,741              --       4,106,285
Interest expense and financing costs                                      (74,307)    (29,958,427)       (511,021)    (30,543,755)

STATEMENT OF OPERATIONS (FOR THE NINE MONTHS ENDED JUNE 30, 2007)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                         932,668       3,661,741              --       4,594,409
Interest expense and financing costs                                     (144,895)    (29,958,427)       (511,021)    (30,614,343)

STATEMENT OF OPERATIONS (SINCE INCEPTION)
Gain on change in fair value of warrant and option liability         $         --    $         --    $    692,799    $    692,799
Gain on change in fair value of beneficial conversion liability                --       7,923,801              --       7,923,801
General and administrative (compensation expense)                      12,661,991       4,215,298              --      16,877,289
Interest expense and financing costs                                     (379,581)    (29,958,427)       (511,021)    (30,849,029)

STATEMENT OF CASH FLOWS (FOR THE NINE MONTHS ENDED JUNE 30, 2007)
Net (loss) gain                                                      $ (1,101,520    $(25,696,367)   $    181,778    $(26,616,109)
Gain on change in fair value of warrant and option liability                   --              --        (692,799)       (692,799)
Gain on change in fair value of beneficial conversion liability                --      (7,923,801)             --      (7,923,801)
Change in accrued expenses                                                319,558          96,000              --         415,558
Non-cash compensation expense                                                  --       3,565,741              --       3,565,741
Non-cash financing costs                                                       --      29,958,427         511,021      30,469,448

STATEMENT OF CASH FLOWS (SINCE INCEPTION)
Net (loss) gain                                                      $(16,400,573)   $(26,249,924)  $     181,778   $ (42,468,719)
Gain on change in fair value of warrant and option liability                   --              --        (692,799)       (692,799)
Gain on change in fair value of beneficial conversion liability                --      (7,923,801)             --      (7,923,801)
Change in accrued expenses                                              1,387,473         576,000              --       1,963,473
Non-cash compensation expense                                                  --       3,639,298              --       3,639,298
Non-cash financing costs                                                       --      29,958,427         511,021      30,469,448

</TABLE>

<PAGE>

PLAN OF OPERATION. During the next twelve months we plan to continue testing of
the ELIXIR unit at the Villa Park Dam under our arrangement with the Serrano
Water District. We believe that if the unit operates successfully, we will be in
a position to aggressively market the ELIXIR product, using the Villa Park Dam
unit as a prototype for additional installations. We plan to engage in
substantial promotional activities in connection with the installation and
operation of the unit, including media exposure and access to other public
agencies and potential private customers. If the unit continues to operate
successfully, we believe we will receive orders for additional units.

Depending on the availability of financing, we plan to establish a manufacturing
facility in Southern California to commence production of the units. Depending
on the size of the planned facility, we believe it may require capital
expenditures in the range of $5 million to $20 million. In addition to capital
expenditures, this will require hiring of a substantial number of additional
employees. We anticipate that all of our capital needs will need to be funded by
equity financing.

RESULTS OF OPERATIONS (THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE MONTHS
ENDED JUNE 30, 2006, AS RESTATED). The Company was relatively inactive during
the quarter ended June 30, 2006 due to lack of resources. During the first nine
months of fiscal 2007, the Company raised capital through the sale of
Convertible Debentures, and was able to resume activities in the first quarter
of fiscal 2007. Revenues for both the three month period ended June 30, 2006 and
the three month period ended June 30, 2007 were zero, as the Company has not yet
commenced the sale of products. General and administrative expenses for the
period of three months ended June 30, 2007 totaled $4,106,285, an increase of
$3,864,049 over the $242,236 incurred in the corresponding period in 2006, due
to the resumption of development and capital-raising activities and advisory
board compensation expense of $3,661,741. Interest expense and financing costs
increased by $30,541,349 from $2,406 for the quarter ended June 30, 2006 to
$30,543,755 for the quarter ended June 30, 2007. The increase represents
interest on convertible notes issued during the past nine months and financing
costs of $30,469,448 related to beneficial conversion features on the Company's
convertible notes and warrants issued in connection with those notes. Increase
in gain on change in fair value of the warrant and option liability was $692,799
for the three months ended June 30, 2007 and represents the decrease in the fair
value of the warrant and option liability. The warrants and options were
required to be classified as liabilities as of June 6, 2007, and valued at fair
value on each balance sheet date, with the change in value reported in earnings.
Therefore, there was no increase or decrease in the change in the option and
warrant liability for the three months ended June 30, 2006. The increase in the
gain on change in fair value of the beneficial conversion liability was
$7,923,801 for the three months ended June 30, 2007 and represents the decrease
in the fair value of the beneficial conversion liability. The beneficial
conversion features were required to be classified as liabilities as of June 6,
2007, and valued at fair value on each balance sheet date, with the change
reported in earnings. Therefore, there was no increase or decrease in the change
of beneficial conversion liability for the three months ended June 30, 2006.

As a result of these items, the loss for the three months ended June 30, 2007
was $26,042,220 representing an increase of $25,789,833 over the loss of
$252,387 for the corresponding period in the 2006 fiscal year.

<PAGE>

RESULTS OF OPERATIONS (NINE MONTHS ENDED JUNE 30, 2007 COMPARED TO NINE MONTHS
ENDED JUNE 30, 2006, AS RESTATED). During the first nine months of fiscal 2007,
the Company raised capital through the sale of Convertible Debentures, and was
able to resume activities in the first quarter of fiscal 2007. Revenues for both
the nine month period ended June 30, 2006 and the nine month period ended June
30, 2007 were zero, as the Company has not yet commenced the sale of products.
General and administrative expenses for the nine months ended June 30, 2007
totaled $4,549,409, an increase of $4,147,162 over the $447,247 incurred in the
corresponding period in 2006, due to the resumption of development and
capital-raising activities and advisory board compensation expense of
$3,661,741. Interest expense and financing costs increased by $30,607,125 from
$7,218 for the nine months ended June 30, 2006 to $30,614,343 for the nine
months ended June 30, 2007. The increase represents interest on convertible
notes issued during the past nine months and financing costs of $30,469,448
related to beneficial conversion features on the Company's convertible notes and
warrants issued in connection with those notes. Increase in gain on change in
fair value of the warrant and option liability was $692,799 for the nine months
ended June 30, 2007 and represents the decrease in the fair value of the warrant
and option liability. The warrants and options were required to be classified as
liabilities as of June 6, 2007, and valued at fair value on each balance sheet
date, with the change in value reported in earnings. Therefore, there was no
increase or decrease in the change in the option and warrant liability for the
nine months ended June 30, 2006. The increase in the gain on change in fair
value of the beneficial conversion liability was $7,923,801 for the nine months
ended June 30, 2007 and represents the decrease in the fair value of the
beneficial conversion liability. The beneficial conversion features were
required to be classified as liabilities as of June 6, 2007, and valued at fair
value on each balance sheet date, with the change reported in earnings.
Therefore, there was no increase or decrease in the change of beneficial
conversion liability for the nine months ended June 30, 2006.

As a result of these items, the loss for the nine months ended June 30, 2007 was
$26,616,109 representing an increase of $26,043,937 over the loss of $572,172
for the nine months ended June 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES, AS RESTATED. On June 30, 2007, the Company had
cash and cash equivalents of $455,563. The sole source of liquidity has been
borrowings from affiliates and the sale of securities. Management anticipates
that additional capital will be required to finance the Company's operations.
The Company believes that anticipated proceeds from sales of securities and
other financing activities, plus possible cash flow from operations during the
2007 fiscal year, will be sufficient to finance the Company's operations.
However, the Company has no commitments for financing, and there can be no
assurance that such financing will be available or that the Company will not
encounter unforeseen difficulties that may deplete its capital resources more
rapidly than anticipated. Also, the Company may not be able to generate revenues
from operations during the fiscal year.

As of June 30, 2007, the Company had an accumulated deficit of $42,468,719. It
can be expected that the future operating results will continue to be subject to
many of the problems, expenses, delays and risks inherent in the establishment
of a developmental business enterprise, many of which the Company cannot
control.

GOING CONCERN OPINION. We currently have insufficient assets to continue our
operations, unless we secure additional financing. As a result of our ongoing
losses, lack of revenues from operations, and accumulated deficits, there is
doubt about our ability to continue as a going concern.

ITEM 3. CONTROLS AND PROCEDURES. At the end of the period covered
by this Form 10-QSB, the Company's then management, including its Chief
Executive Officer and Chief Financial Officer, conducted an evaluation of the
effectiveness of the Company's disclosure controls and procedures. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer determined
that at the time of its original filing, such controls and procedures were
effective to ensure that information relating to the Company required to be
disclosed in 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 rules and forms of the Securities and Exchange Commission. The
management also reported that there had been no changes in the Company's
internal controls over financial reporting that were identified during the
evaluation that occurred during the Company's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

<PAGE>

Subsequent to the original filing of this Form 10-QSB for the period ended June
30, 2007 on August 14, 2007, the Company identified the following material
weaknesses as of June 30, 2007:

           (1) Insufficient numbers of internal personnel possessing the
appropriate knowledge, experience and training in applying US GAAP and in
reporting financial information in accordance with the requirements of the SEC;
and

           (2) lack of audit committee to oversee the Company's accounting and
financial reporting processes, as well as approval of the Company's independent
auditors.

           These material weaknesses may also constitute deficiencies in the
disclosure of controls and procedures. In light of these weaknesses, the
Company's management, including the CEO and CFO, have concluded that as of the
Evaluation Date, the disclosure controls and procedures were not effective, in
that they did not ensure (i) that information required to be disclosed by us in
the reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms and (ii) that information required to be disclosed in reports that we file
or submit under the Exchange Act is accumulated and communicated to its
management including its Chief Executive and Financial Officers, to allow timely
decisions regarding required disclosure. To address this ineffectiveness of its
disclosure controls and procedures, the Company is continuing with corrective
actions, including the search for additional staff with certain qualifications
and independent internal reviews of key account reconciliations, to ensure that
the financial statements and other financial information included in this
quarterly report are complete and accurate in all material respects.

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

       The Company is not a party to any material pending legal proceedings.

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

       During the period of three months ended June 30, 2007 the Company issued
Convertible Debentures in the amount of $569,000 to three accredited investors.

       The Company believes such sales were exempt from the registration
requirements of the Securities Act of 1933, as amended, by virtue of Section 4
(2) thereof and Regulation D thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

       None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       None

ITEM 5. OTHER INFORMATION

       None

ITEM 6. EXHIBITS


10.1  Form of Securities Purchase Agreement, dated as of June 18, 2007, between
      Sionix Corporation and certain investors. (1)

10.2  Form of Convertible Debenture, dated as of June 18, 2007, issued by Sionix
      Corporation to certain investors. (1)

10.3  Form of Registration Rights Agreement, dated as of June 18, 2007, between
      Sionix Corporation and certain investors. (1)

10.4  Form of Warrant, dated as of June 18, 2007, issued by Sionix Corporation
      to certain investors. (1)

31.1  Certificate of Chief Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002. *

31.2  Certificate of Chief Financial Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002. *

32.1  Certificate of Chief Executive Officer pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002. *

32.2  Certificate of Chief Financial Officer pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002. *

------------
*    Filed herewith.
(1)  Filed on August 14, 2007 as an exhibit to our Form 10-KSB, and incorporated
     by reference.

<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                           SIONIX CORPORATION

Date: January 5, 2010
                                           By: /s/ James R. Currier
                                           -------------------------------------

                                           James R. Currier, Chairman and
                                            Chief Executive Officer


                                           By: /s/ David R. Wells
                                           ----------------------------------
                                           David R. Wells, President,
                                           Chief Financial Officer and Director