-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LKbT4P8+3DOrgzwJ2UMZHFMgrZQQ9MZwClu+De/z2JFfBnRIue764PlQBxo2/u/b WJa05ZMEy944/92TYU7J3A== /in/edgar/work/20000818/0000950137-00-003781/0000950137-00-003781.txt : 20000922 0000950137-00-003781.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950137-00-003781 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000818 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXON TECHNOLOGIES INC CENTRAL INDEX KEY: 0001065189 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 870502701 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24721 FILM NUMBER: 705737 BUSINESS ADDRESS: STREET 1: 1401 BROOK DRIVE CITY: DOWNERS GROVE STATE: IL ZIP: 60515 BUSINESS PHONE: 6309166196 FORMER COMPANY: FORMER CONFORMED NAME: REXFORD INC DATE OF NAME CHANGE: 19980630 10-Q 1 e10-q.txt QUARTERLY REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 2000 Commission File Number 02474 LEXON TECHNOLOGIES, INC. ------------------------------------------------------------- (Exact Name of Registrant, as Specified in its Charter) 87-0502701 ------------------------------------ (IRS Employer Identification Number) DELAWARE -------------------------------------- (State or other Jurisdiction of Incorporation or Organization) 1401 BROOK DRIVE, DOWNERS GROVE, ILLINOIS 60515 ----------------------------------------------------------------- (Address of Principle Executive Offices) (630) 916-6196 -------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name, Address, or Fiscal Year, if Changed Since Last Report) INDICATE, BY CHECK MARK, WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO[ ] ON AUGUST 15, 2000 THERE WERE 13,842,561 SHARES OF LEXON TECHNOLOGIES, INC.'S COMMON STOCK OUTSTANDING. 2 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS
(Unaudited) JUNE 30, 2000 DECEMBER 31, 1999 ------------- ----------------- Current assets Cash $ 3,554 $ 20,892 Accounts receivable, less allowance for doubtful accounts of $2,500 in 2000 and 1999 47,339 18,153 Inventories 1,656 1,656 Prepaid expenses 1,820 12,570 ----------- ---------- Total current assets 54,369 53,271 ----------- ---------- Property and equipment Leasehold improvements 5,371 29,744 Furniture and equipment 147,730 178,452 Capital leases 0 105,458 ----------- ---------- 153,101 313,654 Accumulated depreciation 103,821 116,631 ----------- ---------- Net property and equipment 49,280 197,023 ----------- ---------- Other assets Computer software costs, net of accumulated amortization of $106,044 in 2000 and $76,875 in 1999 431,021 325,279 Unamortized debt issue costs 5,492 38,442 Deferred charges 0 72,440 Deposits 0 17,762 ----------- ---------- Total other assets 436,513 453,923 ----------- ---------- $ 540,162 $ 704,217 =========== ==========
See notes to consolidated financial statements. 3 Page 2 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) JUNE 30, 2000 DECEMBER 31, 1999 ------------- ----------------- Current liabilities Current maturities of long-term capital lease obligations $ 0 $ 19,286 Notes payable 973,000 1,123,000 Stockholder advances 115,000 0 Accounts payable 370,809 217,618 Accrued liabilities Salaries 94,500 51,600 Interest 45,599 23,219 Other 42,796 0 Distributions 209,774 209,774 ------------- ------------- Total current liabilities 1,851,478 1,644,497 ------------- ------------- Capital lease obligations, net of current maturities 0 82,499 ------------- ------------- Total liabilities 1,851,478 1,726,996 ------------- ------------- Stockholders' equity (deficit) Common stock, par value $0.001 per Share; authorized 100,000,000 shares; issued and outstanding 13,842,561 shares in 2000 and 12,441,561 shares in 1999 13,843 12,442 Additional paid-in capital 417,218 68,119 Retained earnings (deficit) (1,742,377) (1,103,340) ------------- ------------- Total stockholders' deficit (1,311,316) (1,022,779) ------------- ------------- $ 540,162 $ 704,217 ============= =============
See notes to consolidated financial statements. 4 Page 3 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2000 1999 2000 1999 ---- ---- ---- ---- Net sales $ 267,487 $ 178,441 $ 428,953 $ 365,221 Cost of sales 16,139 25,751 40,938 121,243 ------------ ------------ ------------ ------------ Gross profit 251,348 152,690 388,015 243,978 Selling, general and administrative expenses 465,158 422,671 1,070,278 631,302 ------------ ------------ ------------ ------------ Loss from operations (213,810) (269,981) (682,263) (387,324) ------------ ------------ ------------ ------------ Other income (expense) Interest income 157 0 457 0 Interest expense (32,663) (5,057) (73,365) (5,057) Other income 0 6,372 150,000 6,372 Loss on sale of assets (42,932) 0 (42,932) 0 Loss on abandonment of leasehold improvements (27,876) (3,323) (27,876) (3,323) Forgiveness of debt 36,942 0 36,942 0 ------------ ------------ ------------ ------------ Other income (expense), net (66,372) (2,008) 43,226 (2,008) ------------ ------------ ------------ ------------ Loss before income tax expense (280,182) (271,989) (639,037) (389,332) Income tax expense 0 (39,571) 0 0 ------------ ------------ ------------ ------------ Net loss $ (280,182) $ (311,560) $ (639,037) $ (389,332) ============ ============ ============ ============ Weighted average common shares outstanding 13,842,561 11,500,081 13,478,545 11,500,081 ============ ============ ============ ============ Basic and diluted loss per common share $ (.02) $ (.03) $ (.05) $ (.03) ============ ============ ============ ============
See notes to consolidated financial statements. 5 Page 4 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
TOTAL COMMON STOCK ADDITIONAL RETAINED STOCKHOLDERS' ------------ PAID-IN EARNINGS EQUITY SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT) ------ ------ ------- --------- --------- Balance, December 31, 1998 11,500,081 $ 11,500 $ - $ 239,725 $ 251,225 Stockholders' deficit assumed in reverse acquisition of Rexford, Inc. by Chicago Map Corporation - - - (40,549) (40,549) Issuance of common stock 941,480 942 68,119 500 69,561 Net loss - - - (1,089,482) (1,089,482) Distributions to stockholders: Cash - - - (3,760) (3,760) Accrued - - - (209,774) (209,774) ---------- --------- ---------- ----------- ------------ Balance, December 31, 1999 12,441,561 12,442 68,119 (1,103,340) (1,022,779) Issuance of common stock 1,401,000 1,401 349,099 - 350,500 Net loss - - - (639,037) (639,037) ---------- --------- ---------- ----------- ------------ Balance, June 30, 2000 13,842,561 $ 13,843 $ 417,218 $(1,742,377) $ (1,311,316) ========== ========= ========== =========== ============
See notes to consolidated financial statements. 6 Page 5 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED (UNAUDITED)
JUNE 30, 2000 JUNE 30, 1999 ------------- ------------- Cash flows from operating activities: Net loss $ (639,037) $ (389,332) ------------ ----------- Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation 26,730 14,363 Amortization 62,119 13,913 Write off of deferred charges 72,440 0 Loss on disposition and abandonment of assets 70,808 3,323 Forgiveness of debt (36,942) 0 Change in assets (increase) decrease (18,436) 69,681 Change in liabilities increase (decrease) 282,067 294,201 ------------ ----------- Total adjustments 458,786 395,481 ------------ ----------- Net cash (used in) provided by operating activities (180,251) 6,149 ------------ ----------- Cash flows from investing activities: Capital expenditures (11,185) (169,893) Payment of computer software costs (134,911) (44,768) Acquisition of intangible assets 0 (50,220) Proceeds from sale of assets 55,590 0 Payment of deposits 0 (15,000) ------------ ----------- Net cash used in investing activities (90,506) (279,881) ------------ ----------- Cash flows from financing activities: Proceeds from issuance of notes payable 0 223,000 Stockholder advances 115,000 0 Principal payments of notes payable (150,000) 0 Principal payments under capital lease obligations (62,081) 0 Proceeds from issuance of common stock 350,500 500 Cash distributions paid to stockholders 0 (3,759) ------------ ----------- Net cash provided by financing activities 253,419 219,741 ------------ ----------- Net decrease in cash (17,338) (53,991) Cash at beginning of period 20,892 71,526 ------------ ----------- Cash at end of period $ 3,554 $ 17,535 ============ ===========
See notes to consolidated financial statements. 7 Page 6
JUNE 30, 2000 JUNE 30, 1999 ------------- ------------- Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 50,985 $ 0 Income taxes 0 0 Supplemental disclosure of noncash investing and financing activities: Security deposits applied against accounts payable and capital lease obligations $ 17,762 $ 0 Proceeds from sale of assets applied against accounts payable 5,800 0
See notes to consolidated financial statements. 8 1. SUMMARY OF ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of LEXON Technologies, Inc. (the "Company") and its wholly-owned subsidiary, Chicago Map Corporation. All material intercompany accounts and transactions have been eliminated in consolidation. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Inventories - Inventories consists of finished goods which are priced at the lower of cost, determined by the first-in, first-out method, or market. Property and Equipment - Property and equipment are recorded at cost. Expenditures for renewals and betterments which extend the life of such assets are capitalized. Maintenance and repairs are charged to expense as incurred. Differences between amounts received and net carrying value of assets retired or disposed of are charged or credited to income. Depreciation - Depreciation is charged to income using straight-line and accelerated methods based on the estimated useful lives of the assets. Computer Software Costs - Costs related to the purchase and development of computer software are capitalized from the time technological feasibility is established until the software is ready for use. Upon the general release of the software to consumers, capitalized costs are amortized on a straight-line basis over the estimated economic life of the software, generally twenty-four months. Amortization expense charged to income was $12,311 and $7,096 for the three months ended June 30, 2000 and 1999, respectively. During the first six months of 2000 and 1999 amortization expense was $29,169 and $13,913, respectively. Unamortized computer software costs determined to be in excess of the net realizable value of the software are expensed immediately. Unamortized Debt Issue Costs - Expenses related to the issuance of notes payable are being amortized on a straight-line basis over the term of the notes. Amortization expense charged to income was $16,475 for the three months ended June 30, 2000. During the first six months of 2000 amortization expense was $32,950. No amortization was charged to income in 1999. Deferred Charges - Deferred charges consisted of incremental costs incurred in connection with a proposed offering of securities. The offering was rescinded during the three months ended March 31, 2000, and these costs, totaling $72,440, were expensed. Revenue Recognition - The Company records sales and related profits as products are shipped. Revenue from licensing of software is based on sales of copies of software products in accordance with distribution agreements with licensed developers and recognized as licensing fees accrue. Revenue for post-contract customer support, upgrades and enhancements is recognized ratably over the term of the related agreements, which in most cases is one year. Income Taxes - Prior to July 21, 1999, Chicago Map Corporation had elected S corporation status for income tax purposes. Under this election, the Company was not liable for federal income taxes, but was liable for certain state income and replacement taxes. Federal taxable income (loss) and tax credits flowed through to the stockholders to be reported on their individual income tax returns. Upon acquisition by Rexford, Inc., Chicago Map Corporation terminated its S corporation election. 7 9 1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED) Earnings (Loss) Per Share - Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share is computed using the weighted average number of common shares and dilutive common share equivalents outstanding during the year. All of the common share equivalents of 7,806,628 as of June 30, 2000 have an antidilutive effect on earnings (loss) per share and, therefore, have not been used in determining the total weighted average number of common shares outstanding used in calculating diluted earnings (loss) per share. There were no common share equivalents in the six month period ended June 30, 1999. 2. NATURE OF OPERATIONS The Company creates digital map technologies which provide for the design and development of advanced geographic and mapping software applications for institutional, governmental, corporate and public consumers throughout the world. 3. NAME CHANGE Effective July 21, 1999, the name of the Company was changed from Rexford, Inc. to LEXON Technologies, Inc. 4. ORGANIZATION AND PRESENTATION On July 21, 1999, LEXON Technologies, Inc. (formerly Rexford, Inc.) (Rexford) acquired all of the issued and outstanding common stock of Chicago Map Corporation (Chicago Map) in exchange for 10,500,000 shares of common stock of Rexford. The shares issued in the acquisition resulted in the owners of Chicago Map having operating control of Rexford immediately following the acquisition. Therefore, for financial reporting purposes, Chicago Map is deemed to have acquired Rexford in a reverse acquisition accompanied by a recapitalization. The surviving entity reflects the assets and liabilities of Rexford and Chicago Map at their historical book values and the historical operations of the Company are those of Chicago Map. The issued common stock is that of Rexford and the retained earnings (deficit) is that of Chicago Map. The consolidated statements of income (loss) include operations of Chicago Map for the three and six months ended June 30, 2000 and 1999 and operations of Rexford for periods after July 21, 1999 (date of acquisition). 5. ACQUISITION On March 12, 1999, Chicago Map Corporation acquired certain assets of TRIUS, Inc. for $62,300 in cash and 2,198 shares of common stock of Chicago Map Corporation. The principal business of TRIUS, Inc. is the development of computer software technologies. 6. CASH The Company maintains its cash in bank accounts which at times exceed the federally insured limit of $100,000. Management believes there is no significant concentration of credit risk with respect to these accounts. 8 10 7. DEPRECIATION Depreciation was charged to income, based on the estimated useful lives of the assets, in the following amounts:
Three Months Ended Six Months Ended June 30, June 30, -------- -------- Estimated 2000 1999 2000 1999 Life - Years ---- ---- ---- ---- ------------ Leasehold improvements $ 379 $ 32 $ 861 $ 64 5 - 39 Furniture and equipment 6,623 12,827 12,956 14,299 3 - 7 Capital leases 6,456 - 12,913 - 7 -------- --------- --------- --------- $ 13,458 $ 12,859 $ 26,730 $ 14,363 ======== ========= ========= =========
8. NOTES PAYABLE Notes payable consist of the following:
JUNE 30, 2000 DECEMBER 31, 1999 ------------- ----------------- Promissory notes due on August 1, 2000 with interest payable monthly at 12% per annum (18% prior to February 1, 2000) $ 600,000 $ 750,000 Promissory note due on September 26, 2000 with interest payable at maturity at 12% per annum 100,000 100,000 Promissory notes with stockholders and employees due on various dates through July 29, 2000. Interest at 12% per annum is payable at maturity 273,000 273,000 ----------- ------------ Total $ 973,000 $ 1,123,000 =========== ============
The promissory notes due on August 1, 2000 are secured by all of the assets of the Company, the common stock of Chicago Map Corporation, and the guarantees of Chicago Map Corporation and an officer of the Company. In addition, if the Company does not receive debt or equity financing proceeds in an aggregate amount of $3,600,000 during the period from December 30, 1999 to August 1, 2000, the promissory notes will be payable in six equal monthly installments of principal and interest commencing August 1, 2000, as stated in the loan agreements. The promissory notes due on July 29, 2000 and through September 26, 2000 are secured by the accounts receivable of Chicago Map Corporation. 9 11 9. LEASE COMMITMENTS The Company leases office facilities under an operating lease expiring in April, 2002. Under terms of the lease, the Company is responsible for insurance, utilities, repairs and maintenance. Future minimum lease commitments under all noncancelable leases in effect at June 30, 2000 are as follows: Operating Year ending December 31, Leases ------------------------ ------ 2000 (six months) $ 24,158 2001 50,278 2002 30,000 2003 7,162 2004 3,036 ----------- Net minimum lease payments $ 114,634 =========== During the three months ended June 30, 2000, the Company negotiated an early buyout option on both of its capital leases. The buy-out resulted in the forgiveness of debt of $36,942, which is included in other income in the Consolidated Statements of Income (Loss). Total lease-related expenses for the capital leases for the three and six months ended June 30, 2000 and 1999 were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------- -------- 2000 1999 2000 1999 ---- ---- ---- ---- Depreciation $6,456 - $12,913 - Interest expense 1,273 - 5,760 - ------ ------- ------- ------- $7,729 - $18,673 - ====== ======= ======= =======
Rent expense for operating leases charged to income for the three months ended June 30, 2000 and 1999 was $23,109 and $14,660, respectively. During the first six months of 2000 and 1999 rent expense was $58,744 and $26,467, respectively. 10. REVERSE STOCK SPLIT On July 20, 1999, the stockholders of Rexford, Inc. approved a one-for-seventy reverse stock split whereby the issued and outstanding shares of common stock of the Company were reduced from 70,000,000 to 1,000,081. The reverse stock split did not affect the authorized shares of common stock of the Company. 10 12 11. STOCK-BASED COMPENSATION Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, companies to record compensation expense for stock-based employee compensation at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value method described in Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Under APB No. 25, compensation expense is measured as the excess of market price over the price the employee must pay to acquire the stock on the grant date. During July of 1999, the Company issued 3,504,096 stock options, of which 3,503,096 were outstanding and exercisable at June 30, 2000. The options were granted at market price and, as a result, no compensation expense has been recognized in 1999. The weighted average exercise price of the options outstanding at June 30, 2000 was $2.40 per share. The weighted average life of the options outstanding at June 30, 2000 was 9.06 years. Pro forma information regarding consolidated net income (loss) and earnings (loss) per common share is required by SFAS No. 123 and has been determined as if the Company had accounted for its stock options under the fair value method defined in that Statement. The weighted average fair value of stock options granted during 1999 was $.61 per share. The fair value of the stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 6.08%, dividend yield of 0%, expected volatility factor of 10%, and an expected life of 5 years. The Company's pro forma information for the six months ended June 30, 2000 follows: PRO FORMA AS REPORTED --------- ----------- Net loss $(639,037) $(639,037) Loss per common share Basic (0.05) (0.05) Diluted (0.05) (0.05) These pro forma amounts may not be representative of the effects of such disclosures in future years. 11 13 12. STOCK PURCHASE WARRANTS In connection with the issuance of common stock and notes payable during 2000 and 1999, the Company issued stock purchase warrants that are convertible into shares of common stock. Each warrant represents the right to purchase one share of the Company's common stock. Stock purchase warrants outstanding at June 30, 2000 consist of the following:
Warrants convertible at an exercise price of $2.50 per share with expiration dates ranging from September 2000 to August 2004 648,000 Warrants convertible at an exercise price of $.25 per share with expiration dates ranging from September 2000 to February 2001 3,600,000 Warrants convertible at an exercise price of $.50 per share with expiration dates ranging from February 2001 to August 2001 1,023,000 --------- 5,271,000 =========
13. EMPLOYEE BENEFIT PLAN During 1999, the Company implemented a defined contribution plan pursuant to Section 401(k) of the Internal Revenue Code. The plan covers all employees meeting eligibility and service requirements. Eligible participants may elect salary deferral contributions up to 15% of compensation, or the maximum amount allowed under the Internal Revenue Code. The plan does not provide for discretionary matching contributions by the Company. 14. INCOME TAXES The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting basis and tax basis of the Company's assets and liabilities. Measurement of deferred tax assets and liabilities is based upon the provisions of enacted tax laws and the effects of future changes in tax laws or rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets and liabilities at June 30, 2000 consist of the following: Deferred tax assets attributable to: Allowance for doubtful accounts $ 968 Net operating loss carryforwards 644,924 ----------- Gross deferred tax assets 645,892 Valuation allowance (642,153) ----------- Net deferred tax assets 3,739 ----------- Deferred tax liability attributable to: Depreciation (3,739) ----------- Net deferred tax asset (liability) $ - =========== 12 14 14. INCOME TAXES (CONTINUED) At June 30, 2000, the Company had net operating loss carryforwards for tax purposes of $1,664,801 expiring as follows: YEAR AMOUNT ---- ------ 2002 $ 7,342 2003 49,380 2004 34,314 2005 7,609 2006 6,144 2008 4,073 2009 3,497 2010 2,746 2011 42,794 2017 46,350 2018 365,433 2019 456,082 2020 639,037 ---------- $1,664,801 ========== 15. TRANSACTIONS WITH RELATED PARTY During the three month period ended June 30, 2000 the Company began leasing space from an entity owned by an officer and director for $2,400 per month. In addition, the Company sold certain assets to an entity owned by an officer and director for a total of $61,390. During 1999, Chicago Map Corporation leased office facilities on a month-to-month basis from a stockholder at a monthly rental of $3,000. Rent expense charged to income amounted to $9,000 and $12,000 for the three and six months ended June 30, 1999. 16. OTHER EVENTS In February 2000, a new equity investor acquired voting control of the Company's issued and outstanding shares of common stock. Thereafter, a major reorganization of the Company and its board of directors was implemented. A new management team was installed and administrative staff was reduced significantly. The Company negotiated the transfer of its lease to a related party at a reduced rent. These changes are expected to reduce employment costs significantly and result in other cost savings on an annualized basis. In addition, management is reviewing other financial alternatives available to the Company to increase liquidity, including restructuring its debt and raising additional capital. 13 15 17. SUBSEQUENT EVENTS The Company incurred a net loss of $280,182 and $639,037 in the three and six months ended June 30, 2000 and used substantial amounts of working capital in its operations. At June 30, 2000, current liabilities exceeded current assets by $1,797,109 and total liabilities exceeded total assets by $1,311,316. As a result of these losses, management has executed changes in its operations to reduce its cash requirements and is working towards raising additional capital to funds its operations. The continued operations of the Company are dependent upon the success of these strategies and its ability to meet its financing requirements. On August 10, 2000, the Company entered into a Fifth Supplemental Agreement to amend the terms of a loan made to the Company on August 10, 1999 by a group of investors. Under the terms of the Agreement, the maturity date of the loan was extended from August 1, 2000 to September 10, 2000. In addition, the terms of the Agreement require an officer and stockholder of the Company to sell to the group of investors 100,000 shares of the Company's common stock in exchange for $10.00. This amendment and extension allowed the Company to avoid having the group of lenders declare an event of default under the original August 10, 1999 loan. 14 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Some of the information in this Quarterly Report may be forward-looking statements under the federal securities laws. Such statements can be identified by the use of words such as "anticipates," "intends," "seeks," "believes," "estimates," and "expects." These statements discuss expectations for the future, contain projections concerning the results of our operations or our future financial condition or state other forward-looking information. Such statements are subject to a number of risks and uncertainties that have been identified in previous filings with the Securities and Exchange Commission. Our actual results, performance or achievements could differ substantially from the results expressed in, or implied by, those statements. We assume no responsibility for revising forward-looking statements in light of future events or circumstances. RESULTS OF OPERATIONS: Net sales increased for the three months ended June 30, 2000 to $267,487 from $178,441 for the three months ended June 30, 1999. During the first six months of 2000 net sales increased to $428,953 from $365,221 compared to the same period in the prior year. The primary factor in the general increase of the year-to-date sales is the Company's shift from the retail market to the more profitable commercial market and its new focus on the National Atlas project. Gross profit increased during the three months ended June 30, 2000 to $251,348 or 94.0% of net sales, compared to $152,690 or 85.6% of net sales for the same period in the prior year. For the six month period ended June 30, 2000 gross profit increased to $388,015 or 90.5% of net sales from $243,978 or 66.8% of net sales for the same period in 1999. The variation in gross profit for the six months then ended June 30, 2000 compared to the same period in the prior year is primarily related to the decrease in development costs incurred on Chicago Map Corporation products being sold in the retail market. Selling, general and administrative expenses increased to $465,158 or 173.9% of net sales for the three months ended June 30, 2000 compared to $422,671 or 236.9% of sales for the same period in 1999. Selling and administrative expenses for the six month period ended June 30, 2000 increased to $1,070,278 or 249.5% of net sales compared to $631,302 or 172.9% of sales for the same period in 1999. The increases are primarily attributable to the expenses necessary to implement the National Atlas of the United States of America project. Interest expense for the three months ended June 30, 2000 was $32,663 compared to $5,057 for the same period in 1999. For the six month period ended June 30, 2000 interest expense was $73,365 compared to $5,057 for the same period in 1999. This increase was attributable to various interim working capital loans. As a result of the factors described above, net loss decreased to ($280,182) for the three months ended June 30, 2000 from ($311,560) for the same period in 1999. Basic earnings per share for the second fiscal quarter of 2000 were ($0.02) compared to ($0.03) for the same period in the prior year. For the first six months of 2000 net income was a loss of ($639,037) compared to a loss of ($389,332) for the same period in the prior 15 17 year. Basic earnings per share for the six month period ended June 30, 2000 were ($.05) compared to ($.03) for the same period in 1999. LIQUIDITY AND CAPITAL RESOURCES: For the six months ended June 30, 2000 the primary source of liquidity was cash provided by equity investments and stockholder advances. The net cash used in operations was $180,252 for the six months ended June 30, 2000 compared to net cash provided by operations of $6,149 for the same period in 1999. Net cash used in investing activities was $90,505 which was mainly due to payments of computer software costs of $134,911. For the same period in the prior year net cash used in investing activities was $279,881. Net cash provided by financing activities was $253,419 for the six months ended June 30, 2000 compared to $219,741 provided in the prior year. The Company incurred a net loss of $280,182 and $639,037 in the three and six months ended June 30, 2000 and used substantial amounts of working capital in its operations. At June 30, 2000, current liabilities exceeded current assets by $1,797,109. While the Company believes it could generate substantial profits and cash flow through the distribution of the National Atlas of the United States, completing development of this product will require significant additional funding for which the Company currently has no commitments. The Company is currently working towards raising additional capital, but there can be no assurance that such capital will be available on terms acceptable to the Company, if at all. Cash generated from the Company's operations is currently significantly insufficient to fund the development of the National Atlas project and satisfy the Company's other working capital requirements. In addition, the Company is required to make significant payments of principal and interest on its outstanding indebtedness. In light of these factors, there can be no assurance that the Company will be able to continue its operations on a going-forward basis if it is unable to obtain additional capital. 16 18 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company does not currently possess a significant or material investment portfolio due to limitations on its cash resources. To the extent that the Company's cash resources are invested in interest-bearing or investment-type accounts, the Company's investment portfolio would be exposed to market risk as it relates to interest rates. Investments are comprised of certificates of deposit, commercial paper, U.S. Treasury securities, asset-backed securities, and money market accounts. Only high credit quality issuers are used and exposure to any one issuer is limited by policy. Maturities and average lives are laddered up to a maximum term of three years. These investments are considered available for sale and are recorded on the balance sheet at fair value. 17 19 LEXON TECHNOLOGIES, INC. PART II - OTHER INFORMATION JUNE 30, 2000 ITEM 1. LEGAL PROCEEDINGS. On December 15, 1997, Chicago Map was served with a complaint in case captioned Integrated GPS Technologies, Inc. v. Chicago Map Corporation, Defendant Civil Action No. H-97-4063 in the United States District Court for the Southern District of Texas. The complaint alleged that Chicago Map committed trademark infringement and engaged in false advertising and unfair competition, under both federal and Texas state law related to Chicago Map's Precision Mapping (TM) software and demanded declaratory and injunctive relief as well as unspecified monetary damages. At the close of the plaintiff's case, the trial judge granted Chicago Map's motion for a directed verdict and the plaintiff appealed to the Fifth Court of Appeals. Oral argument has been scheduled for September 7, 2000. Chicago Map maintains insurance policies which cover intellectual property infringement actions and Chicago Map believes that any damage awards granted to the plaintiff in Integrated GPS v. Chicago Map should be subject to payment or reimbursement by Chicago Map's insurance policies. If, as a result of determinations adverse to Chicago Map, Chicago Map is ordered to pay Integrated GPS damages from its cash reserves or assets without payment or reimbursement from Chicago Map's insurer or if Chicago Map is ordered to cease distribution of its Precision Mapping software, such determinations could have a materially adverse effect on Chicago Map's financial condition and results of operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (c) RECENT SALES OF UNREGISTERED SECURITIES. On May 11, 2000, the Company issued 400,000 shares to Anthony Perino in exchange for $100,000, under the terms of a Stock Purchase Agreement, dated February 9, 2000, by and among Lexon, Steven J. Peskaitis and Mr. Perino. This issuance was exempt from registration in reliance on Section 4(2) of the Act. ITEM 3. DEFAULT BY THE COMPANY ON ITS SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS. None. ITEM 5. OTHER INFORMATION. On June 12, 2000, in the second closing of a series of transactions between Lexon and Anthony Perino, Chairman, Chief Executive Officer and majority stockholder of Lexon, Mr. Perino acquired (i) 2,000,000 shares of Lexon's common stock from Steven J. Peskaitis in exchange for a cash payment of $500 and (ii) 400,000 shares of Lexon's common stock from Lexon in exchange for a cash payment of $100,000 (collectively the "Shares"). Perino's acquisition of the Shares was effected under the terms of a Stock Purchase Agreement, through which Perino acquired voting control of Lexon's issued and II-1 20 outstanding common stock. Lexon's issuance of the aforementioned 400,000 shares of common stock were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. On July 19, 2000, Peter J. Haleas resigned as a director of the Company. On August 1, 2000, Jerome Wolowicki resigned as Chief Financial Officer and as director of the Company. On August 10, 2000, the Company entered into a Fifth Supplemental Agreement to amend the terms of a loan made to the Company on August 10, 1999 by a group of investors. Under the terms of the Agreement, the maturity date of the loan was extended from August 1, 2000 to September 10, 2000. In addition, the terms of the Agreement require an officer and stockholder of the Company to sell to the group of investors 100,000 shares of the Company's common stock in exchange for $10.00. This amendment and extension allowed the Company to avoid having the group of lenders declare a default of the original August 10, 1999 loan. II-2 21 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits
Incorporation Page Number Exhibit by Reference (if Number (if applicable) applicable) ------ --------------- ----------- 2.1 Agreement and Plan of Reorganization, dated as of July 21, 1999, by and between Rexford, Inc, and Chicago Map Corporation........................... + 2.2 Securities Purchase Agreement, dated as of August 10, 1999, by and among LEXON Technologies, Inc. and Miller Capital Corporation, Stephen A. McConnell, Jock Patton and Dickerson Wright.................. ++ 3.1 Articles of Incorporation............................. + 3.2 Bylaws................................................ ++++ 4.1 Interim Loan Agreement, dated as of March 26, 1999, by and between Chicago Map Corporation and Mark Scharmann......................................... ++++ 4.2 Promissory Note, dated as of March 26, 1999, by and between Chicago Map Corporation and Mark A. Scharmann......................................... ++++ 4.3 Security Agreement, dated as of March 26, 1999, by and between Mark A. Scharmann and Chicago Map Corporation....................................... ++++ 4.4 Interim Loan Agreement, dated as of April 29, 1999, by and between Steven J. Peskaitis and Chicago Map Corporation................................... ++++ 4.5 Promissory Note, dated as of April 29, 1999, by and between Chicago Map Corporation and Steven J. Peskaitis......................................... ++++ 4.6 Promissory Note, dated as of July 10, 1999, by and between Chicago Map Corporation and Steven J. Peskaitis......................................... ++++ 4.7 Promissory Note, dated as of July 10, 1999, by and between Chicago Map Corporation and Stanley J. Peskaitis......................................... ++++ 4.8 Promissory Note, dated as of July 10, 1999, by and between Chicago Map Corporation and John B. McLean............................................ ++++
II-3 22
Incorporation Page Number Exhibit by Reference (if Number (if applicable) applicable) ------ --------------- ----------- 4.9 Form of Stock Option Agreement and Schedule thereto, dated as of July 21, 1999 by and between LEXON Technologies, Inc. and Steven J. Peskaitis........ ++++ 4.10 Promissory Note, dated as of August 10, 1999, by LEXON Technologies, Inc. and Miller Capital Corporation, Stephen A. McConnell, Jock Patton and Dickerson Wright.............................. ++ 4.11 Security and Pledge Agreement, dated as of August 10, 1999 by and among LEXON Technologies, Inc. and Miller Capital Corporation, Jock Patton, Stephen A. McConnell and Dickerson Wright................. ++ 4.12 Continuing Guaranty, dated as of August 10, 1999, by and among Chicago Map Corporation and Steven J. Peskaitis and Miller Capital Corporation, Jack Patton, Stephen A. McConnell and Dickerson Wright. ++ 4.13 Stock Pledge and Security Agreement, dated as of August 10, 1999, by and among Steven J. Peskaitis and Miller Capital Corporation, Stephen A. McConnell, Jack Patton and Dickerson Wright....... ++ 4.14 Warrants to Purchase Common Stock, dated as of August 10, 1999, by LEXON Technologies, Inc. ++ 4.15 Supplemental Agreement to Bridge Loan Transaction, dated as of December 30, 1999, by and among LEXON Technologies, Inc., Chicago Map Corporation and Steven J. Peskaitis and Miller Capital Corporation, Stephen A. McConnell, Jock Patton and Dickerson Wright.............................. ++++ 10.1 Stock Purchase Agreement dated as of February 9, 2000, by and among Anthony Perino and LEXON Technologies, Inc. and Steve J. Peskaitis......... +++ 10.2 Industrial Building Lease, dated as of June 1, 1999, by and between Chicago Map Corporation and United States Brass & Copper Co., for office space at 1401 Brook Drive, Downers Grove, IL 60615......... ++++ 10.3 Cooperative Research and Development Agreement, dated as of March 26, 1999, by and among United States Geological Survey and Chicago Map Corporation..... ++++
II-4 23
Incorporation Page Number Exhibit by Reference (if Number (if applicable) applicable) ------ --------------- ----------- 10.4 Employment Agreement, dated as of March 12, 1999, by and between Chicago Map Corporation and Paris Karahalios........................................ ++++ 10.5 Employment Agreement, dated as of March 12, 1999, by and between Chicago Map Corporation and David A. Schulz............................................ ++++ 10.6 Employment Agreement, dated as of April 19, 1999, by and between Chicago Map Corporation and Kenneth J. Eaken.......................................... ++++ 10.7 Employment Agreement, dated as of February 23, 1999, by and between Chicago Map Corporation and John B. McLean......................................... ++++ 10.8 Employment Agreement, dated as of May 1, 1999, by and between Chicago Map Corporation and Steven J. Peskaitis......................................... ++++ 10.9 Registration Rights Agreement, dated as of February 9, 2000, by and among Anthony Perino and LEXON Technologies, Inc........................... +++++ 10.10 Voting Trust Agreement, dated as February 9, 2000, by and among, Anthony Perino, as Voting Trustee, and Steven J. Peskaitis and Stanley Peskaitis......... +++++ 11.1 Statement Re: Computation of Per Share Earnings....... 27 Financial Data Schedule...............................
+ Incorporated by reference to LEXON Technologies, Inc.'s Current Report on Form 8-K, dated as of July 21, 1999 and filed with the SEC on August 4, 1999. ++ Incorporated by reference to LEXON Technologies, Inc.'s Current Report on Form 8-K, dated as of August 10, 1999 and filed with the SEC on August 24, 1999. +++ Incorporated by reference to LEXON Technologies, Inc.'s Current Report on Form 8-K, dated as of February 9, 2000 and filed with the SEC on February 18, 2000 ++++ Incorporated by reference to LEXON Technologies, Inc.'s Annual Report on Form 10-K, dated as of December 31, 1999 and filed with the SEC on April 14, 2000. +++++ Incorporated by reference to LEXON Technologies, Inc.'s Quarterly Report on Form 10-Q, dated as of March 31, 2000 and filed with the SEC on May 22, 2000. (b) Current Reports on Form 8-K II-5 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LEXON TECHNOLOGIES, INC. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal executive officer of the registrant. /s/ Anthony Perino August 18, 2000 ----------------------------------- -------------------------- Anthony Perino Date Principal Executive Officer LEXON TECHNOLOGIES, INC. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal accounting officer of the registrant. /s/ Kenneth J. Eaken August 18, 2000 ----------------------------------- -------------------------- Kenneth J. Eaken Date Principal Accounting Officer 25 LEXON TECHNOLOGIES, INC. EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 11.1 Statement Re: Computation of Per Share Earnings 27 Financial Data Schedule EX-11.1 2 ex11-1.txt COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED ------------------ JUNE 30, 2000 JUNE 30, 1999 ------------- ------------- Net income (loss ) (in thousands) $ (280) $ (312) Weighted average common shares outstanding 13,842,561 11,500,081 Basic income (loss) per share $ (0.02) $ (0.03) Dilutive effective of options and warrants outstanding under treasury-stock method ------- ------- Diluted income (loss) per share $ (0.02) $ (0.03)
EX-27 3 ex27.txt FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 3,554 0 49,839 2,500 1,656 54,369 153,101 103,821 540,162 1,851,478 0 0 0 13,843 (1,325,159) 540,162 267,487 267,487 16,139 465,158 (37,099) 70,808 32,663 (280,182) 0 (280,182) 0 0 0 (280,182) (0.02) (0.02)
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