-----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, VZ236Jwi/Y8Ggf2GvAniDK41DS2uCo2Hwv/M+LvqaP48Ln6DEXTis4pMkXlTfCmp /JPVMT9pJ7p9qbQ7vzhjJw== /in/edgar/work/0001012895-00-500133/0001012895-00-500133.txt : 20001115 0001012895-00-500133.hdr.sgml : 20001115 ACCESSION NUMBER: 0001012895-00-500133 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-24721 FILM NUMBER: 765576 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 10QSB 1 f10qs00.txt SEPTEMBER 2000 FORM 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 2000 Commission File Number 02474 LEXON TECHNOLOGIES, INC. ----------------------------------------------------- (Exact Name of Registrant, as Specified in its Charter) Delaware 87-0502701 - ------------------------------- ---------------------------------- (State or other Jurisdiction of (IRS Employer Identification Number) 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) 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. (1) Yes X No (2) Yes X No --- --- --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.001 par value 14,592,561 - ----------------------------- ---------------------------- Title of Class Number of Shares Outstanding as of November 15, 2000 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LEXON TECHNOLOGIES, INC. AND SUBSIDIARY FINANCIAL STATEMENTS (UNAUDITED) The accompanying financial statements have been prepared by the Company, without audit, in accordance with the instructions to Form 10-QSB pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore may not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. These financial statements should be read in conjunction with the accompanying notes, and with the historical financial information of the Company. 3 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS September 30, December 31, 2000 1999 ------------- ------------ (Unaudited) Current assets Cash $ 533 $ 20,892 Accounts receivable, less allowance for doubtful accounts of $2,500 in 2000 and 1999 80,671 18,153 Inventories 1,656 1,656 Prepaid expenses 187,500 12,570 ----------- ---------- Total current assets 270,360 53,271 ----------- ---------- Property and equipment Leasehold improvements 5,371 29,744 Furniture and equipment 147,730 178,452 Capital leases - 105,458 ----------- ---------- 153,101 313,654 Accumulated depreciation and amortization (108,387) (116,631) ----------- ---------- Net property and equipment 44,714 197,023 ----------- ---------- Other assets Computer software production costs, net of accumulated amortization of $116,002 in 2000 and $76,875 in 1999 465,474 325,279 Debt issue costs, net of accumulated amortization of $27,458 in 1999 - 38,442 Deferred charges - 72,440 Deposits - 17,762 ----------- ---------- Total other assets 465,474 453,923 ----------- ---------- $ 780,548 $ 704,217 =========== ========== See notes to consolidated financial statements. 4 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) September 30, December 31, 2000 1999 ------------- ------------ (Unaudited) Current liabilities Current maturities of long-term capital lease obligations $ - $ 19,286 Notes payable 973,000 1,123,000 Stockholder advances 115,000 - Accounts payable 496,781 217,618 Accrued liabilities: Salaries 159,106 51,600 Interest 61,189 23,219 Other 46,002 - Distributions 209,774 209,774 ------------- ------------ Total current liabilities 2,060,852 1,644,497 Capital lease obligations, net of current maturities - 82,499 ------------- ------------ Total liabilities 2,060,852 1,726,996 ------------- ------------ Stockholders' equity (deficit) Common stock, par value $0.001 per share; authorized 100,000,000 shares in 2000 and 1999; issued and outstanding 14,592,561 shares in 2000 and 12,441,561 shares in 1999 14,593 12,442 Additional paid-in capital 603,968 68,119 Retained earnings (accumulated deficit) (1,898,865) (1,103,340) ------------- ------------ Total stockholders' deficit (1,280,304) (1,022,779) ------------- ------------ $ 780,548 $ 704,217 ============= ============ See notes to consolidated financial statements. 5 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net sales $ 204,507 $ 201,175 $ 633,460 $ 566,396 Cost of sales 13,891 32,732 54,829 153,975 ---------- ---------- ---------- ---------- Gross profit 190,616 168,443 578,631 412,421 Selling, general and administrative expenses 319,514 362,850 1,389,792 994,152 ---------- ---------- ---------- ---------- Loss from operations (128,898) (194,407) (811,161) (581,731) ---------- ---------- ---------- ---------- Other income (expense) Interest income - 2,073 457 2,073 Interest expense (27,590) (30,097) (100,955) (35,154) Other income - - 150,000 6,372 Loss on sale of assets - - (42,932) - Loss on abandonment of leasehold improvements - (15) (27,876) (3,338) Forgiveness of debt - - 36,942 - ---------- ---------- ---------- ---------- Other income (expense), net (27,590) (28,039) 15,636 (30,047) ---------- ---------- ---------- ---------- Loss before income tax expense (156,488) (222,446) (795,525) (611,778) ---------- ---------- ---------- ---------- Income tax expense - - - - ---------- ---------- ---------- ---------- Net loss $ (156,488) $ (222,446) $ (795,525) $ (611,778) ========== ========== ========== ========== Weighted average common shares outstanding 13,920,279 11,546,130 13,621,751 11,515,546 ========== ========== ========== ========== Basic and diluted loss per common share $ (.01) $ (.02) $ (.06) $ (.05) ========== ========== ========== ==========
See notes to consolidated financial statements. 6 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited)
Retained Total Additional Earnings Stockholders' Common Stock Paid-In (Accumulated 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 2,151,000 2,151 535,849 - 538,000 Net loss - - - (795,525) (795,525) ---------- --------- ---------- ---------- ---------- Balance, September 30, 2000 14,592,561 $ 14,593 $ 603,968 $(1,898,865) $(1,280,304) ========== ========= ========== ========== ==========
See notes to consolidated financial statements. 7 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED (Unaudited) September 30, September 30, 2000 1999 ------------- ------------- Cash flows from operating activities: Net loss $ (795,525) $ (611,778) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 108,865 77,984 Write off of deferred charges 72,440 - Loss on disposition and abandonment of assets 70,808 3,338 Forgiveness of debt (36,942) - Change in assets (increase) decrease (49,948) 23,273 Change in liabilities increase (decrease) 491,441 94,936 ------------- ------------ Total adjustments 656,664 199,531 ------------- ------------ Net cash used in operating activities (138,861) (412,247) ------------- ------------ Cash flows from investing activities: Capital expenditures (11,185) (206,148) Payment of computer software costs (179,322) (242,458) Proceeds from sale of assets 55,590 - Payment of debt issue costs - (77,525) Payment of deferred charges - (61,940) Payment of deposits - (15,000) ------------- ------------ Net cash used in investing activities (134,917) (603,071) ------------- ------------ Cash flows from financing activities: Proceeds from issuance of notes payable - 1,123,000 Stockholder advances 115,000 - Principal payments of notes payable (150,000) - Principal payments under capital lease obligations (62,081) - Proceeds from issuance of common stock 350,500 26,600 Cash distributions paid to stockholders - (3,760) ------------- ------------ Net cash provided by financing activities 253,419 1,145,840 ------------- ------------ Net increase (decrease) in cash (20,359) 130,522 Cash at beginning of period 20,892 71,526 ------------- ------------ Cash at end of period $ 533 $ 202,048 ============= ============ See notes to consolidated financial statements. 8 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE NINE MONTHS ENDED (Unaudited) September 30, September 30, 2000 1999 ------------- ------------- Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 59,235 $ 15,250 Income taxes - - Supplemental disclosure of noncash investing and financing activities: Security deposits applied against accounts payable and capital lease obligations $ 17,762 $ - Proceeds from sale of assets applied against accounts payable 5,800 - Proceeds from issuance of common stock applied to prepaid expenses 187,500 - See notes to consolidated financial statements. 9 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 1. SUMMARY OF ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of LEXON Technologies, Inc. (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 consist 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 and Amortization - Depreciation and amortization of property and equipment are charged to income using straight-line and accelerated methods based on the estimated useful lives of the assets. Computer Software Production 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 was $9,958 and $30,262 for the three months ended September 30, 2000 and 1999, respectively. Amortization expense was $39,127 and $44,175 for the nine months ended September 30, 2000 and 1999, respectively. Unamortized computer software production costs determined to be in excess of the net realizable value of the software are expensed immediately. Debt Issue Costs - Costs related to the issuance of notes payable are being amortized on a straight-line basis over the term of the notes. Amortization expense was $5,492 for the three months ended September 30, 2000, and $38,442 for the nine months ended September 30, 2000. 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. 10 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 1. SUMMARY OF ACCOUNTING POLICIES (Continued) 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. 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. The common share equivalents have a weighted average of 5,873,410 and 1,138,834 for the nine months ended September 30, 2000 and 1999, respectively. All of the common share equivalents 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. 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 individual 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 statements of income (loss) include operations of Chicago Map for the three and nine months ended September 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. 11 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 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. DEPRECIATION Depreciation was charged to income, based on the estimated useful lives of the assets, in the following amounts:
Three Months Nine Months Ended September 30, Ended September 30, Estimated 2000 1999 2000 1999 Life-Years -------- -------- -------- -------- ----------- Leasehold improvements $ 33 $ 32 $ 894 $ 96 5 40 Furniture and equipment 4,533 13,877 17,489 28,176 3 7 Capital leases - - 12,913 - 7 -------- -------- -------- -------- $ 4,566 $ 13,909 $ 31,296 $ 28,272 ======== ======== ======== ========
8. NOTES PAYABLE Notes payable consist of the following:
September 30, 2000 December 31, 1999 ------------------ ----------------- Promissory notes payable to stockholders due on November 10, 2000 with interest payable monthly at 12% per annum (18% prior to February 1, 2000). $ 600,000 $ 750,000 Promissory note payable to a stockholder due on September 26, 2000 with interest payable at maturity at 12% per annum. 100,000 100,000 Promissory notes payable to 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 November 10, 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/stockholder 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 November 10, 2000, the promissory notes will be payable in six equal monthly installments of principal and interest commencing November 10, 2000, as stated in the loan agreements. On September 21, 2000, the Company entered into a Sixth Supplemental Agreement to amend the terms of the note. Under the terms of the Agreement, the maturity date of the loan was extended from September 10, 2000 to November 10, 2000. 12 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 8. NOTES PAYABLE (Continued) In addition, the Agreement required an officer/stockholder of the Company (personal guarantor) to sell to the lender, an investor group, 750,000 restricted shares of the Company's common stock in exchange for $10. The officer/stockholder also was required to transfer an additional 100,000 restricted shares to the lender as payment in full for the consideration offered by another officer/stockholder in the Fifth Supplemental Agreement to the loan. The total 850,000 shares were taken from the 1.5 million shares held in escrow as collateral for the loan. Other terms of the Agreement include the condition that all proceeds from the sale of the Company's subsidiary, if it is sold, will be applied as a principal reduction of the loan. The promissory notes due on July 29, 2000 and through September 26, 2000 are secured by the accounts receivable of Chicago Map Corporation. 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 as of September 30, 2000 are as follows: Operating Year ending December 31, Leases ------------------------ ----------- 2000 (three months) $ 12,569 2001 50,278 2002 30,000 2003 7,162 2004 3,036 ----------- Net minimum lease payments $ 103,045 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 nine months ended September 30, 2000 and 1999 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2000 1999 2000 1999 ---------- ----------- ----------- ------------ Depreciation - - $ 12,913 - Interest expense - - 5,760 - ---------- ----------- ----------- ------------ - - $ 18,673 - Rent expense for operating leases for the three months ended September 30, 2000 and 1999 was $18,816 and $29,365, respectively. During the first nine months of 2000 and 1999 rent expense was $77,560 and $55,832, respectively. 13 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 CONSULTING AGREEMENT COMMITMENT 10. CONSULTING AGREEMENT COMMITMENT On September 12, 2000, the Company entered into an agreement to receive consulting services, including stockholder communications and relations and marketing strategies, for a minimum of 12 months. In return, total compensation of approximately $336,250 will be paid through the issuance of stock options under the 2000 Stock Option Plan. As of September 30, 2000, $187,500 of such fees have been incurred and paid. See Notes 12 and 14. 11. 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. 12. 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 employee 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. As required by SFAS No. 123 the Company accounts for stock-based non-employee compensation using the fair value method. See Notes 10 and 14. During 1999 and 2000, the Company issued 4,849,096 stock options, of which 4,098,096 and 3,504,096 were outstanding and exercisable as of September 30, 2000 and 1999, respectively. The options were granted at market price and, as a result, no compensation expense was recognized in 2000 or 1999. The weighted average exercise price of the options outstanding as of September 30, 2000 is $2.09 per share. The weighted average life of the options outstanding as of September 30, 2000 is 7.81 years. Pro forma information regarding 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 nine months ended September 30, 2000 follows: Pro Forma As Reported ------------ -------------- Net loss $ (795,525) $ (795,525) Loss per common share Basic (0.06) (0.06) Diluted (0.06) (0.06) These pro forma amounts may not be representative of the effects of such disclosures in future years. 14 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 13. 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 as of September 30, 2000 consist of the following: Warrants convertible at an exercise price of $2.50 per share with expiration dates ranging from October 2000 to August 2004 548,000 Warrants convertible at an exercise price of $.25 per share with expiration dates of February 2001 1,000,000 Warrants convertible at an exercise price of $.50 per share with expiration dates ranging from February 2001 to August 2001 1,023,000 ---------- 2,571,000 ========== 14. 2000 STOCK OPTION PLAN AND NONMONETARY TRANSACTION On September 14, 2000, the Company implemented a stock option plan for the purpose of maintaining and developing a management team, attracting qualified officers and employees capable of assisting in future success of the Company, and rewarding those individuals who have contributed to the success of the Company. The options are subject to various types of restrictions as determined by the Company's board of directors, including vesting periods, exercise rights of the options, and limits on the terms of up to five years. If an option holder's employment is terminated within six months of the grant of the options, any unexercised options become null and void. In accordance with the terms of the plan, the Company registered 2,500,000 shares of stock to be available for issuance by the Plan. As of September 30, 2000, 1,345,000 options have been granted in connection with a consulting agreement dated September 12, 2000, of which 750,000 options have been exercised. No gain or loss on the transaction was recognized. See Notes 10 and 12. 15. 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. 15 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 16. 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 as of September 30, 2000 consist of the following: Deferred tax assets attributable to: Allowance for doubtful accounts $ 1,030 Net operating loss carryforwards 750,007 ------------ Gross deferred tax assets 751,037 Valuation allowance (747,062) ------------ Net deferred tax assets 3,975 ------------ Deferred tax liability attributable to Depreciation (3,975) ------------ Net deferred tax asset (liability) $ - ============ As of September 30, 2000, the Company has net operating loss carryforwards for tax purposes of $1,821,289 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 795,525 ---------- $1,821,289 17. TRANSACTIONS WITH RELATED PARTIES On September 18, 2000 the Company entered into a Development Licensing Agreement for a term of four years. The licensee subsequently became a stockholder of the Company (Note 10). The fee for the non-exclusive software license totaled $87,500, of which $52,500 is receivable as of September 30, 2000. 16 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 17. TRANSACTIONS WITH RELATED PARTIES (Continued) During May and June, 2000, the Company leased space from an entity owned by an officer and director for $2,400 per month. In addition, in June 2000 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 $0 and $12,000 for the three and nine months ended September 30, 1999. See Note 8 for additional related party transactions. 18. 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. 19. MANAGEMENT PLANS The Company incurred a net loss of $156,488 and $795,525 in the three and nine months ended September 30, 2000 and used substantial amounts of working capital in its operations. As of September 30, 2000, current liabilities exceeded current assets by $1,790,492 and total liabilities exceeded total assets by $1,280,304. 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 fund its operations. Continued operations of the Company are dependant upon the success of these strategies and its ability to meet its financing requirements. 17 ITEM 2. 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 - --------------------- Three and Nine Months ended September 30, 2000 compared to September 30, 1999 - ----------------------------------------------------------------------------- Net sales increased for the three months ended September 30, 2000 to $204,507 from $201,175 for the three months ended September 30, 1999. During the first nine months of 2000 net sales increased to $633,460 from $566,396 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 September 30, 2000 to $190,616 or 93.2% of net sales, compared to $168,443 or 83.7% of net sales for the same period in the prior year. For the nine month period ended September 30, 2000 gross profit increased to $578,631 or 91.3% of net sales from $412,421 or 72.8% of net sales for the same period in 1999. The increase in gross profit for the nine months then ended September 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 decreased to $319,514 or 156.2% of net sales for the three months ended September 30, 2000 compared to $362,850 or 180.4% of sales for the same period in 1999. Selling and administrative expenses for the nine month period ended September 30, 2000 increased to $1,389,792 or 219.4% of net sales compared to $994,152 or 175.5% of sales for the same period in 1999. The increase for the nine months in fiscal 2000 is 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 September 30, 2000 was $27,590 compared to $30,097 for the same period in 1999. For the nine month period ended September 30, 2000 interest expense was $100,955 compared to $35,154 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 $156,488 for the three months ended September 30, 2000 from $222,446 for the same period in 1999. Basic loss per share for the third fiscal quarter of 2000 was $0.01 compared to $0.02 for the same period in the prior year. For the first nine months of 2000, the net loss was $795,525 compared to a loss of $611,778 for the same period in the prior year. Basic loss per share for the nine month period ended September 30, 2000 was $.06 compared to $.05 for the same period in 1999. 18 Liquidity and Capital Resources - ------------------------------- For the nine months ended September 30, 2000 the primary source of liquidity was cash provided by equity investments and stockholder advances. In addition, in the first quarter of fiscal 2000, the Company received $150,000 cash in settlement of a pending lawsuit. The net cash used in operations was $138,861 for the nine months ended September 30, 2000 compared to net cash used in operations of $412,247 for the same period in 1999. Net cash used in investing activities was $134,917, which was mainly due to payments of computer software costs of $179,322. For the same period in the prior year net cash used in investing activities was $603,071. Net cash provided by financing activities was $253,419 for the nine months then ended September 30, 2000 compared to $1,145,840 provided in the same period in the prior year. The Company incurred a net loss of $156,488 and $795,525 in the three and nine months ended September 30, 2000 and used substantial amounts of working capital in its operations. As of September 30, 2000, current liabilities exceeded current assets by $1,790,492. Additionally, at the date of this filing, the Company is delinquent on notes payable to certain stockholders and employees in amounts totaling $973,000 plus accrued interest (See Note 8 to the financial statements). The Company is currently negotiating extensions for the repayment of the notes, but cannot say at this date if the extensions will be granted. While the Company believes it could generate substantial profits and cash flow through 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 has retained the services of a financial advisory firm to address its need to raise additional capital to satisfy its liquidity requirements, 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. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS LEXON does not currently possess a significant or material investment portfolio due to limitations on its cash resources. To the extent that LEXON's cash resources are invested in interest-bearing or investment-type accounts, LEXON'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. 19 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The management of the Company is not aware of any material pending or threatened litigation. ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS None. 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 In September 2000, Anthony Perino resigned as a Chief Executive Officer and as a director of the Company. Kenneth J. Eaken, the President, was appointed as Chief Executive Officer, and as Chairman of the Board. In September 2000, the Company implemented a stock option plan (the "2000 Stock Option Plan")for the purpose of maintaining and developing a management team, attracting qualified officers and employees capable of assisting in future success of the Company, and rewarding those individuals who have contributed to the success of the Company. In accordance with the terms of the plan, the Company registered 2,500,000 shares of stock to be available for issuance by the Plan. As of September 30, 2000, 1,345,000 options have been granted in connection with a consulting agreement. See Notes 10 and 12. In September 2000, the Company entered into an agreement to receive consulting services, including stockholder communications and relations and marketing strategies, for a minimum of 12 months. In return, total compensation of approximately $336,250 will be paid through the issuance of stock options under the 2000 Stock Option Plan. See Notes 12 and 14. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- Exhibit 27. Financial Data Schedule (b) Reports on Form 8-K ------------------- None. 20 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. Date: November 14, 2000 /S/Kenneth J. Eaken, President and Chief Executive Officer EX-27 2 f10qsx27.xfd FINANCIAL DATA SCHEDULE
5 9-MOS Jan-01-2000 Dec-31-2000 Sep-30-2000 533 0 80,671 0 187,500 270,360 153,101 (108,387) 780,548 2,060,852 0 0 0 618,561 (1,898,865) 780,548 633,460 0 54,829 1,389,792 0 0 (100,955) (795,525) 0 0 0 0 0 (795,525) (0.06) (0.06)
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