10QSB 1 f01s10q.txt LEXON SEPTEMBER 2001 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, 2001 Commission File Number 0-24721 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) 13237 Montfort Drive, #205, Dallas, Texas 75240 ----------------------------------------------- (Address of Principle Executive Offices) (972)386-6054 -------------------------------------------------- (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 No X (2) Yes X No --- --- --- --- THIS REPORT IS BEING FILED ON OR ABOUT MARCH 25, 2002, WHICH IS BEYOND THE DATE ON WHICH THE REPORT WOULD HAVE BEEN TIMELY FILED. AS A RESULT, READERS ARE ENCOURAGED TO CONSULT THE COMPANY'S REPORTS FOR PERIODS SUBSEQUENT TO THE PERIOD FOR WHICH THIS REPORT HAS BEEN FILED TO OBTAIN CURRENT INFORMATION REGARDING THE COMPANY. 2 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 16,486,831 ----------------------------- ---------------------------- Title of Class Number of Shares Outstanding as of March 22, 2002 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, 2001 2000 ----------- ----------- (Unaudited) CURRENT ASSETS Cash $ - $ 6,873 Accounts receivable - 12,746 ----------- ----------- Total Current Assets - 19,619 ----------- ----------- PROPERTY AND EQUIPMENT Leasehold improvements - 5,371 Furniture and fixtures - 99,358 Equipment - 48,372 Accumulated depreciation - (111,431) ----------- ----------- Total Property and Equipment - 41,670 ----------- ----------- TOTAL ASSETS $ - $ 61,289 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 668,102 $ 586,447 Accrued interest 121,805 84,505 Accrued wages 293,138 159,106 Accrued distributions 209,774 209,774 Other accrued expenses 6,013 13,104 Notes payable, related parties 488,000 1,063,000 ----------- ----------- Total Current Liabilities 1,786,832 2,115,936 ----------- ----------- STOCKHOLDERS' EQUITY (DEFICIT) Common stock, par value $0.001 per share; authorized 100,000,000 shares; issued and outstanding 15,872,561 shares 15,873 15,873 Additional paid-in capital 807,688 807,688 Accumulated deficit (2,610,393) (2,878,208) ----------- ----------- Total Stockholders' Equity (Deficit) (1,786,832) (2,054,647) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ - $ 61,289 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 4 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY Consolidated Statements of Operations (Unaudited)
For the For the Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 ----------- ----------- ----------- ----------- NET SALES $ 54,169 $ 204,507 $ 274,987 $ 633,460 COST OF SALES 5,603 13,891 5,835 54,829 ----------- ----------- ----------- ----------- GROSS MARGIN 48,566 190,616 269,152 578,631 ----------- ----------- ----------- ----------- EXPENSES Selling, general and administrative 61,591 299,498 455,073 1,280,927 Depreciation and amortization - 20,016 8,702 108,865 ----------- ----------- ----------- ----------- Total Expenses 61,591 319,514 463,775 1,389,792 ----------- ----------- ----------- ----------- (LOSS) BEFORE OTHER INCOME (EXPENSE) (13,025) (128,898) (194,623) (811,161) ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Interest income - - - 457 Interest expense (11,190) (27,590) (37,300) (100,955) Debt forgiveness - - - 36,942 Other income - - - 150,000 Gain (loss) on disposition of assets 499,738 - 499,738 (70,808) ----------- ----------- ----------- ----------- Total Other Income (Expense) 488,548 (27,590) 462,438 15,636 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 475,523 (156,488) 267,815 (795,525) INCOME TAXES - - - - ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ 475,523 $ (156,488) $ 267,815 $ (795,525) =========== =========== =========== =========== BASIC INCOME (LOSS) PER COMMON SHARE $ 0.03 $ (0.01) $ 0.02 $ (0.06) =========== =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 15,872,561 13,920,279 15,872,561 13,621,751 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 5 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 267,815 $ (795,525) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 8,702 108,865 Deferred charges - 72,440 Debt forgiveness - (36,942) Loss (gain) on disposition of assets (499,738) 70,808 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 6,106 (49,948) Increase (decrease) in accounts payable and accrued expenses 245,896 491,441 ----------- ----------- Net Cash Provided by (Used in) Operating Activities 28,781 (138,861) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures - (11,185) Proceeds from sale of fixed assets - 55,590 Payment of computer software costs - (179,322) ----------- ----------- Net Cash (Used in) Investing Activities - (134,917) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Advance from shareholder - 115,000 Principal payments under notes payable (35,654) (150,000) Principal payments under capital lease obligations - (62,081) Proceeds from issuance of common stock - 350,500 ----------- ----------- Net Cash Provided by (Used in) Financing Activities (35,654) 253,419 ----------- ----------- NET (DECREASE) IN CASH (6,873) (20,359) CASH AT BEGINNING OF PERIOD 6,873 20,892 ----------- ----------- CASH AT END OF PERIOD $ - $ 533 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest $ - $ 59,235 Income Taxes $ - $ - The accompanying notes are an integral part of these consolidated financial statements. 6 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY Notes to the Consolidated Financial Statements September 30, 2001 and December 31,2000 NOTE 1 -BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements include normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto included in its December 31, 2000 Annual Report on Form 10-KSB. Operating results for the nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. NOTE 2 -GOING CONCERN The Company's consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has historically incurred significant losses which have resulted in an accumulated deficit of $2,878,208 at December 31, 2000, a working capital deficit of approximately $2,100,000 and limited internal financial resources. These factors combined, raise substantial doubt about the Company's ability to continue as a going concern. The Company's assets were entirely seized in August 2001. Through some additional funding in late 2001, the Company has been able to settle a large majority of its outstanding debt. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. NOTE 3 -MATERIAL EVENTS Effective July 25, 2001, certain secured creditors holding past due promissory notes totaling $570,000 exercised their rights pursuant to a Security Agreement dated November 18, 1999, to take possession of the assets of the Company and to sell such assets at a private or public sale. A public sale was held on August 14, 2001 at which time, the secured creditors acquired the assets of the Company in lieu of the outstanding note totaling $570,000. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward-looking Statements --------------------------------------------------------- This report may contain "forward-looking" statements. Examples of forward- looking statements include, but are not limited to: (a) projections of revenues, capital expenditures, growth, prospects, dividends, capital structure and other financial matters; (b) statements of plans and objectives of Lexon or its management or Board of Directors; (c) statements of future economic performance; (d) statements of assumptions underlying other statements and statements about Lexon and its business relating to the future; and (e) any statements using the words "anticipate," "expect," "may," "project," "intend" or similar expressions. THIS REPORT IS BEING FILED ON OR ABOUT MARCH 25, 2002, WHICH IS BEYOND THE DATE ON WHICH THE REPORT WOULD HAVE BEEN TIMELY FILED AND MAY NOT CONTAIN INFORMATION CONCERNING THE MORE RECENT ACTIVITIES OF THE COMPANY. THE FOOTNOTES TO THE FINANCIAL STATEMENTS INCLUDED WITH THIS REPORT MAY CONTAIN INFORMATION REGARDING THE COMPANY THAT OCCURRED SUBSEQUENT TO SEPTEMBER 30, 2001. HOWEVER, THE READER SHOULD RELY ON INFORMATION CONTAINED IN REPORTS FOR MORE RECENT PERIODS FILED SUBSEQUENT TO THIS REPORT. General ------- DURING THE FISCAL PERIOD FOR WHICH THIS REPORT IS BEING FILED, LEXON'S ASSETS WERE SEIZED DUE TO DEFAULT ON A LOAN AGREEMENT AND SOLD AT PUBLIC AUCTION IN AUGUST 2001. CURRENTLY, LEXON HAS NO BUSINESS OPERATIONS. RECENTLY, LEXON'S MANAGEMENT OBTAINED SOME BRIDGE FINANCING AND IS SEEKING TO SETTLE OUTSTANDING DEBTS AND BECOME CURRENT IN ITS REPORTING OBLIGATIONS UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. MANAGEMENT IS ALSO EXPLORING POSSIBLE BUSINESS OPPORTUNITIES OR COMBINATIONS ALTHOUGH NO DEFINITIVE TERMS OR AGREEMENTS HAVE BEEN ENTERED INTO. Results of Operations --------------------- Three and Nine Months ended September 30, 2001 compared to September 30, 2000 ----------------------------------------------------------------------------- Our net sales decreased for the three months ended September 30, 2001 to $54,169 from $204,507 for the three months ended September 30, 2000. During the first nine months of 2001 net sales decreased to $274,987 from $633,460 compared to the same period in the prior year. The primary factor in the general decrease of the year-to-date sales is Lexon's shift from the retail market to what management expected to be the more profitable commercial market and its focus on developing the National Atlas project, and the suspension of all sales activities on July 25, 2001 due to the seizure of assets described in Note 3 to the financial statements. Our gross margin decreased during the three months ended September 30, 2001 to $48,566 from $190,616 for the same period in the prior year. For the nine month period ended September 30, 2001, gross margin decreased to $269,152 from $578,631 for the same period in 2000. A decrease in the cost of sales in the periods ended September 30, 2001 compared to the prior year periods is due to the fact that the majority of the sales revenue in 2001 came from licensing which had no associated hard costs. 8 Our selling, general and administrative expenses decreased to $61,591 for the three months ended September 30, 2001 from $299,498 for the same period in 2000. Selling, general and administrative expenses for the nine month period ended September 30, 2001 decreased to $455,073 from $1,280,927 for the same period in 2000. The decrease for the three and nine months in fiscal 2001 is attributable to the necessary reduction in Lexon's workforce because of lack of operating funds, and the closing of our operations due to the asset seizure described above and in Note 3 to the financial statements. Other income for the three and nine months ended September 30, 2001 consisted of a gain on disposition of assets of $499,738. The gain on disposition of assets was offset by interest expense of $11,190 and $37,300, respectively. The interest expense for the respective periods is associated with outstanding loans and notes payable. For the comparable periods in 2000, significantly higher interest expenses of $27,590 and $100,955, respectively, and loss on disposition of assets of $70,800 in the nine month period, were offset in the nine month period by debt forgiveness of $36,942 due to a settlement of lease obligations, and a payment of $150,000 received in settlement of an outstanding lawsuit. Because we recognized a gain on the disposition of our assets in connection with the seizure of our assets and their sale at public auction, we show net income of $475,523 and $267,815, respectively, for the three and nine months ended September 30, 2001, with a basic gain of $0.03 and $0.02 per share, respectively. For the prior year's comparable periods, we had a net loss of $156,488 and $795,525, respectively, with a basic loss per share of $0.01 and $0.06. Our net income in 2001 has little significance going forward because it comes from the sale of all of our operating assets. Liquidity and Capital Resources ------------------------------- At September 30, 2001, Lexon had a working capital deficit of $12786,832 with no cash or accounts receivable. For the nine months ended September 30, 2001, the only source of liquidity was increases in accounts payable and accrued expenses, compared with fiscal 2000 when Lexon received cash from the issuance of notes payable, an advance from a shareholder, and the issuance of common stock. Our net cash provided by operations was $28,781 for the nine months ended September 30, 2001 compared to net cash used in operations of $138,861 for the same period in 2000. Operations in 2001 were greatly reduced due to lack of resources, then suspended entirely when Lexon's assets were seized. Net cash used by investing activities was $0 for the nine months ended September 30, 2001 compared to $134,917 used in the same period in the prior year, consisting of payments for computer software and capital expenditures, offset by proceeds from the sale of fixed assets. In fiscal 2001, Lexon had no resources to expend on investing activities. Net cash used in financing activities was $35,654 for the nine months ended September 30, 2001, due to principal payments of notes payable. For the same period in the prior year, net cash from financing activities was $253,419 derived from the issuance of notes payable and the sale of our common stock, offset by payments under a capital lease and principal payments on notes payable. 9 In 2001 and 2000, Lexon has incurred significant losses which have resulted in an accumulated deficit of $2,783,208 at December 31, 2000, a working capital deficit and limited internal financial resources. Accordingly, the report of the auditors includes a going concern qualification raising substantial doubt about Lexon's ability to continue as a going concern. Management efforts to renegotiate payment terms or extend payment terms with some creditors were unsuccessful, and Lexon's operations ceased when its assets were seized. However, through recent bridge financing, Lexon has been able to settle a substantial portion of its outstanding debt, and management hopes to be able to find additional sources of funding and/or a possible business opportunity or combination in order to recommence operations during fiscal 2002, although no definitive terms or agreements for funding or a business combination have been reached. Lexon intends to include additional information regarding management's efforts in subsequent reports. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Lexon 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 None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- None. (b) Reports on Form 8-K ------------------- On August 3, 2001, Lexon filed a Current Report on Form 8-K, as amended, reporting that Lexon's prior accountant is no longer performing audits on public companies. 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: March 25, 2002 /S/Kenneth J. Eaken, President, Chief Executive Officer and Principal Accounting Officer