10-Q 1 f02j10q.txt LEXON JUNE 30, 2002 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 June 30, 2002 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) 2691 Richter Avenue, #124, Irvine, California 92623 --------------------------------------------------- (Address of Principle Executive Offices) (949)757-0888 -------------------------------------------------- (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 19,148,683 ----------------------------- ---------------------------- Title of Class Number of Shares Outstanding as of June 30, 2002 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 (A Development Stage Company) Consolidated Balance Sheets ASSETS June 30, December 31, 2002 2001 ----------- ----------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 22,334 $ 36,134 Cash held in trust 13,308 150,000 Loans receivable - related parties 52,769 30,769 Advances to officers 6,500 - ----------- ----------- Total Current Assets 94,911 216,903 ----------- ----------- FIXED ASSETS, NET 9,799 7,075 ----------- ----------- OTHER ASSETS 8,000 - ----------- ----------- TOTAL ASSETS $ 112,710 $ 223,978 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 287,882 $ 2,587 Accounts payable - related party 4,000 4,851 Accrued wages 270,164 - Other accrued expenses 7,266 - ----------- ----------- Total Current Liabilities 569,312 7,438 ----------- ----------- STOCKHOLDERS' EQUITY (DEFICIT) Common stock, par value $0.001 per share; authorized 100,000,000 shares; 19,148,683 and 17,500,000 shares issued and outstanding, respectively 19,149 17,500 Additional paid-in capital 208,708 941,220 Subscription receivable - (220,000) Deficit accumulated during the development stage (684,459) (522,180) ----------- ----------- Total Stockholders' Equity (Deficit) (456,602) 216,540 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 112,710 $ 223,978 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 4 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Statements of Operations (Unaudited)
From Inception For the For the on July 18, 2001 Three Months Ended Six Months Ended Through June 30, June 30, June 30, 2002 2001 2002 2001 2002 ----------- ----------- ----------- ----------- ----------- REVENUES $ - $ - $ - $ - $ - ----------- ----------- ----------- ----------- ----------- EXPENSES Research and development - - - - 405,000 Selling, general and administrative 115,810 - 164,181 - 281,138 Depreciation and amortization 646 - 1,235 - 1,458 ----------- ----------- ----------- ----------- ----------- Total Expenses 116,456 - 165,416 - 687,596 ----------- ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS (116,456) - (165,416) - (687,596) ----------- ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Interest income 1,450 - 3,137 - 3,137 ----------- ----------- ----------- ----------- ----------- Total Other Income (Expense) 1,450 - 3,137 - 3,137 ----------- ----------- ----------- ----------- ----------- NET LOSS $ (115,006) $ - $ (162,279) $ - $ (684,459) =========== =========== =========== =========== =========== BASIC LOSS PER SHARE $ (0.01) N/A $ (0.01) N/A =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 18,115,991 N/A 17,809,697 N/A =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 5 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited)
From Inception on July 18, 2001 For the Six Months Ended Through June 30, June 30, 2002 2001 2002 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (162,279) $ - $ (684,459) Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization 1,235 - 1,458 Stock for services - - 13,720 Stock for technology - - 375,000 Changes in assets and liabilities: Increase in other assets (8,000) - (8,000) Increase in accounts payable and accrued expenses (203,397) - (195,959 ----------- ----------- ----------- Net Cash Provided (Used) in Operating Activities (372,441) - (498,240) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for property and equipment (3,959) - (11,257) Cash paid for related party notes receivables (27,000) - (67,769) Cash received from related party notes receivables 5,000 - 15,000 Advances to officers (6,500) - (6,500) Cash placed into escrow - - (150,000) Cash received from escrow 150,000 - 150,000 Cash paid for note receivable (200,000) - (200,000) Note receivable converted in acquistion 200,000 - 200,000 Cash received in acquisition 34,408 - 34,408 ----------- ----------- ----------- Net Cash Used in Investing Activities 151,949 - (36,118) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Receipt fo subscription receivable 220,000 - 220,000 Cash received from issuance of common stock - - 350,000 ----------- ----------- ----------- Net Cash Provided by Financing Activities - - 570,000 ----------- ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS (492) - 35,642 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 36,134 - - ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 35,642 $ - $ 35,642 =========== =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION Cash Payments For: Interest $ - $ - $ - Income taxes $ - $ - $ - Non-Cash Investing and Financing Activities Stock issued for technology $ - $ - $ 375,000 Stock issued for services $ - $ - $ 13,720
The accompanying notes are an integral part of these consolidated financial statements. 6 LEXON TECHNOLOGIES, INC. AND SUBSIDIARY (A Development Stage Company) Notes to the Consolidated Financial Statements June 30, 2002 and December 31, 2001 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 with Form 8-K and amendment thereto filed pursuant to the Merger Agreement with Lexon Technologies, Inc. as described in Note 3. Operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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 $684,459 at June 30, 2002, a working capital deficit of approximately $474,000 and limited internal financial resources. These factors combined, raise substantial doubt about the Company's ability to continue as a going concern. 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 On April 14, 2002, the Company entered into a merger agreement (effective May 27, 2002) with Phacon Corporation (Phacon) to acquire 100% of the outstanding common stock of Phacon by issuing 17,500,000 (post-split) shares of common stock. As part of the agreement, the Company effected a 1 for 10 reverse stock split. The acquired shares of Phacon were entirely canceled leaving the Company as the surviving entity. This merger transaction has been accounted for in the consolidated financial statements as a reverse acquisition. As a result of this transaction, the former shareholders of Phacon acquired or exercised control over a majority of the shares of Lexon. Accordingly, the transaction has been treated for accounting purposes as a recapitalization of Phacon; therefore, these consolidated financial statements represent a continuation of Phacon, not Lexon, the legal survivor. Phacon is treated as the survivor for accounting purposes and Lexon is the survivor for legal purposes. Because the historical financial statements are presented in this manner, proforma financial statements are not required. 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 our management or Board of Directors; (c) statements of future economic performance; (d) statements of assumptions underlying other statements and statements about us and our business relating to the future; and (e) any statements using the words "anticipate," "expect," "may," "project," "intend" or similar expressions. General ------- On April 14, 2002, we entered into a merger agreement (effective May 27, 2002) with Phacon Corporation ("Phacon") to acquire 100% of the outstanding common stock of Phacon by issuing to the Phacon shareholders 17,500,000 shares of our common stock after effecting a 1-for-10 reverse split of our previously issued and outstanding shares. This merger transaction has been accounted for in the consolidated financial statements included with this report as a reverse acquisition. As a result of this transaction, the shareholders of Phacon acquired or exercised control over a majority of our shares. Accordingly, the transaction has been treated for accounting purposes as a recapitalization of Phacon; therefore, the consolidated financial statements and the discussion and analysis below represent a continuation of Phacon, not Lexon, the legal survivor. Phacon is treated as the survivor for accounting purposes and Lexon is the survivor for legal purposes. Because Phacon was incorporated in July 2001, there are no applicable prior year periods for comparative purposes. Our business going forward is the business of Phacon. Business -------- Phacon was formed in July of 2001 to commercialize a proprietary device and proprietary software package that reduces the amount of electricity required to power various indoor lighting devices in commercial buildings, factories, and office structures, as well as outdoor street and parking lot lighting. Since Phacon's inception, it has been involved in the development of its technology. Our business activities to date have included raising capital, developing prototype devices and installing test systems in Canada and Korea, and beginning to establish a marketing and sales distribution network. Results of Operations for the Three and Six Months Ended June 30, 2002 ---------------------------------------------------------------------- We had no revenues for the six months ended June 30, 2002 and have had no revenues from inception (July 18, 2001) to date. We expect that our initial revenues will be generated by the sale of energy saving lighting and related products. Additional revenues may be derived from the licensing of our proprietary technology. Operating expenses for the three and six months ended June 30, 2002 were $116,456 and $165,416, respectively, consisting primarily of $115,810 and $164,181 for general and administrative expenses. Operating expenses since inception (July 18, 2001) total $687,596, consisting primarily of $405,000 for research and development, and $281,138 for general and administrative expenses. Our net loss per share for the three and six months ended June 30, 2002 was $0.01 and $0.01, respectively, based on a weighted average of 18,115,991 and 17,809,697 shares outstanding. 8 Provided adequate funding is found, we anticipate that operating expenses will increase substantially as research and production staff is hired and sales and marketing operations commence. Liquidity and Capital Resources ------------------------------- Our primary source of liquidity has been cash proceeds from the sale of our common stock. We anticipate that we will need to raise significant additional capital to complete development of our technology and bring our existing product to market. At this date we have no agreements or commitments for funding. At June 30, 2002, we had a working capital deficit of $474,401. We had cash and cash equivalents of $22,334, and restricted cash of $13,308. The restricted cash consists of the balance of funds deposited in escrow pursuant to the merger discussed above to pay for the settlement of outstanding debt and the expenses of the merger. We also have related party loans receivable of $52,769 and advances to officers of $6,500. We expect these loans and advances to be repaid within the next twelve months. Liabilities at June 30, 2002 total $569,312, consisting of primarily of accounts payable of $287,882 and accrued wages of $270,164. Management is working on a plan to resolve the accounts payable and accrued wages. For the six months ended June 30, 2002, cash flows used by operating activities totaled $372,441. Cash provided by investing activities totaled $151,949, consisting of cash received from related party notes receivable, cash received from escrow, and cash received in the acquisition, offset by cash paid for property and equipment, cash paid for related party notes receivable and advances to officers. Cash provided by financing activities consisted of $220,000 received for a subscription receivable for the sale of common stock (see below). In July 2001, we issued an aggregate of 13,720,000 shares of restricted common stock to founders and other individuals and entities that provided services in connection with the formation and initial organization of the company at a price of $0.001 per share. In August 2001, we completed a private placement to an accredited investor of an aggregate of 2,280,000 shares of restricted common stock for aggregate proceeds of $570,000. At December 31, 2001, $350,000 had been received by Phacon with the balance of $220,000 paid during the six months ended June 30, 2002. In October, Phacon issued 1,500,000 shares of its restricted common stock valued at $0.25 per share, or a total of $375,000, for the acquisition of technology relating to the regulation and control of electric power to flourescent lighting devices. Because we have had no operations, have an operating loss and are dependent on financing to continue operations, our financial statements contain a going concern qualification. We intend to seek debt financing from traditional lending sources, loans from or private sales of our securities to our existing officers, directors, and shareholders, or such other debt or equity offerings that may be available to us. There is no assurance that we will be able to obtain funding when and if needed, or that such funding, if available, can be obtained on terms reasonable or acceptable to us. We may also seek joint venture partners, business acquisitions and business alliances to create some synergy with our planned operations. 9 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not aware of any material pending or threatened litigation. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS See Item 4 below. ITEM 3. DEFAULT BY THE COMPANY ON ITS SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS On April 5, 2002, a majority of our shareholders approved the acquisition of all of the issued and outstanding shares of Phacon Corporation, a privately-held California corporation. In connection with the acquisition transaction, the majority of our shareholders and Board of Directors adopted resolutions to effect a 10-for-1 reverse split of our issued and outstanding shares of $.001 par value common stock. The acquisition was effected pursuant to a Merger Agreement entered into April 14, 2002, with an effective date of May 29, 2002. A total of 17,500,000 post-split shares of our common stock was issued in connection with the transaction. Prior to the effectiveness of the Merger, a total of 16,486,831 shares of the our common stock were issued and outstanding. On May 29, 2002, the effective date of the 10-for-1 reverse split, a total of (approximately) 19,148,684 shares of our common stock were issued and outstanding, including the shares issued in the Merger. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- Exhibit 99 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. (b) Reports on Form 8-K ------------------- To report the closing of the merger with Phacon Corporation described above, we filed a Current Report on Form 8-K on May 28, 2002, with an amendment containing financial information on June 27, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this report to be signed on our behalf by the undersigned, thereunto duly authorized. LEXON TECHNOLOGIES, INC. Date: August 14, 2002 /S/Kenneth J. Eaken, President, Chief Executive Officer and Chief Financial Officer