Lexon Technologies, Inc.: Form 10-Q - Filed by newsfilecorp.com

10-Q 1 form10q.htm QUARTERLY REPORT FOR PERIOD ENDED SEPTEMBER 30, 2010 Lexon Technologies, Inc.: Form 10-Q - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549

FORM 10-Q

(Mark One)

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

For the fiscal period ended: September 30, 2010

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

For the transition period from ________________to ________________

Commission File Number: 0-24721

LEXON TECHNOLOGIES, INC.
(Exact name of registrant as specified in charter)

Delaware	87-0502701
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer I.D. No.)


14830 Desman Road	90638
(Address of principal executive offices)	(Zip Code)

Issuer's telephone number, including area code:(714) 522-0270

Securities registered pursuant to section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None	N/A

Securities registered pursuant to section 12(g) of the Act:

Common Stock, par value $0.001 per share
(Title of class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)
Yes [ x ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act). See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

Smaller reporting company [ x ]

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 15, 2010, Lexon had 510,789,721 shares of common stock, par value $0.001 outstanding.

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

	Page

Financial Statements:
Balance Sheets (unaudited)	4
Statements of Operations (unaudited)	6
Statements of Cash Flows (unaudited)	7
Notes to Financial Statements (unaudited)	9

LEXON TECHNOLOGIES, INC.

BALANCE SHEETS

ASSETS
		(Unaudited)
		September 30,		December 31,
		2010		2009
Current assets:
Cash and cash equivalents	$	2,300	$	61,661
Accounts receivable, net		314,346		468,821
Inventories		443,733		838,220
Other current assets		18,000		18,000

Total current assets		778,379		1,386,702

Due from related parties		130,000		190,000

Property and equipment, net		71,814		112,392

Other assets:
Intangibles, net of amortization		427,968		276,365
Security deposits		20,748		20,748
Goodwill		3,214,289		3,214,289

Total other assets		3,663,005		3,511,402

Total assets	$	4,643,198	$	5,200,496

The accompanying notes are an integral part of the unaudited financial statements.

LEXON TECHNOLOGIES, INC.

BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY
		(Unaudited)
		September 30,			December 31,
		2010			2009
Current liabilities:

Accounts payable	$	660,069		$	552,634
Due to related parties		91,960			91,960
Line of credit		450,000			450,000
Current portion of notes payable		243,568			249,534
Current portion of capital lease obligations		22,096			21,888
Accrued expenses		312,599			110,747
Other current liabilities		25,695			-
Total current liabilities		1,805,987			1,476,763
Contingent liabilities		-			274,610
Long-term liabilities:

Notes payable, net of current portion		44,510			99,460
Capital lease obligations, net of current portion		11,606			28,561
Deferred rent		37,622			53,398
Total long-term liabilities		93,738			181,419

Total liabilities		1,899,725			1,932,792

Stockholders’ equity:

Common stock - $0.001 par value; 2,000,000,000 shares authorized, 510,789,721 and 499,739,721 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively		510,790			499,740
Additional paid-in capital		3,088,904			2,737,454
Stock subscription receivable		(100,000	)		(100,000	)
Retained earnings (accumulated deficit)		(756,221	)		130,510
Total stockholders’ equity		2,743,473			3,267,704

Total liabilities and stockholders’ equity	$	4,643,198		$	5,200,496

The accompanying notes are an integral part of the unaudited financial statements.

LEXON TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2010			2009			2010			2009
Net sales	$	985,926		$	1,496,128		$	3,200,503		$	4,471,159
Cost of goods sold		921,260			925,737			2,896,815			3,078,291
Gross profits		64,666			570,391			303,688			1,392,868
Selling, general and administrative expenses		401,065			483,062			1,412,140			1,061,193
Income (loss) from operations		(336,399	)		87,329			(1,108,452	)		331,675
Other income (expenses):
Gain on forgiveness of debt		-			-			274,610			-
Interest expense		(14,943	)		(6,934	)		(44,889	)		(30,479	)
Net other income (expense)		(14,943	)		(6,934	)		229,721			(30,479	)
Income (loss) before income tax provision		(351,342	)		80,395			(878,731	)		301,196
Provision for income taxes		-			-			-			-
Net income (loss)	$	(351,342	)	$	80,395		$	(878,731	)	$	301,196
Earnings per share of common stock – Basic		(0.00	)		0.00			(0.00	)		0.00
Earnings per share of common stock - Diluted		(0.00	)		0.00			(0.00	)		0.00
Weighted average shares of common stock outstanding		548,623,187			34,183,778			548,623,187			34,183,778

The accompanying notes are an integral part of the unaudited financial statements.

LEXON TECHNOLOGIES, INC.

STATEMENTS OF CASHFLOWS

(Unaudited)

		Nine Months Ended
		September 30,
		2010			2009
Cash flows from operating activities:

Net income (loss)	$	(878,731	)	$	301,196
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:

Bad debt expense		42,450			-
Depreciation and amortization		198,975			76,111
Gain on forgiveness of debt		(274,610	)		-
Noncash professional service		30,000			-
Noncash employee compensation		20,000

Changes in assets and liabilities:

Accounts receivable		112,025			(439,210	)
Inventories		394,487			(69,013	)
Accounts payable		107,435			116,217
Accrued expenses		193,352			19,818
Deferred rent		(15,776	)		350
Other current liabilities		25,695			-
Total adjustments		834,033			(295,727	)
Net cash used in operating activities		(44,698	)		5,469

Cash flows from investing activities:

Note receivable		-			(18,000	)
Due from related parties		60,000			75,450

Net cash provided by investing activities		60,000			57,450

Cash flows from financing activities:

Net proceeds from line of credit		-			(150,000	)
Payments on notes payable		(60,916	)		68,392
Payments on capital lease obligations		(16,747	)		(26,209	)
Proceeds from convertible bonds		-			304,335
Issuance of common stock		11,000			-
Distributions to stockholder		(8,000	)		(299,807	)
Net cash used in financing activities		(74,663	)		(103,289	)

Net decrease in cash		(59,361	)		(40,370	)

Cash and cash equivalents, at the beginning of period		61,661			80,263

Cash and cash equivalents, at the end of period	$	2,300		$	39,893

The accompanying notes are an integral part of the unaudited financial statements.

LEXON TECHNOLOGIES, INC.

STATEMENTS OF CASHFLOWS

(Unaudited)

		Nine Months Ended
		September 30,
		2010		2009
Supplemental disclosures:
Cash paid during the period:
Income taxes	$	-	$	2,249
Interest expense	$	30,154	$	30,479

Noncash investing and financing activities:
Common stock issued for acquisition of intangibles	$	310,000	$	-
Common stock issued for employee compensation	$	11,500	$	-

The accompanying notes are an integral part of the unaudited financial statements.

LEXON TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1 - Nature of Business

Lexon Technologies, Inc. ("the Company" or "Lexon") was incorporated in April 1989 under the laws of state of Delaware, and owns 90.16% of Lexon Semiconductor Corporation ("Lexon Semi" or formerly known as Techone Co., Ltd ("Techone")) which had developed and manufactured Low Temperature Cofired Ceramic (LTCC) components, including LTCC wafer probe cards, LTCC circuit boards, LTCC Light Emitting Diode (LED) displays and related products for the semiconductor testing and measurement, custom Printed Circuit Board (PCB), and cellular phone industries.

Initially registered as California Cola Distributing Company, Inc, the Company changed its name twice; first to Rexford, Inc. in October 1992, and to the current name in July 1999.

In July 1999, Lexon acquired 100% of the outstanding common stock of Chicago Map Corporation (CMC) in exchange for 10,500,000 shares of the Company's common stock through a reverse acquisition accompanied by a recapitalization. The surviving entity, Lexon, reflected the assets and liabilities of Lexon and CMC at their historical book values. Lexon dissolved CMC in 2002.

In April 2002, Lexon acquired 100% of the outstanding common stock of Phacon Corporation (Phacon) in exchange for 17,500,000 shares of Company's common stock through a reverse acquisition accompanied by a recapitalization. As part of the agreement, the Company elected a 1 for 10 reverse stock split and the acquired shares of Phacon were entirely canceled leaving the Company as the surviving entity.

In March 2003, the Company incorporated Lexon Korea Corporation (“LexonKorea”) as a wholly-owned subsidiary in Korea for the purpose of entering into potential business combinations with Korean operating entities. LexonKorea was reorganized in August 2005, and as a result, the Company’s equity share in LexonKorea was reduced to 10%.

On October 7, 2009, Paragon Toner, Inc. (Paragon), a California corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Company whereby the Company issued 347,448,444 shares of common stock (the “Common Stock”) of the Company (the “Acquisition Shares”) to the shareholders of Paragon, representing approximately 72% of the issued and outstanding Common Stock after completion of the merger in October 2009. The effective date of the Merger was October 22, 2009 (“Effective Date”). The Company has decided to maintain the name of the predecessor company. The Merger has been accounted for as a recapitalization of Paragon with Paragon as the acquirer (reverse merger).

Shortly after the Merger, Lexon Semi was dissolved. The Company’s sole line of business is now in manufacturing, marketing and selling of recycled monochrome and color toner cartridges for laser printers and other related devices.

Note 2 - Summary of Significant Accounting Policies

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are primarily used for depreciation of property and equipment, amortization of intangible assets, allowances for doubtful accounts and inventory valuation. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenues from product sales when earned. Specifically, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred (or services have been rendered), the price is fixed or determinable, and collectability is reasonably assured. Revenue is not recognized until title and risk of loss have transferred to the customer. The shipping terms for the majority of the Company’s revenue arrangements are FOB (free on board) destination. Revenue is recorded net of customer returns, allowances and discounts that occur under arrangements established with customers.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be categorized as cash and cash equivalents.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is computed based upon the management’s estimate of uncollectible accounts and historical experience. The Company performs ongoing credit evaluations of its customers to estimate potential credit losses. Amounts are written off against the allowance in the period the Company determines that the receivable is uncollectible.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Appropriate consideration is given to obsolescence, slow moving items and other factors in evaluating net realizable value.

Property and Equipment

Property and equipment are stated at cost. The straight-line method is used to calculate depreciation over their estimated useful lives ranging as follows:

Automobile	3 years
Furniture & fixture	5 to 7 years
Leasehold improvement	5 years
Machinery and equipment	5 years

Leasehold improvements are depreciated to expense over the shorter of the life of the improvement or the remaining lease term. Capital expenditures that enhance the value or materially extend the useful life of the related assets are reflected as additions to property and equipment. Expenditures for repairs and maintenance are charged to expense as incurred. Upon a sale or disposition of assets, a gain or a loss is included in the statement of operations.

Impairment of Long-lived Assets

The Company periodically reviews the recoverability of its long-lived assets using the methodology prescribed in accounting guidance now codified as FASB ASC Topic 360, “Property, Plant and Equipment.” The Company also reviews these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted future net cash flows from the operations to which the assets relate, based on management’s best estimates using appropriate assumptions and projections at the time, to the carrying amount of the assets. If the carrying value is determined not to be recoverable from future operating cash flows, the asset is deemed impaired and an impairment loss is recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the asset. In management’s opinion, no such impairment existed as of September 30, 2010 and December 31, 2009.

Accrued Expenses

The Company’s accrued expenses consist of amounts payable for salaries, payroll taxes and sales taxes.

Deferred Rent

The Company recognizes rent expense equal to the total of the payments and free rent received due over the lease term, divided by the number of months of the lease term applying the straight-line method. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent.

Shipping and Handling

Certain shipping and handling fees are charged to customers and these are classified as revenue. The costs associated with all shipping to customers are recorded as operating expenses. Shipping expenses for the nine months ended September 30, 2010 and 2009 amounted to $119,482 and $139,044, respectively.

Income Taxes

The Company elected to be subject to the S corporation provisions of the Internal Revenue Code for federal and state income tax purposes effective January 27, 2004. Accordingly, as an S corporation, the Company’s taxable income or losses and applicable tax credits are passed through to its shareholder and reported on shareholder’s individual income tax return. However, the State of California requires S Corporation to pay a state franchise tax (currently 1.5% on its taxable income). The Merger described in Note 3 resulted in the termination of S status.

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the results of operations in the period that includes the enactment date. The realizability of deferred tax assets is evaluated based on a “more likely than not” standard, and to the extent this threshold is not met, a valuation allowance is recorded. See Note 14 Income Taxes for more information about the Company’s income taxes.

Recent Accounting Pronouncements

In August 2010, the FASB issued Accounting Standards Update 2010-21, "Accounting for Technical Amendments to Various SEC Rules and Schedules". This Accounting Standards Update amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026; Technical Amendments to Rules, Forms, Schedules and Codifications of Financial Reporting Policies. Management does not expect this update to have a material effect on the Company's financial statements.

In February 2010, the FASB issued Accounting Standards Update 2010-09, "Subsequent Events: Amendments to Certain Recognition and Disclosure Requirements." This FASB retracts the requirement to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or were available to be issued. ASU 2010-09 is effective for interim and annual financial periods ending after February 24, 2010, and has been applied with no material impact on the Company's financial statements.

In February 2010, the FASB issued Accounting Standards Update 2010-08, "Technical Corrections to Various Topics." This FASB eliminates inconsistencies and outdated provisions in GAAP and provides needed clarification on others. ASU 2010-08 is effective for interim and annual financial periods ending after February 2010, and has been applied with no material impact on the Company's financial statements.

Note 3 - Merger

Note 4 - Inventories

The following table provides the components of inventories as of September 30, 2010 and December 31, 2009:

		September 30,			December 31,
		2010			2009

Finished goods	$	185,770		$	582,603
Raw materials		292,673			290,603
		478,443			873,206
Less: Inventory reserve		(34,710	)		(34,986	)
Total	$	443,733		$	838,220

Overhead allocated to the inventory amounted to $45,853 and $19,897 for the nine months ended September 30, 2010 and 2009, respectively.

Note 5- Property and Equipment

Property and equipment consist of the following as of September 30, 2010 and December 31, 2009:

		September 30,			December 31,
		2010			2009

Automobile	$	34,092		$	34,092
Furniture and fixture		53,388			53,388
Leasehold improvement		5,060			5,060
Machinery and equipment		439,030			439,030
		531,570			531,570
Less: Accumulated depreciation		(459,756	)		(419,178	)
Net property and equipment	$	71,814		$	112,392

Depreciation expense amounted to $40,578 and $64,218 for the nine months ended September 30, 2010 and 2009, respectively.

Note 6 - Capitalized Website Costs

The Company amortizes its website over the estimated useful life of three years. Amortizable intangible assets are tested for impairment when impairment indicators are present, and, if impaired, written down to fair value based on either discounted cash flows or appraised values. No impairment of website costs has been identified during the periods presented. The carrying amount and accumulated amortization related to the website costs as of September 30, 2010 and December 31, 2009, are as follows:

		September 30,			December 31,
		2010			2009

Gross balance	$	633,589		$	323,589
Less: Accumulated amortization		(205,621	)		(47,224	)

Net balance	$	427,968		$	276,365

Estimated aggregate amortization expense for each of the succeeding years is as follows:

Years ending December 31,		Amount

Remainder of 2010	$	52,025
2011		195,667
2012		180,276
Total	$	427,968

Total amortization expenses were $158,397 and $11,647 for the nine months ended September 30, 2010 and 2009, respectively.

Note 7 - Transactions with Related Parties

Due from Related Parties

Advances to family members of the stockholder are unsecured, non-interest bearing and due on demand. The Company has $130,000 and $190,000 due from related parties as of September 30, 2010 and December 31, 2009, respectively.

Due to Related Parties

Interest bearing notes payable to related parties consisting of the following as of September 30, 2010 and December 31, 2009:

		September 30,		December 31,
		2010		2009

Unsecured note payable to a shareholder, with interest at 7.5% per annum. Note is in default and is payable on demand.	$	5,000	$	5,000

Expired convertible debt issued to a former employee, with interest at 7.5% per annum. The conversion maturity date was in October 2004. The note is payable on demand.		30,000		30,000

Expired convertible debt issued to a Director, with interest at 7.5% per annum. The conversion maturity date was in October 2005. The note is payable on demand.		56,960		56,960

Total notes payable	$	91,960	$	91,960

Note 8- Line of Credit

The Company has a line of credit with a bank with a maximum borrowing limit of $450,000. The outstanding balance was $450,000 as of both September 30, 2010 and December 31, 2009. This line of credit matures on December 7, 2010 and is secured by the Company’s accounts receivable, inventory and other miscellaneous assets. Interest is accrued at the bank’s prime plus 1.00% (4.25% as of September 30, 2010).

The Company incurred interest expenses on this line of credit of $26,872and $15,170 for the nine months ended September 30, 2010 and 2009, respectively.

Note 9 - Notes Payable

The Company has long term notes payable as follows:

		September 30,			December 31,
		2010			2009

A note payable to a bank, due in monthly installments of $2,931, including interest at the bank’s prime plus 1.25% (4.50% as of September 30, 2010). The note matures in May 2011, and is collateralized by substantially all the assets of the Company. The note is subject to various restrictive covenants, including maintenance of financial ratios at all times.	$	23,053		$	48,162

A note payable to a bank, due in monthly installments of $4,587, including interest at the bank’s prime plus 1.50% with minimum interest rate of 6.25% (6.25% as of September 30, 2010). The note matures in January 2012, and is collateralized by substantially all the assets of the Company.		95,043			130,850

Unsecured note payable to an unrelated individual, with interest at 7.5% per annum. The note is in default and is payable on demand.		20,000			20,000

Unsecured note payable to an unrelated party, with interest at 7.5% per annum. As disclosed in Note 11, the creditor has filed suit to collect on this note.		149,982			149,982


Total notes payable		288,078			348,994

Less: Current portion		(243,568	)		(249,534	)

Notes payable, net of current	$	44,510		$	99,460

Maturities of notes payable as of September 30, 2010 are as follows:

Years ending December 31,		Amount

2010	$	193,821
2011		63,045
2012		31,212
Total	$	288,078

Total interest expense on the notes payable were $6,742 and $4,086 for the nine months ended September 30, 2010 and 2009, respectively.

Note 10 - Capital Lease Obligations

The Company entered into numerous capital lease agreements with leasing companies to purchase certain equipment and transportation vehicles. As of September 30, 2010 and December 31, 2009, these assets are carried as follows:

		September 30,			December 31,
		2010			2009
Equipment	$	162,889		$	162,889
Transportation vehicles		32,800			32,800
Less: Accumulated depreciation		(187,666	)		(179,643	)
	$	8,023		$	16,046

The related future minimum lease payments under the capital lease obligations are as follows:

		September 30,			December 31,
		2010			2009

Total minimum lease payments	$	39,837		$	62,752
Less: Amount representing interest		(6,135	)		(12,303	)
Present value of net minimum lease payments		33,702			50,449

Less: Current portion		(22,096	)		(21,888	)

Capital lease obligations, net of current portion	$	11,606		$	28,561

Maturities of capital lease obligations as of September 30, 2010, are as follows:

Years ending December 31,		Amount

Remainder of 2010	$	5,141
2011		20,447
2012		8,114
Total	$	33,702

Total interest expenses from the capital lease obligations were $6,103 and $10,919 for the nine months ended September 30, 2010 and 2009, respectively.

Note 11 - Commitments and Contingencies

Legal Proceedings

On July 14, 2008, Advanced Digital Technology Co. Ltd., a Korean corporation (“ADT”), filed a claim against Lexon and certain named individuals who are former and current officers of the Company. The claim alleges breach of an agreement to settle an earlier dispute, involving ADT's investment of $150,000 in Lexon on or about January 16, 2007 and ADT's subsequent unilateral decision to rescind and demand a refund of this investment. The total amount of damages claimed under the pending lawsuit is the investment amount of $150,000 plus filing costs, interest and attorney fees for an aggregate amount of $178,522. On or about May 2, 2009, Lexon became aware of a default judgment entered in the amount above. Such judgment was entered on December 22, 2009. On or about May 8, 2009, Lexon has retained the law firm of Smith, Chapman & Campbell for the purpose of setting aside the default judgment as the Company was never in receipt of the notice of default entry. On or about July 21, 2009, the court set aside the default as the court agreed that service was never properly served.

On September 5, 2008, Vivien and David Bollenberg, a current shareholder (the “Bollenbergs”), filed a claim against Lexon and other third parties, including ByungHwee Hwang (also referred to as "Ben Hwang") and other financial agents and institutions involved in the alleged fraudulent transaction. The lawsuit is currently pending in the Orange County Superior Court in Santa Ana, California. The filed complaint alleges that Ben Hwang together with his representatives, including his accountant, escrow agent and real estate agent/broker, made certain representations to and solicited the Bollenbergs to make an investment in several companies and ventures including Lexon with the intent to misappropriate the solicited funds for personal use. The Bollenbergs allege that they invested a total of $1,500,000 among and between the various companies and ventures recommended by Ben Hwang, of which investment amount approximately $550,000 was invested in Lexon ($150,000 for 600,000 shares at $0.25 per share and $400,000 initially invested in Lexon Korea and later converted into 1,150,000 shares in Lexon for a total of 1,750,000 shares in Lexon). The final disposition of this case has not yet been resolved.

Operating lease

The Company leases its warehouse and office from a non-affiliate. Future minimum rental payments under these leases as of September 30, 2010, are as follows:

Years ending December 31,		Amount
Remainder of 2010	$	69,266
2011		279,619
2012		23,301
Total	$	372,186

Rent expenses amounted to $166,228 and $189,243 for the nine months ended September 30, 2010 and 2009, respectively. The Company allocated $155,292 and $174,517 of rent expenses to cost of goods sold for the nine months ended September 30, 2010 and 2009, respectively.

Note 12 - Dissolution of Subsidiary

As discussed in Note 1, on October 29, 2009, the subsidiary, Lexon Semiconductor Corporation was formally dissolved with the approval of the City of Pyongtaek in Korea. The subsidiary had been previously classified as a discontinued operation. With the dissolution, the Company recognized a forgiveness of debt totaling $418,970.

Note 13 - Distributions to Stockholder

Prior to the Merger described in Note 3, Paragon operated as a private S Corporation. As such, Paragon made periodic distribution to the sole stockholder at the time. Distributions paid to the stockholder aggregated $8,000 and $299,807 for the nine months ended September 30, 2010 and 2009.

Note 14 - Income Taxes

Significant components of deferred tax assets are as follows:

		September 30,			December 31,
		2010			2009

Loss carry forwards	$	2,408,245		$	1,602,904
Other		229,720			229,720
Total deferred tax asset		2,637,965			1,832,624

Valuation allowance		(2,637,965	)		(1,832,624	)
Total deferred tax asset, net	$	-		$	-

As of September 30, 2010, the Company had approximately $4,100,000 of net operating loss (“NOL”) carryforwards for U.S. federal income tax purposes expiring in 2020 through 2030. In addition, the Company has California state NOL carryforwards of approximately $3,300,000 expiring in 2013 through 2020.

The ability to realize the tax benefits associated with deferred tax assets, which includes benefits related to NOL’s, is principally dependent upon the Company’s ability to generate future taxable income from operations. The Company has provided a full valuation allowance for its net deferred tax assets due to the Company’s net operating losses. The valuation allowance has increased by $454,000 during the nine months ended September 30, 2010.

Section 382 of the Internal Revenue Code (“IRC”) imposes limitations on the use of NOL’s and credits following changes in ownership as defined in the IRC. The limitation could reduce the amount of benefits that would be available to offset future taxable income each year, starting with the year of an ownership change.

Note 15 - Subsequent Events

The Company has evaluated all subsequent events to the balance sheet date of December 31, 2009 through the date that the financial statements were issued on November 12, 2010, and has determined that there are no subsequent events that require disclosure under FASB Accounting Standards Codification Topic 855, Subsequent Events.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Report.

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.

Results of Operation for the Three Months Ended September 30, 2010 as Compared to the Three Months Ended September 30, 2009

Revenues.

Revenues decreased by $510,202 to $985,926 for the three months ended September 30, 2010 as compared to $1,496,128 for the three months ended September 30, 2009. This decline was primarily attributed to a sharp decrease in sales caused by the downturn in the economy, our ability to source empty cartridges as our entire industry has experienced a shortage of empty cartridges.

Cost of Goods Sold.

Cost of Goods Sold decreased by $ 4,477 to $921,260 for the three months ended September 30, 2010 as compared to $925,737 for the three months ended September 30, 2009.

Selling, General and Administrative Expenses.

Selling, General and Administrative Expenses (“SG&A”) decreased by $81,997 to $401,065 for the three months ended September 30, 2010 as compared to $483,062 for the three months ended September 30, 2009. This decrease of $81,997 in SG&A was attributed to an effort by the Company to restructure current personnel as well as the minimization of professional service related to our public listing on the OTC Bulletin Board.

Other Income and Expenses.

Other expense for the three months ended September 30, 2010 was $14,943 compared with other expenses of $6,934 for the three months ended September 30, 2009. Interest expenses for the three months ended September 30, 2010 was $14,943 compared to $6,934 in interest expenses for the three months ended September 30, 2010.

Net income.

As a result, we recorded a net loss of $351,342 for the three months ended September 30, 2010 compared with a net income of $80,395 for the three months ended September 30, 2009.

Results of Operation for the Nine Months Ended September 30, 2010 as Compared to the Nine Months Ended September 30, 2009

Revenues.

Revenues decreased by $1,270,656 to $3,200,503 for the nine months ended September 30, 2010 as compared to $4,471,159 for the nine months ended September 30, 2009. This decline was primarily attributed to a sharp decrease in sales caused by the downturn in the economy, our ability to source empty cartridges as our entire industry has experienced a shortage of empty cartridges.

Cost of Goods Sold.

Cost of Goods Sold decreased by $ 181,476 to $2,896,815 for the nine months ended September 30, 2010 as compared to $3,078,291 for the nine months ended September 30, 2009.

Selling, General and Administrative Expenses.

Selling, General and Administrative Expenses (“SG&A”) increased by $350,947 to $1,412,140 for the nine months ended September 30, 2010 as compared to $1,061,193 for the nine months ended September 30, 2009. This increase of $350,947 in SG&A was attributed to professional services and filing expenses related to our public listing on the OTC Bulletin Board as we completed our reverse merger in the 4th quarter of 2009.

Other Income and Expenses.

Other income for the nine months ended September 30, 2010 was $229,721 compared with other expenses of $30,479 for the nine months ended September 30, 2009. Interest expenses for the nine months ended September 30, 2010 was $44,889 compared to $30,479 in interest expenses for the three months ended September 30, 2010.

Net income.

As a result, we recorded a net loss of $878,731 for the nine months ended September 30, 2010 compared with a net income of $301,196 for the nine months ended September 30, 2009.

Liquidity and Capital Resources.

At September 30, 2010, we had current assets of $778,379 and current liabilities of $1,805,987. Current assets consisted primarily of accounts receivable and inventories.

Current liabilities at September 30, 2010, consisted of accounts payable of $660,069, accounts payable due to related parties of $91,960, credit line of $450,000, accrued expenses of $312,599, notes payable of $243,568 and capital lease obligations of $22,098.

For the nine months ended September 30, 2010, net cash used in operating activities totaled $(44,698) compared to net cash provided by operating activities of $5,469 in the prior year period. Our operating activities since inception have been funded primarily by income organically generated by the company and by the limited sale of our common stock.

Net cash provided by investing activities for the nine months ended September 30, 2010 amounted to $60,000 compared to net cash provided by investment activities of $57,450 for the same previous year period.

Net cash used in financing activities for the nine months ended September 30, 2010 was $74,663 compared to net cash used in of $103,289 for the nine months ended September 30, 2009

Net cash and cash equivalents at September 30, 2010 was $2,300.

None.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 4.

CONTROLS AND PROCEDURES

Our Chief Executive Officer, President, and Chief Financial Officer (the “Certifying Officer”) is responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officer has designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this report was prepared. The Certifying Officer has evaluated the effectiveness of the Company's disclosure controls and procedures within 90 days of the date of this report and believes that the Company’s disclosure controls and procedures are effective based on the required evaluation. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

ITEM 4T.

CONTROLS AND PROCEDURES

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

PART II

ITEM 1.

LEGAL PROCEEDINGS

To the best knowledge of management, there are two pending legal proceedings against us.

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

ITEM 3.	DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

Exhibit 31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, RULES 13(A)-14 AND 15(D)-14, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

Exhibit 31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, RULES 13(A)-14 AND 15(D)-14, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

Exhibit 32 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LEXON TECHNOLOGIES, INC.

Date: November 19, 2010	By:	/s/ James Park
		James Park
		President, Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates stated.