0001144204-08-048609.txt : 20080819 0001144204-08-048609.hdr.sgml : 20080819 20080819161929 ACCESSION NUMBER: 0001144204-08-048609 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080630 FILED AS OF DATE: 20080819 DATE AS OF CHANGE: 20080819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXICON UNITED INC CENTRAL INDEX KEY: 0001158201 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 061625312 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-33131 FILM NUMBER: 081027868 BUSINESS ADDRESS: STREET 1: 4500 STEINER RANCH BLVD., STREET 2: SUITE # 1708 CITY: AUSTIN, STATE: TX ZIP: 78732 BUSINESS PHONE: (512) 266-3507 MAIL ADDRESS: STREET 1: 4500 STEINER RANCH BLVD., STREET 2: SUITE # 1708 CITY: AUSTIN, STATE: TX ZIP: 78732 10-Q 1 v124288_10q.htm

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 quarterly period ended: June 30, 2008

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

For the transition period from ____________ to _____________

Commission File No. 0-33131

LEXICON UNITED INCORPORATED

(Exact name of small business issuer as specified in its charter)

DELAWARE	06-1625312
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4500 Steiner Ranch Blvd.

Suite # 1708, Austin, Texas 78732

(Address of Principal Executive Offices)

(512) 266-3507

(Registrant’s Telephone Number, Including Area Code)

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. Yes No X

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



Large Accelerated Filer o	Accelerated Filer o	Non-Accelerated Filer o (Do not check if a smaller reporting company)	Smaller Reporting Company þ

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

The numbers of shares outstanding of each of the issuer’s classes of common equity, as of August 1, 2008, are as follows:

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	8,691,134

TABLE OF CONTENTS

_________________

PART I - FINANCIAL INFORMATION

		PAGE

ITEM 1.	INTERIM FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION	7
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4A(T).	CONTROLS AND PROCEDURES	15


PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	15
ITEM 1A	RISK FACTORS	16
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES	23
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	23
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	23
ITEM 5.	OTHER INFORMATION	23
ITEM 6.	EXHIBITS	23

SIGNATURES

PART I - FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS

LEXICON UNITED INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


	June 30			December 31,
	2008			2007
	(Unaudited)

CURRENT ASSETS
Cash and cash equivalents	$	449,825		$	467,195
Accounts receivable		405,040			288,588
Other receivables		293,228			205,013
Prepaid expenses		9,180			3,145
Total current assets		1,157,273			963,941

FIXED ASSETS
Building, equipment, and leasehold improvements,
net of accumulated depreciation of $518,201 and
$471,766 at June 30, 2008 and December 31, 2007, respectively		806,817			740,525

OTHER ASSETS

Investment in receivable portfolios		816,294			-
Customer Lists, net of amortization of $128,430 and $102,744 at		385,303			410,989
June 30, 2008 and December 31, 2007, respectively
Tradenames, net of amortization of $55,042 and $44,034 at		165,129			176,137
June 30, 2008 and December 31, 2007, respectively
Goodwill		853,141			853,141
Security deposit		1,350			-
Total other assets		2,221,217			1,440,267

TOTAL ASSETS	$	4,185,307		$	3,144,733


CURRENT LIABILITIES
Loans payable to banks	$	434,437		$	491,474
Current portion of long term debt		163,488			270,603
Bank Overdrafts		457,699			378,514
Note Payable to an individual		317,231			-
Accounts Payable		297,544			176,022
Loans payable to officer		138,613			52,504
Accrued Expenses		716,560			466,959
Accrued Municipal Service Taxes		178,603			159,841
Accrued Payroll and related taxes		1,520,028			1,366,938
Accrued Employee Benefits		201,405			180,819

Total Current Liabilities		4,425,608			3,543,674

LONG TERM LIABILITIES
Long term debt		383,203			352,998

Total Long Term Liabilities		383,203			352,998

TOTAL LIABILITIES		4,808,811			3,896,672

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock $0.001 par value, 10,000,000
shares authorized, none issued and outstanding		-			-
Common stock $0.001 par value, 40,000,000
shares authorized, 8,691,134 and 8,459,250 shares
issued and outstanding at June 30, 2008 and December 31, 2007
respectively		8,691			8,456
Paid in capital		2,713,459			1,903,194
Accumulated deficit		(2,439,293	)		(2,025,245	)
Accumulated other comprehensive loss		(906,361	)		(638,344	)
Total Stockholders' Deficit		(623,504	)		(751,939	)


TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	4,185,307		$	3,144,733

See accompanying notes to financial statements.

LEXICON UNITED INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)




	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
REVENUE
Service revenue	$	1,211,244		$	629,493		$	2,096,109		$	1,268,685

COST OF SERVICES		784,879			435,456			1,274,936			847,445

GROSS PROFIT		426,365			194,037			821,173			421,240

COSTS AND EXPENSES
Selling, general and administrative		345,469			362,930			858,373			676,005
Depreciation		38,670			31,120			79,439			57,416
Amortization		18,347			18,347			36,694			36,694
Interest expense		140,231			88,893			261,597			144,847
Total costs and expenses		542,717			501,290			1,236,103			914,962

OPERATING LOSS		(116,352	)		(307,253	)		(414,930	)		(493,722	)

OTHER INCOME
Interest income and other		(4,463	)		11,603			884			22,906
Total Other Income		(4,463	)		11,603			884			22,906


NET LOSS	$	(120,815	)	$	(295,650	)	$	(414,046	)	$	(470,816	)


NET LOSS PER COMMON SHARE	$	(0.01	)	$	(0.04	)	$	(0.05	)	$	(0.06	)

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING		8,526,633			8,456,250			8,491,636			8,456,250

See accompanying notes to financial statements.

LEXICON UNITED INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Six Months Ended
	June 30
	2008			2007

CASH FLOWS FROM OPERATING ACTIVITES
Net loss	$	(414,046	)	$	(470,816	)
Noncash items included in net loss
Depreciation		84,731			60,739
Amortization of intangibles		36,694			36,694
Decrease (increase) in assets:
Accounts receivable		(83,929	)		(11,536	)
Other receivables		(67,633	)		(32,501	)
Prepaid expenses		(7,868	)		1,563
Security deposit		(1,350	)		-
Investment in receivable portfolio		(309,856	)		-
Increase (decrease) in liabilities:
Accounts payable		(11,390	)		(54,953	)
Accrued expenses		198,502			139,322

NET CASH USED IN OPERATING ACTIVITIES		(576,145	)		(331,488	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(23,677	)		(42,721	)

NET CASH USED IN INVESTING ACTIVITIES		(23,677	)		(42,721	)

CASH FLOWS FROM FINANCING ACTIVITIES
Loan from Keyano Invest, Inc		1,000,000			-
Loan from related party		8,767			25,958
Net change in bank loans		-			9,360
Proceeds from new loans		-			209,898
Repayment of loans		(467,155	)		(148,634	)
Issuance of common stock		10,500			-


NET CASH PROVIDED BY FINANCING ACTIVITIES		552,112			96,582


EFFECT OF EXCHANGE RATE OF CASH		30,340			12,413

NET DECREASE IN CASH		(17,370	)		(265,214	)

CASH, beginning of period		467,195			896,531

CASH, end of period	$	449,825		$	631,317




SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	121,366		$	144,847

Non cash items
Purchase of furniture and equipment	$	41,350		$	75,672

Conversion of loan from Keyano Invest, Inc to common stock	$	800,000

Loans and accounts payable incurred for acquisition of receivable portfolio	$	503,438

See accompanying notes to financial statements

LEXICON UNITED INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED FINANCIAL STATEMENTS

June 30, 2008

NOTE A - BASIS OF PRESENTATION

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. Results for the six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. For further information, refer to the financial statements and footnotes thereto included in the Lexicon United Incorporated annual report on Form 10-KSB for the year ended December 31, 2007 filed April 15, 2008.

NOTE B - PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Lexicon United Incorporated, its 80% owned subsidiary, ATN Capital E Participacoes Ltda and its 100% owned subsidiary, Engepet Energy Enterprises, Inc. and its newly created 100% owned subsidiary, United Oil Services, Inc. All material intercompany transactions have been eliminated in consolidation.

NOTE C - INVESTMENT IN RECEIVABLE PORTFOLIO

The Company invests in receivable portfolios at a substantial discount from the face value of the debt portfolios. Under the guidance of American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 03-3, “Accounting for Loans or Certain Securities Acquired in a Transfer” income is recognized using either the interest method or the cost recovery method.

Under the guidance of SOP-03-3, when expected cash flows are higher than prior projections, the increase in expected cash flows results in an increase in the internal rate of return (IRR) and therefore, the effect of the cash flow increase is recognized as the increased revenue prospectively over the remaining life of the affected portfolio. However, when expected cash flows are lower than prior projections, SOP-03-3 requires that the expected decrease be recognized as an impairment by decreasing the carrying value of the affected portfolio, so that the portfolio will amortize over its expected life using the original IRR. A portfolio can become fully amortized while still generating cash collections. In this case, all cash collections are recognized as revenue when received.

Under the cost recovery method, no revenue is recognized until the Company has fully collected the cost of the portfolio, or until such time that the Company considers the collections to be probable and estimable and begins to recognize income based on the interest method described above.

Changes in investment in receivables for the six months ended June 30, 2008 are as follows:

Balance at beginning of period, January 1, 2008	$	0
Acquisition of receivables portfolio		816,294
Gross collections applied to principal		0
Impairment write down		0

Balance at end of period, June 30, 2008		816,294

As of June 30, 2008, no revenue has been recognized from this portfolio.

The Company financed the purchase of the receivable portfolio as follows: (1) From working capital $309,850 (2) through installment payments of $37,690 payable in July, August and September, 2008, aggregating $113,070, (3) a note payable to an individual in the amount of $317,231 due December 2009 bearing interest at the rate of 1.5% per month and (4) a note in the amount of $76,143 due December 2009 bearing interest at 1.5% per month. This loan is included in the caption loans

LEXICON UNITED INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued)

June 30, 2008

NOTE C - INVESTMENT IN RECEIVABLE PORTFOLIO (CON’T)

from officer on the balance sheet. The loan from an individual is deemed to be a related party because of his affiliation with the Company.

NOTE D - GOING CONCERN

As shown in the accompanying financial statements, the Company has incurred cumulative net operating losses of $2,439,293 since inception and the Company has a negative working capital of $3,268,335. The Company has recently formed two new subsidiaries, Engepet Energy Enterprises, Inc. and United Oil Services, Inc. It also seeks to raise capital for working capital and potential capital projects. However, even if the Company does raise capital in the capital markets, there can be no assurances that the revenues and profits will be sufficient to enable it to continue as a going concern. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE E - 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

NOTE F - REVENUE RECOGNITION

The Company derives its revenue primarily from collection of distressed debt by entering into non binding agreements with financial institutions to collect their delinquent debt. Once an agreement is reached with the debtor of the financial institution based upon established parameters, an installment agreement is established. The Company is then entitled to a commission on the agreed settlement. The Company earns and records the pro rata commission for each installment, when the installment payments are received from the debtors.

Revenue from the collection of distressed debt owned by the Company will be recognized based on the AICPA Statement of Position 03-3, if management is reasonably comfortable with expected cash flows. In the event, expected cash flows cannot be reasonably estimated, the Company will use the “Recovery Method” under which revenues are only recognized after the initial investment has been recovered.

NOTE G - PURCHASE OF FIXED ASSETS

During the quarter ended March 31, 2008, the Company purchased new air conditioning equipment. The equipment valued at approximately $28,000 is being financed over a three year period at 12% per year.

During the quarter ended June 30, 2008, the Company purchased new computer equipment. The equipment valued at approximately $6,600 is being financed over a three year period at 13.32% per year.

During the quarter ended June 30, 2008, the Company purchased new computer equipment valued at approximately $7,200. The equipment is being financed over a one year period at 11.4% per year.

LEXICON UNITED INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued)

June 30, 2008

NOTE H - RELATED PARTY

During the quarter ended March 31, 2008, Keyano Invest Inc., a related party, loaned the Company $1,000,000 for working capital purposes on terms and conditions to be determined on an arms length basis between the parties. During the quarter ended June 30, 2008, the Company repaid Keyano Invest Inc $200,000 and converted the remaining balance of $800,000 to a 2.5% convertible debenture. On June 4, 2008, the debenture was converted to 231,884 shares of common stock at a conversion price of $3.45 per share.

NOTE I - STOCKHOLDERS’ DEFICIT

On May 13,2008 the Company issued 3,000 shares of its common shares for $10,500, or $3.50 per share.

On June 4, 2008, the Company issued 231,884 shares of its commons shares in conversion of an $800,000 debenture from Keyano Invest, Inc, a related party (see Note H). The shares were converted at $3.45 per share.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion should be read in conjunction with our financial statements and the notes thereto.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND USE OF TERMS

This quarterly report contains forward-looking statements, which reflect our views with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements. These forward-looking statements are identified by, among other things, the words “anticipates”, “believes”, “estimates”, to expects”, “plans”, “projects”, “targets” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors that may cause actual results to differ from those projected include the following factors:

•	our potential inability to raise additional capital;

•	our potential inability to obtain the right to develop our target markets or to exploit the rights currently held by us;

•	our potential inability to compete with other finance companies that may be more experienced and better capitalized than us;

•	changes in domestic and foreign laws, regulations and taxes;

•	changes in economic conditions;

•	lack of resources compared to our competitors;

•	uncertainties and risks related to the legal systems and economics in our target markets, including Brazil’s legal system and economic, political and social events in Brazil and other target markets;

•	fluctuations in currency exchange rates;

•	the effects of any applicable currency restrictions, including any restrictions on the repatriation of funds back to the United States;

•	a general economic downturn or a downturn in the securities markets;

•	Regulations of the Commission which affect trading in the securities of “penny stocks;” and

•	other risks and uncertainties.

•

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Except as otherwise indicated by the context, references in this report to:

•	“Lexicon,” “we,” “us,” “our,” or the “Company,” are references to Lexicon United Incorporated, and its consolidated subsidiaries.

•	“ATN” are to ATN Capital E Participações Ltda.

•	“Brazil” are to the Federative Republic of Brazil;

•	“U.S. dollar,” “$” and “US$” are to the legal currency of the United States;

•	“Real,” “R$,” and “Reais” are to the legal currency of Brazil;

•	the “SEC” or the “Commission” are to the United States Securities and Exchange Commission;

•	the “Securities Act” are to Securities Act of 1933, as amended; and

•	the “Exchange Act” are to the Securities Exchange Act of 1934, as amended.

Overview

Our Background and History

Our corporate name is Lexicon United Incorporated. We were incorporated on July 17, 2001 in the state of Delaware. We were a “blank check” company and had no operations other than organizational matters and conducting a search for an appropriate acquisition target until February 27, 2006 when we completed an acquisition transaction with ATN, a Brazilian limited company that had commenced business in April 1997. ATN is engaged in the business of managing and servicing accounts receivables for large financial institutions in Brazil.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with US generally accepted accounting principles and our discussion and analysis of our financial condition and results of operations require our management to make judgments, assumptions, and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.

Management believes our critical accounting policies and estimates are those related to revenue recognition and the valuation of goodwill and intangible assets. Management believes these policies to be critical because they are both important to the portrayal of our financial condition and results, and they require management to make judgments and estimates about matters that are inherently uncertain.

Revenue Recognition

We derive our revenues primarily from collection of distressed debt by entering into non binding agreements with financial institutions to collect their debt. Once an agreement is reached with the debtor of the financial institution based upon established parameters, an installment agreement is established. We are then entitled to a commission on the agreed settlement. We earn and record the pro rata commission for each installment, when the installment payments are received from the debtors. Our average fee was approximately 15% during the fiscal years ended December 31, 2007 and 2006.

Revenue from the collection of distressed debt owned by the Company is recognized based on the AICPA Statement of Position 03-3, if management is reasonably comfortable with expected cash flows. In the event expected cash flows cannot be reasonably estimated, the Company will use the “Recovery Method” under which revenues are only recognized after the initial investment has been recovered.

Valuation of Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we are required to compare the fair values of goodwill and other intangible assets to their carrying amounts. If the fair value is less than the carrying value, an impairment loss is recognized. The Company had an independent valuation performed of its goodwill, customer lists and trademarks as of December 31, 2007.

Based upon this valuation, we believe that, as of December 31, 2007 and June 30, 2008, there is no impairment loss of goodwill or other intangible assets and an adjustment to the carrying values of the assets is not required.

Industry Wide Factors that are Relevant to Our Business

We are in the business of managing the recovery of credit accounts receivable in Brazil for our third-party clients who are either credit card issuers or transferees of credit accounts receivable. Our business, therefore, depends on the growth of the credit card sector in Brazil.

The credit card sector in Brazil became the third largest issuer worldwide after the United States and China, and according to the projections of major sources such as the Brazilian Association of Credit Cards Issuers (ABECS), the Brazilian Institute of Statistics (IBGE), the Brazilian Banks Federation (FERBABAN) and Citibank, this sector is poised to continue its double-digit growth.

During the last decade the volume of transactions has soared from 1.36 billion in 2004 to over 2 billion in 2006, with the number of plastic credit and debit cards dramatically increasing from 17 million in 1996 to 80 million in 2006. This trend reflects the inclusion of low-income consumers where at 32% of the GDP in Brazil, it is still well below the Chileans who are at 63% and the Bolivians who are at 42%.

This economic growth of the commercial credit sector is following the same pattern with the same projections. New bank accounts increased from 31.4 million in the year 2000 to 95.1 million in 2005 where consumers view the credit card as a financial instrument to be used in lieu of the check. The number of checks used dropped 27% from 1999 to 2005 while credit card payments increased by 240%. According to data from the Brazilian Central Bank, in 2005, payments by credit cards surpassed payments made by check.

Uncertainties that Affect our Financial Condition

We have approximately fifteen clients, but we currently rely on five major clients for a significant portion of our revenue. None of these major clients are contractually obligated to continue use of our services at historic levels or at all, subject only to notice periods for termination. If any of these clients were to significantly reduce their amount of service, fail to pay, or terminate their relationships with us altogether, our business could be harmed. The number of major clients on whom we rely has remained the same for fiscal years 2008 and 2007. During fiscal year 2007, no one customer has been responsible for more than 20% of our revenues.

The portfolios of consumer receivables that we service consist of one or more of the following types of consumer receivables:

·	charged-off receivables - accounts that have been written-off by the originators and may have been previously serviced by collection agencies;

·	semi-performing receivables - accounts where the debtor is making partial or irregular monthly payments, but the accounts may have been written-off by the originators; and

·	performing receivables - accounts where the debtor is making regular monthly payments that may or may not have been delinquent in the past.

Charged-off receivables accounted for more approximately 99% of our business in 2007, while semi-performing and performing receivables each accounted for less than 1% of our business in the period.

ATN’s long period of operations and its demonstrated capacity to process millions of receivables, large and small, have made ATN an attractive resource for customers desiring to secure their receivables. Our success rate is measured by how long an outstanding debt is past due as well as whether such debt has been categorized as a performing, semi-performing or charged-off item. On average we recover between 2.5% and 8% of face value of our debt. Due to our level of professionalism and our successful performance we believe that we are in the top 5% of businesses in this field in Brazil.

In order to further increase our revenue base and eliminate the uncertainty of our ability to continue as a going concern, with adequate capitalization, we plan to start using ATN’s consumer database and its vast experience in collections to start buying defaulted outstanding consumer loans and other assets, which are usually discounted to their legal principal balance or appraised value. We believe that the impact on our liquidity would be highly improved and we would have the opportunity to build our own short and long-term portfolio of restructured receivables. Purchased debts for our own account would also suppress the efforts and costs of collection monitoring and reporting back to original holders to the benefit of our bottom line.

Investment in Receivable Portfolio

Changes in investment in receivables for the six months ended June 30, 2008 are as follows:

Balance at beginning of period, January 1, 2008	$	0
Acquisition of receivables portfolio		816,294
Gross collections applied to principal		0
Impairment write down		0

Balance at end of period, June 30, 2008		816,294

As of June 30, 2008, no revenue has been recognized from this portfolio.

Results of Operations

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007.

The following table summarizes the results of our operations during the three-month period ended June 30, 2008, and 2007 and provides information regarding the dollar and percentage increase or (decrease) from the second fiscal quarter of 2008 to the same period of 2007.

	ThreeMonths Ended June 30, 2008			Three Months Ended June 30, 2007			Increase (Decrease)			Percentage Increase (Decrease)

Revenues		1,211,244			629,493			581,751			92.42
Net income (loss)		(120,815	)		(295,650	)		174,835			59.14
Cost of Services		784,879			435,456			349,423			80.24
Selling, General and Administrative Expense		345,469			362,930			(17,461	)		(4.81	)
Interest Expense		140,231			88,893			51,338			57.75
Earnings (Loss) per common share		(.01	)		(.04	)		.03			76.00

Revenues. We had revenues of $1,211,244 in the three-month period ending June 30, 2008, compared to revenues of $629,493 during the same period in 2007. Our revenues increased $581,751 or 92.42% in the three-month period ending June 30, 2008 primarily due to an increase in collection of receivables and revenue from Engepet Energy Enterprises.

Net Loss. During the three-month period ending June 30, 2008 we incurred a net loss of $(120,815) compared with $(295,650) for the same period in the prior year. The decrease in our loss is primarily due to an increase in expenses as described below offset by increased revenues.

Cost of Services. Our cost of services for the three-month period ending June 30, 2008 was $784,879 as compared to $435,456 during the same period in 2007. This increase of $349,423 or 80.24% is primarily the result of increased salaries and related expenses and increased internship program expenses.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $17,461 or 4.81%, to $345,469 in the three-month period ending June 30, 2008 compared to $362,930 in the same period in 2007. The decrease is primarily due to lower telephone and communication costs during the second quarter.

Interest Expense. Interest expense in the three-month period ending June 30, 2008 was $140,231 and interest expense in the same period of 2007 was $88,893. Interest expense increased $51,338 or 57.75% in the three-month period ending June 30, 2008 mainly due to the increase of new borrowings over the past year.

Loss per Common Share. Loss per common share for the three-month period ending June 30, 2008 was $(.01) as compared to a loss of $(.04) during the same period of 2007. This decrease in the loss per share is due to the decreased loss for the period ended June 30, 2008.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007.

The following table summarizes the results of our operations during the six-month period ended June 30, 2008, and 2007 and provides information regarding the dollar and percentage increase or (decrease) from the second fiscal quarter of 2008 to the same period of 2007.

	Six Months Ended June 30, 2008			Six Months Ended June 30, 2007			Increase (Decrease)		Percentage Increase (Decrease)

Revenues		2,096,109			1,268,685			827,424		65.22
Net income (loss)		(414,046	)		(470,816	)		56,770		12.06
Cost of Services		1,274,936			847,445			427,491		50.44
Selling, General and Administrative Expense		858,373			676,005			182,368		26.98
Interest Expense		261,597			144,847			116,750		80.60
Earnings (Loss) per common share		(.05	)		(.06	)		.01.		16.67

Revenues. We had revenues of $2,096,109 in the six-month period ending June 30, 2008, compared to revenues of $1,268,685 during the same period in 2007. Our revenues increased $827,424 or 65.22% in the six-month period ending June 30, 2008 primarily due to an increase in collection of receivables and revenue from Engepet Energy Enterprises.

Net Loss. During the six-month period ending June 30, 2008 we incurred a net loss of $(414,046) compared with $(470,816) for the same period in the prior year. The decrease in our loss is primarily due to an increase in expenses as described below offset by increased revenues.

Cost of Services. Our cost of services for the six-month period ending June 30, 2008 was $1,274,936 as compared to $847,445 during the same period in 2007. This increase of $427,491 or 50.44% is primarily the result of increased salaries and related expenses and increased internship programs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $182,368 or 26.98%, to $858,373 in the six-month period ending June 30, 2008 compared to $676,005 in the same period in 2007. The increase is primarily due to an increase in telephone and communication expenses.

Interest Expense. Interest expense in the six-month period ending June 30, 2008 was $261,597 and interest expense in the same period of 2007 was $144,847. Interest expense increased $116,750 or 80.6% in the six-month period ending June 30, 2008 mainly due to the increase of new borrowings over the past year.

Loss per Common Share. Loss per common share for the six-month period ending June 30, 2008 was $(.05) as compared to a loss of $(.06) during the same period of 2007. This decrease in the loss per share is due to the decreased loss for the period ended June 30, 2008.

Cash Flow Items

The following table provides the statements of net cash flows for the six-month period ended June 30, 2008:

	Six Months Ended June 30,
	2008			2007
Net Cash Provided By (used in) Operating Activities		(576,145	)		(331,488	)
Net Cash Used in Investing Activities		(23,677	)		(42,721	)
Net Cash Provided by Financing Activities		552,112			96,582
Net Increase (decrease) in Cash and Cash Equivalents		(17,370	)		(265,214	)
Cash and Cash Equivalents - Beginning of Period		467,195			896,531
Cash and Cash Equivalents - End of Period		449,825			631,317

We used $576,145 of cash from our operating activities during the six months ended June 30, 2008 as compared to $331,488 cash used during the six months ended June 30, 2007. The difference of $244,657 is mainly attributable to the purchase of a debt receivable portfolio for $816,294 offset by an increase in accounts payable of $101,682 and non cash items of $121,425.

We used $23,677 in cash from our investing activities during the six months ended June 30, 2008, as compared to $42,721 used in the prior period ending June 30, 2007. These funds were used for the purchase of fixed assets.

We provided a net $552,112 from financing activities during the six-month period ended June 30, 2008 as compared to $96,582 during the six months ended June 30, 2007. The change is primarily due to a increase in new borrowings from a related party $1,000,000 offset by payments on notes payable. In June 2008, the balance of the related party borrowing ($800,000) was converted to 231,884 shares of common stock.

Balance Sheet Items

As of June 30, 2008, we had total current assets of $1,157,273, as compared to $1,002,727 as of June 30, 2007. Our total assets as of June 30, 2008 were $4,185,307 as compared to $3,182,713 as of June 30, 2007. We had total current liabilities of $4,425,608 as of June 30, 2008 as compared to $3,649,194 as of June 30, 2007, and we had total liabilities of $4,808,811 as of June 30, 2008 as compared to $4,031,093 as of June 30, 2007.

The increase in total assets is primarily due to the purchase of a debt receivable portfolio for $816,294. The increase in total liabilities is primarily due to an increase in accrued expenses and loans from banks and others.

As of June 30, 2008, our total Stockholders’ Equity (deficit) was $(623,504) as compared to $(848,380) at June 30, 2007. This change was due to an increase in capital stock and paid in capital of $810,500 offset by operating losses and losses due to foreign exchange rates.

Liquidity and Capital Resources

We believe that we will be able to pay our normal and operating expenditures during the next twelve months with our cash reserves and additional cash generated from operations, and by reducing our accrued municipal services tax liability by restructuring such debt. We do not have any material capital commitments during the next twelve months, other than repayment of debt as it comes due, and we do not anticipate the issuance of additional debt (other than to refinance existing debt). We also do not anticipate any material changes in our operations during the next twelve months. As such, we believe that our current cash position is sufficient to retire our current short-term debt as it comes due and, if we are successful in adequately restructuring our municipal services tax liability, we believe that cash generated from operations will be sufficient to pay our operating expenses during the next twelve months.

We had cash and cash equivalents of approximately $449,825 as of June 30, 2008 and we had short-term liabilities in the amount of $4,425,608, as well as long-term liabilities in the amount of $383,203 as of June 30, 2008. The Company intends to use its cash to retire current debt as it comes due as well as to pay operating expenses as necessary.

During 2007, the Company successfully negotiated with Brazilian authorities to favorably settle previously recorded municipal service taxes of $730,000. In addition, the company further evaluated related payroll tax provisions and reduced same by approximately $200,000.

If we are required to make any material and unplanned expenditures during the next twelve months, the company believes that it can raise additional capital in the equity markets through private placements in order to meet its short-term cash requirements. The company believes that such equity funding could also be used to liquidate all or a portion of the Company’s current bank loans or pay other operating expenses. However, we can provide no assurances that we will be able to raise additional capital in the equity markets on favorable terms, if at all or on a timely basis.

As of June 30, 2008, we had cash assets of $449,825 and total assets of $4,185,307 as compared to cash assets of $631,317 and total assets of $3,182,713 as of June 30, 2007. This increase is primarily due to the purchase of a debt receivable portfolio in the amount of $816,294. We have a $(2,452,041) negative working capital at June 30, 2008, of which $1,900,036 relates to municipal taxes and payroll expenses in connection with ATN’s prior and ongoing operations.

Loans Payable to Banks

The Company has several loans with various Brazilian banks and financial institutions. The loans are secured by personal guarantees of the Company’s principal shareholders. The loans mature at various months throughout the year and are generally renewed at maturity. The interest rates are fixed and bear interest at rates ranging from 9.6% to 12.84% per year. The balance of the loans at June 30 2008 was $434,437.

Long-Term Debt

During the year ended December 31, 2007, the Company purchased new computer equipment from DELL Brazil. The equipment valued at approximately $189,500 is financed over a three year period at rates ranging from 12% to 12.84% per year.

In June, 2007, the Company refinanced a working capital loans from Banco Bradesco. The loan is valued at approximately $1143,000 and is payable in 24 monthly installments at 2.6% per month, commencing July, 2007. The loans are guaranteed by a promissory note signed by ATN’s directors

In June, 2007, the Company borrowed two working capital loans from Caixa Economica Federal. The loans are valued at approximately $113,000 and are payable in 24 monthly installments at 2.73% per month, commencing July, 2007. The loans are guaranteed by a promissory note signed by ATN’s directors.

In September, 2007 the Company borrowed a working capital loan from Santander in the amount of $48,942. The loan is valued at approximately $51,000 and is payable in 16 monthly installments at an interest rate of 46.8% per year. The loan is guaranteed by a promissory note signed by ATN’s directors.

In January, 2008, the Company purchased new air conditioning equipment. The equipment valued at approximately $27,500 if financed over a three year period at 12% per year.

During the quarter ended June 30, 2008, the Company purchased new computer equipment. The equipment valued at approximately $6,600 is financed over a three year period at 13.32% per year.

During the quarter ended June 30, 2008, the Company purchased new computer equipment valued at approximately $7,200. The equipment is financed over a one year period at 11.4% per year.

An analysis of the current and long-term portion of the debt at June 30, 2008 is as follows:

Total loans outstanding	$	546,691

Less: current portion	$	163,488

Long-term portion	$	383,203

Our financial statements have been prepared on the basis that we will continue as a going concern, which contemplates the realization and satisfaction of our liabilities and commitments in the normal course of business.

We believe that our increased revenues and our cash on hand will be sufficient to sustain our operations at our current levels for the next twelve months.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 4A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2008. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Controls Over Financial Reporting

During the quarter ended June 30, 2008, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

There are no legal proceedings which are pending or have been threatened against us or any officer, director or control person of which management is aware.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below before you purchase any of our common stock. If any of these risks or uncertainties actually occurs, our business, financial condition or results of operations could be materially adversely affected. In this event you could lose all or part of your investment.

Financial Risks

We only have approximately $449,825 in cash and if we are unable to raise more money we will be required to delay, scale back or eliminate our marketing and development programs.

As of June 30, 2008, we had approximately $449,825 in cash available to fund our operations, which includes cash held by both Lexicon and ATN on a consolidated basis. The amounts and timing of our expenditures will depend primarily on our ability to raise additional capital. We may seek to satisfy our future funding requirements through new offerings of securities or from other sources, including loans from our controlling stockholders. Additional financing may not be available when needed or on terms acceptable to us. We have no current commitment for additional financing. Unavailability of financing may require us to delay, scale back or eliminate some or all of our marketing and development programs. To the extent we raise additional capital by issuing equity securities, your ownership interest would be diluted.

Risks Relating To Our Business

The company has a history of losses and may need additional financing to continue its operations, and such financing may not be available upon favorable terms, if at all.

We have incurred net losses of $414,046 in the first six months of fiscal 2008 and had an accumulated deficit of $2,439,293 and had a negative working capital of $3,268,335 at June 30, 2008. There can be no assurances that we will be able to operate profitably in the future. In the event that we are not successful in implementing its business plan, we will require additional financing in order to succeed. There can be no assurance that additional financing will be available now or in the future on terms that are acceptable to us. If adequate funds are not available or are not available on acceptable terms, we may be unable to develop or enhance our services, take advantage of future opportunities or respond to competitive pressures, all of which could have a material adverse effect on our business, financial condition or operating results.

There is substantial doubt about our ability to continue as a going concern due to significant recurring losses from our operations and our accumulated deficit.

There is substantial doubt about our ability to continue as a going concern due to significant recurring losses from our operations and our accumulated deficit, all of which means that we may not be able to continue operations unless we obtain additional funding. Management’s plans include raising capital through the equity markets to fund future operations and generating of revenue through its business. Failure to raise adequate capital and generate adequate sales revenues could result in our having to curtail or cease operations. Additionally, even if we do raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where we will generate profits and cash flows from operations.

Our business is dependent on our ability to grow internally and if we cannot achieve internal growth our business, results of operations and financial results will suffer.

Our business is dependent on our ability to grow internally, which is dependent upon:

·	Our ability to retain existing clients and expand our existing client relationships; and
·	Our ability to attract new clients.

Our ability to retain existing clients and expand those relationships is subject to a number of risks, including the risk that:

·	We fail to maintain the quality of services we provide to our clients;
·	We fail to maintain the level of attention expected by our clients;

·	We fail to successfully leverage our existing client relationships to sell additional services; and
·	We fail to provide competitively priced services to our clients.

Our ability to attract new clients is subject to a number of risks, including:

·	The market acceptance of our service offerings;
·	The quality and effectiveness of our sales personnel; and

·	The competitive factors within the accounts receivable management industry in Brazil.

If our efforts to retain and expand our client relationships and to attract new clients do not prove effective, it could have a materially adverse effect on our business, results of operations and financial condition.

If we are not able to respond to technological changes in telecommunications and computer systems in a timely manner, we may not be able to remain competitive.

Our success depends in large part on our sophisticated telecommunications and computer systems. We use these systems to identify and contact large numbers of debtors and record the results of our collection efforts. If we are not able to respond to technological changes in telecommunications and computer systems in a timely manner, we may not be able to remain competitive. We anticipate that it will be necessary to invest in technology in the future to remain competitive. We expect that in future periods we will have to invest amounts in technology consistent with our past investments. Telecommunications and computer technologies are changing rapidly and are characterized by short product life cycles, so we must anticipate technological developments. If we are not successful in anticipating, managing, or adopting technological changes on a timely basis or if we do not have the capital resources available to invest in new technologies, our business could be materially adversely affected.

We are highly dependent on our telecommunications and computer systems.

As noted above, our business is highly dependent on our telecommunications and computer systems. These systems could be interrupted by terrorist acts, natural disasters, power losses, or similar events. Our business is also materially dependent on services provided by various local telephone companies. If our equipment or systems cease to work or become unavailable, or if there is any significant interruption in telephone services, we may be prevented from providing services. Because we generally recognize revenue only as accounts receivables are collected, any failure or interruption of services would mean that we would continue to incur payroll and other expenses without any corresponding income.

An increase in communication rates or a significant interruption in communication service could harm our business.

Our ability to offer services at competitive rates is highly dependent upon the cost of communication services provided by various local telephone companies. Any change in the telecommunications market that would affect our ability to obtain favorable rates on communication services could harm our business. Moreover, any significant interruption in communication service or developments that could limit the ability of telephone companies to provide us with increased capacity in the future could harm existing operations and prospects for future growth.

We compete with a large number of providers in the accounts receivable and collection industry in Brazil. We may be forced to lower our rates to compete effectively, which will result in lower profit margins.

In the accounts receivable management and service industry in Brazil, we compete with sizable corporations, as well as many regional and local firms. We may lose business to competitors that offer more diversified services and/or operate in broader geographic areas than we do. We may also lose business to regional or local firms who are able to use their proximity to or contacts with local clients as a marketing advantage. In addition, many companies perform the accounts receivable management services offered by us in-house. Many larger clients retain multiple accounts receivable service providers, which exposes us to continuous competition in order to remain a preferred provider. Because of this competition, in the future we may have to reduce our fees to remain competitive and this competition could have a materially adverse effect on our future financial results.

All of our clients are concentrated in the financial services sector. If this sector performs poorly or if there are any adverse trends in this sector, we will have fewer customers, which will result in lower revenues.

For the period ended June 30, 2008 and for the years ended December 31, 2007 and 2006, we derived approximately 100 percent of our revenue from clients in the financial services sector. If this sector performs poorly, clients in this sector may do less business with us, or they may elect to perform the services provided by us in-house. If there are any trends in this sector to reduce or eliminate the use of third-party accounts receivable service providers, it could harm our business.

Our success depends on our senior management team and the senior management team of our operating subsidiary, ATN, and if we are not able to retain them, we will have significant operating problems.

We are highly dependent upon the continued services and experience of our senior management team. We depend on the services of our senior management team to, among other things, continue the development and implementation of our growth strategies, and maintain and develop our client relationships.

We are dependent on our employees and a higher turnover rate would result in higher costs to train new personnel and could lead to poor service, which would negatively affect our financial condition and operations.

We are dependent on our ability to attract, hire and retain qualified employees. The Brazilian accounts receivable service and management industry, by its nature, is labor intensive and experiences a high employee turnover rate. Many of our employees receive modest hourly wages and some of these employees are employed on a part-time basis. A higher turnover rate among our employees would increase our recruiting and training costs and could materially adversely impact the quality of services we provide to our clients. If we were unable to recruit and retain a sufficient number of employees, we would be forced to limit our growth or possibly curtail our operations. Growth in our business will require us to recruit and train qualified personnel at an accelerated rate from time to time. We cannot assure you that we will be able to continue to hire, train and retain a sufficient number of qualified employees to meet the needs of our business or to support our growth. If we are unable to do so, our results of operations could be harmed. Any increase in hourly wages, costs of employee benefits or employment taxes in Brazil could also have a materially adverse affect.

We may experience variations from quarter to quarter in operating results and net income that could adversely affect the price of our common stock.

Factors that could cause quarterly fluctuations include, among other things, the following:

·	The timing of our clients’ accounts receivable collection programs and the commencement of new contracts and termination of existing contracts;
·	Customer contracts that require us to incur costs in periods prior to recognizing revenue under those contracts;

·	The effects of a change of business mix on profit margins;
·	The timing of additional selling, general and administrative expenses to support new business;

·	Fluctuations in foreign currency exchange rates;
·	The amount and timing of new business; and

·	That our business tends to be slower during summer and holiday seasons.

Most of our accounts receivable management contracts do not require clients to place accounts with us, may be terminated on 30 or 60 days notice and are on a contingent fee basis. We cannot guarantee that existing clients will continue to use our services at historical levels, if at all.

Under the terms of most of our accounts receivable management contracts, clients are not required to give accounts to us for collection and usually have the right to terminate our services on 30 or 60 days notice. Accordingly, we cannot guarantee that existing clients will continue to use our services at historical levels, if at all. In addition, most of these contracts provide that we are entitled to be paid only when we collect accounts. Therefore, under applicable accounting principles, we can recognize revenues only upon the collection of funds on behalf of clients.

We rely on a limited number of major clients for a significant portion of our revenues. The loss of these customers as our clients or their failure to pay us could reduce revenues and adversely affect the results of our operations.

None of our major clients are contractually obligated to continue use of our services at historic levels or at all, subject only to notice periods for termination. If any of these customers were to significantly reduce their amount of service, fail to pay, or terminate their relationships with us altogether, our business could be harmed.

We have engaged in transactions with members of our Board of Directors, significant stockholders, and entities affiliated with them; future transactions with related parties could pose conflicts of interest.

In the past, we have engaged in transactions with members of our Board of Directors, significant stockholders, and entities affiliated with them, which inherently give rise to conflicts of interest. For example, certain of these parties have previously provided debt financing to us and have received additional equity interests, such as shares of our stock upon the conversion of such debt financing. Transactions with related parties such as these pose a risk that such transactions are on terms that are not as beneficial to us as those that may be arranged with third parties.

Risks of Doing Business in Brazil

The executive offices of our subsidiary and all of our operations are based in Brazil. Accordingly, we are subject to all of the risks inherent in doing business in a foreign jurisdiction.

The executive offices of our subsidiary and all of our material operations are in Brazil and we expect to make further investments in Brazil in the future. Therefore, our business, financial condition and results of operations are to a significant degree subject to economic, political and social events in Brazil, including the material risks outlined below.

Political or economic instability in Brazil could have an adverse impact on our results of operations due to diminished revenues.

All of our revenues are derived from Brazil. Political or economic instability in Brazil could have an adverse impact on our results of operations due to diminished revenues. Our future revenue, costs of operations and profit results could also be affected by a number of other factors related to our Brazilian operations, including changes in economic conditions in Brazil, changes in a country’s political condition, trade protection measures, licensing and other legal requirements, and local tax issues.

Fluctuations in currency exchange rates could negatively affect our performance

Unanticipated currency fluctuations in the Brazilian Real could lead to lower reported consolidated results of operations due to the translation of these currencies into U.S. dollars when we consolidate our financial results. We provide accounts receivable collection and management services to our Brazilian clients utilizing Brazilian labor sources. A decrease in the value of the U.S. dollar in relation to the Brazilian Real could increase our cost of doing business in Brazil.

Governmental policies in Brazil could impact our business.

Changes in Brazil’s governmental policies which could have a substantial impact on our business include:

●

new laws and regulations or new interpretations of those laws and regulations;

●

the introduction of measures to control inflation or stimulate growth;

●

changes in the rate or method of taxation;

●

the imposition of additional restrictions on currency conversion and remittances abroad; and

●

any actions which limit our ability to finance and operate our business in Brazil.

Fluctuations in exchange controls could negatively affect our performance.

Exchange transactions are generally controlled by the Central Bank of Brazil which authorizes a series of banks to act in the foreign exchange market, selling and buying currencies. There is a commercial rate of exchange published daily by the Central Bank based upon market results on said day. A free market, and quotation system exists, mainly dealing with tourist activities. Both rates have been extremely close since the inception of the stabilization plan ("Plano Real") several years ago. Subject to certain registration requirements with the Central Bank of Brazil and compliance with certain regulations, we may repatriate U.S. Dollars earned from our Brazilian operations through the repayment of loans and the payment of dividends. On occasions in the past, Brazil has imposed temporary restrictions on the conversion and remittance of foreign capital, for example when there was a serious imbalance in Brazil's balance of payments. In such circumstances, we could be adversely affected, if the exchange control rules were changed to delay or deny remittances abroad from us.

Your ability to bring an action against us, ATN and those of our officers and directors that are based in Brazil, or to enforce a judgment against us and such officers and directors or to recover assets in the possession of us, ATN or such officers and directors, will be difficult since any such action or recovery of assets would be an international matter, involving Brazilian laws and geographic and temporal disparities.

We conduct all of our operations in Brazil through our subsidiary, ATN. All but one of our management personnel reside in Brazil and all of the assets of ATN and those Brazilian residents are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us, ATN or these individuals in the United States in the event that you believe that your rights have been violated under applicable law or otherwise. Even if an action of this type is successfully brought, the laws of the United States and of Brazil may render a judgment unenforceable.

Concentrated Control Risk

The management team collectively has the power to make all major decisions regarding the company without the need to get consent from any stockholder or other person. This discretion could lead to decisions that are not necessarily in the best interests of minority shareholders.

Our management team, including the management of our subsidiary, ATN, collectively owns over 90% of the outstanding common stock. Management, therefore, has the power to make all major decisions regarding our affairs, including decisions regarding whether or not to issue stock and for what consideration, whether or not to sell all or substantially all of our assets and for what consideration and whether or not to authorize more stock for issuance or otherwise amend our charter or bylaws. The management team is in a position to elect all of our directors and to dictate all of our policies.

Market Risks

Theremay not be an efficient public trading market for our common stock and our stock price may become highly volatile.

Since we are relatively thinly capitalized and our stock is a penny stock, our stock price may become highly volatile. As a result, investors may find it difficult to dispose of our securities, or to obtain accurate quotations of the price of our securities. This volatility may significantly affect the price of our common stock and on our ability to raise additional capital.

The equity markets have, on occasion, experienced significant price and volume fluctuations that have affected the market prices for many companies’ securities that have often been unrelated to the operating performance of these companies. Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

We do not intend to pay dividends to our stockholders, so you will not receive any return on your investment in our company prior to selling your interest in us.

We have never paid any dividends to our stockholders. We currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any dividends in the foreseeable future. If we determine that we will pay dividends to the holders of our common stock, we cannot assure that such dividends will be paid on a timely basis. As a result, you will not receive any return on your investment prior to selling your shares in our company and, for the other reasons discussed in this “Risk Factors” section, you may not receive any return on your investment even when you sell your shares in our company and your shares may become worthless.

A significant number of our shares will be eligible for sale and their sale or potential sale may depress the market price of our common stock.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock. We have authorized 40,000,000 shares of common stock. As of June 30, 2008, we had outstanding 8,691,134 shares of common stock. Accordingly, we have 31,308,866 shares of common stock available for future sale.

Because our stock is considered a penny stock, any investment in our stock is considered to be a high-risk investment and is subject to restrictions on marketability.

Our common stock is a "penny stock" within the meaning of Rule 15g-9 to the Securities Exchange Act of 1934, which is generally an equity security with a price of less than $5.00. Our common stock is subject to rules that impose sales practice and disclosure requirements on certain broker-dealers who engage in certain transactions involving a penny stock. Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor.

In addition, the penny stock regulations require the broker-dealer to:

·	deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
·	disclose commissions payable to the broker-dealer and the Registered Representative and current bid and offer quotations for the securities; and

·	send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks.

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of holders of our capital stock to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities. In addition, the liquidity of our securities may be decreased, with a corresponding decrease in the price of our securities. Our common stock in all probability will be subject to such penny stock rules and our stockholders will, in all likelihood, find it difficult to sell their securities.

Certain provisions of our Certificate of Incorporation and Delaware law may make it more difficult for a third party to effect a change- in-control.

Our Certificate of Incorporation authorizes the Board of Directors to issue up to 10,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors without further action by the stockholders. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of the Board of Directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control.

In addition, we are also subject to Section 203 of the Delaware General Corporation Law that, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder. The preceding provisions of our Certificate of Incorporation, as well as Section 203 of the Delaware General Corporation Law, could discourage potential acquisition proposals, delay or prevent a change-in-control and prevent changes in our management, even if such things would be in the best interests of our stockholders.

ITEM 2.

UNREGISTERED SHARES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On May 13, 2008, the Company issued 3,000 shares of its common shares for $10,500, or $3.50 per share.

On June 4, 2008, the Company issued 231,884 shares of its common shares is conversion of an $800,000 debenture from Keyano Invest, Inc., a related party (see Note 14). The shares were converted at $3.45 per share.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted during the first quarter of fiscal year 2008 to a vote of security holders, through the solicitation of proxies or otherwise.

ITEM 5.

OTHER INFORMATION.

On May 13, 2008 the Company issued 3,000 shares of its common shares for $10,500, or $3.50 per share.

On June 4, 2008, the Company issued 231,884 shares of its commons shares in conversion of an $800,000 debenture from Keyano Invest, Inc, a related party. The shares were converted at $3.45 per share.

In June 2008, the Company formed United Oil Services, Inc., a Nevada corporation as a wholly-owned subsidiary. United intends to conduct operations in the oil services industry.

ITEM 6.

EXHIBITS.

31.1 Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Principal Executive Officer and Principal Financial Officer furnished 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 the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATED: August 19, 2008


	LEXICON UNITED INCORPORATED

	By:	/s/ Elie Saltoun
		Elie Saltoun
		Chief Executive Officer, President and Treasurer

EXHIBIT INDEX

Exhibit

Number

Description

31.1

Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-31.1 2 v124288_ex31-1.htm

Exhibit 31.1

Certification of

Principal Executive and

Financial Officer

I, Elie Saltoun, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Lexicon United Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: August 19, 2008

/s/Elie Saltoun

Elie Saltoun, Principal Executive and Financial Officer

EX-32.1 3 v124288_ex32-1.htm

Exhibit 32.1

STATEMENT FURNISHED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned is the Chief Executive Officer and Treasurer or Principal Accounting Officer of Lexicon United Incorporated. This Certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification accompanies the Quarterly Report on Form 10-Q of Lexicon United Incorporated for the quarter ended June 30, 2008.

The undersigned certifies that such 10-QSB Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such 10-QSB Report fairly presents, in all material respects, the financial condition and results of operations of Lexicon United Incorporated as of June 30, 2008.

This Certification is executed as of August 19, 2008.


	By: /s/ Elie Saltoun
	Name: Elie Saltoun Title: Chairman, CEO and Treasurer (Principal Executive Officer and Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to Lexicon United Incorporated and will be retained by Lexicon and furnished to the Securities and Exchange Commission or its staff upon request.