UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ___________ to____________
COMMISSION FILE NUMBER 0-26915
LEXON, INC.
(Name of Small Business Issuer in its charter)
OKLAHOMA 73-1533326
--------------------------------------- ----------------------------------------
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
8908 SOUTH YALE AVENUE, SUITE 409
TULSA, OKLAHOMA 74137-3545
(Address of principal executive offices and Zip Code)
(918) 492-4125
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No __
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: There were 7,762,895 shares of Common
Stock, $0.001 par value, outstanding as of September 30, 2000.
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PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Balance Sheets at September 30, 2000 (Unaudited) and December 31, 1999........................... 3
Statements of Operations for the period from inception (December 16, 1997) to September 30, 2000
and for the three months ended September 30, 2000 and 1999 (unaudited) and for the nine months
ended September 30, 2000 and 1999 (Unaudited)................................................... 4
Statements of Cash Flows for the period from inception (December 16, 1997) to September 30, 2000
(Unaudited) and for the nine months ended September 30, 2000 and 1999 (Unaudited)............... 5
Notes to Financial Statements (Unaudited)....................................................... 6
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<TABLE>
<CAPTION>
Lexon, Inc.
(A Development Stage Company)
Balance Sheets
September 30, 2000 and December 31, 1999
(Unaudited)
<S> <C> <C>
September 30, 2000 December 31,
ASSETS (Unaudited) 1999
Current assets
Cash $98,803 $10,041
Due from related parties 6,532 9,703
Prepaid consulting expenses 915,328 4,062
------------------ ------------
Total current assets 1,020,663 23,806
------------------ ------------
Other assets
Licensed technology, net 211,016 146,794
Sponsored research, net 155,912 77,813
------------------ ------------
Total other assets 366,928 224,607
------------------ ------------
TOTAL ASSETS $1,387,591 $248,413
------------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $59,972 $37,214
Interest payable 8,351 4,900
Payable to UTEK 80,000 -
Payable to North Shore University 13,527 54,108
Payable to University of Maryland 124,537 -
Related party payables 185,585 251,627
------------------ ------------
Total current liabilities 471,972 347,849
------------------ ------------
Shareholders' equity
Preferred stock, $0.001 par value,
5,000,000 shares authorized; no shares
issued and outstanding at September 30, 2000 and
December 31, 1999, respectively - -
Common stock, $0.001 par value,
45,000,000 shares authorized;
7,762,895 shares and 6,809,513 shares
issued and outstanding at September 30, 2000 and
December 31, 1999, respectively 7,763 6,810
Paid in capital 6,292,412 3,249,558
Deficit accumulated during the development stage (5,384,556) (3,355,804)
------------------ ------------
915,619 (99,436)
------------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,387,591 $248,413
------------------ ------------
The accompanying notes are an integral part of the financial statements
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<TABLE>
<CAPTION>
Lexon, Inc.
(A Development Stage Company)
Statements of Operations
For the Nine Months Ended September 30, 2000 and 1999 and
For the Three Months Ended September 30, 2000 and 1999 and For the
Period from Inception (December 16, 1997) to September 30, 2000
(Unaudited)
<S> <C> <C> <C> <C> <C>
From inception Nine Months Ended Three Months Ended
(December 16, -------------------------- --------------------------
1997) through September September September September
September 30, 2000 30, 2000 30, 1999 30, 2000 30, 1999
------------------ --------- --------- --------- ---------
Revenue $ - $ - $ - $ - $ -
Expenses
Research and development 1,000,052 192,397 583,842 37,662 127,051
General and administrative 3,991,975 1,825,228 1,614,467 343,937 430,053
------------------ --------- --------- --------- ---------
Total operating expenses 4,992,027 2,017,625 2,198,309 381,599 557,104
------------------ --------- --------- --------- ---------
Operating loss (4,992,027) (2,017,625) (2,198,309) (381,599) (557,104)
Interest expense 392,530 11,128 5,318 3,454 1,900
------------------ --------- --------- --------- ---------
Net loss $ (5,384,557) $ (2,028,753) $ (2,203,627) $ (385,053) $ (559,004)
Weighted average shares outstanding 5,949,232 7,103,422 6,659,988 7,505,594 6,802,013
------------------ --------- --------- --------- ---------
Loss per share $ (0.91) $ (0.29) $ (0.33) $ (0.05) $ (0.08)
------------------ --------- --------- --------- ---------
The accompanying notes are an integral part of the financial statements
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<TABLE>
<CAPTION>
Lexon, Inc.
(A Development Stage Company
Statements of Cash Flows
From Inception (December 16, 1997) through September 30, 2000 and For
the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<S> <C> <C> <C>
From inception
(December 16, Nine Months Nine Months
1997) through Ended Ended
September September September
30, 2000 30, 2000 30, 1999
-------------- ----------- -----------
Operating activities
Net loss $ (5,384,557) $ (2,028,753) $ (2,203,627)
Plus non-cash charges to earnings:
Amortization of license and sponsored research agreements 429,862 182,217 123,821
Value of common stock options granted to
non-employees for services 1,299,219 - 1,046,133
Value of warrants issued to non-employees 1,109,672 1,109,672 -
Amortization of Stock Options Issued to Non-employee Lenders 356,346 - -
Value of services contributed by employees 811,479 310,000 210,000
Value of stock issued for services 500,737 279,062 209,750
Change in working capital accounts:
(Increase) decrease in prepaid expenses - 4,063 (8,125)
(Increase) decrease in other receivables (6,532) 3,171 (9,703)
Increase in accounts payable and accrued liabilities 48,438 11,224 4,833
Increase in interest payable 8,351 3,451 117,161
Increase (decrease) in payable to North Shore 25,060 (161,048) 67,635
-------------- ----------- -----------
Total operating activities (801,925) (286,941) (442,122)
-------------- ----------- -----------
Financing activities
Loans from related parties 515,585 165,958 100,000
Repayment of loans from related parties (330,000) (100,000) (230,000)
Sale of common stock for cash:
To founders 5,000 -
To third-party investors 1,121,578 195,370 643,487
Less: issue costs (140,498) - (72,211)
To employees upon exercise of employee stock options 320,313 234,375 -
-------------- ----------- -----------
Total financing activities 1,491,978 495,703 441,276
-------------- ----------- -----------
Investing activities
Purchase of Cancer Diagnostics Inc. (120,000) (120,000)
Purchase of exclusive licenses (160,000) - -
Payment of sponsored research contract (311,250) - -
-------------- ----------- -----------
Total investing activities (591,250) (120,000) -
-------------- ----------- -----------
Change in cash 98,803 88,762 (846)
Cash at beginning of period - 10,041 31,164
-------------- ----------- -----------
Cash at end of period $ 98,803 $ 98,803 $ 30,318
-------------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest and taxes during the period - 1,233 20,156
-------------- ----------- -----------
Non-cash financing and investing activities:
Common stock issued in Gentest Merger 1,000 - -
-------------- ----------- -----------
The accompanying notes are an integral part of the financial statements
</TABLE>
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Lexon, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception (December 16, 1997) through September 30, 2000 and
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Note 1-- Organization and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, the
information furnished reflects all adjustments, consisting only of normal
recurring adjustments which are, in the opinion of management, necessary in
order to make the financial statements not misleading.
Organization and Nature of Operations
Lexon, Inc. ("Lexon" or "the Company") is a development stage corporation that
acquires, develops, and markets emerging medical technologies. Lexon owns the
exclusive worldwide license to develop, manufacture, obtain FDA approval for,
and market a cancer screening test kit for detecting the ebaf protein, which
allows for early, non-invasive screening for colon cancer and certain types of
ovarian and testicular cancers. The Company also owns, through CDI, the
exclusive worldwide license to the Telomerase Assay, a blood screening test for
lung cancer.
Development Stage Operations
The Company was incorporated on December 16, 1997 under the laws of the state of
Oklahoma. Since inception, the Company's primary focus has been raising capital
and developing the Ebaf blood screening process.
Income Taxes
The Company uses the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". Under the liability method, deferred taxes are determined based
on the differences between the financial statements and tax basis of assets and
liabilities at enacted tax rates in effect in the years in which the differences
are expected to reverse.
Compensation of Officers and Employees
The Company's sole officer and director and its other employees serve without
pay or other non-equity compensation. The fair value of these services is
estimated by management and is recognized as a capital contribution. For the
nine months ended September 30, 2000 and 1999 and for the period from inception
(December 16, 1997) to September 30, 2000 the Company recorded $310,000,
$210,000, and $801,479, respectively, as a capital contribution by its sole
officer and director and its other employees.
Fair Market Value of Stock Options and Stock Issued for Services
The fair market value of stock options granted or stock issued as payment for
services is equal to the closing price of the Company's common stock on the date
options are granted or on the date agreements for services are signed. On
November 4, 1998, the Company's common stock began trading on the OTC Bulletin
Board under the symbol "LXXN". Prior to trading, the Board of Directors
determined the fair market value of stock options granted or stock issued as
payment for services.
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Stock-based Compensation
The Company accounts for stock-based compensation arrangements in accordance
with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees", and complies with the disclosure provisions of SFAS No.
123, "Accounting for Stock-Based Compensation". Under APB No. 25, compensation
expense is based on the difference, if any, on the date of grant, between the
fair value of the Company's stock and the exercise price. The Company accounts
for stock issued to non-employees in accordance with the provisions of SFAS No.
123 and the Emerging Issues Task Force Consensus in Issue No. 96-18.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Research and Development ("R&D") Costs
The Company is amortizing the $311,250 paid pursuant to the Sponsored Research
Agreement for the Ebaf assay over two years, which is the life of the service
agreement. The $249,458 to be paid pursuant to the Sponsored Research Agreement
for the Telomerase assay acquired through the purchase of Cancer Diagnostics,
Inc. is being amortized over two years, which is the life of the service
agreement (See Note 5). Any other costs relating to the development of the Ebaf
and Telomerase Assays are expensed as incurred. Compensation cost associated
with stock options granted to Dr. Tabibzadeh, the inventor of the Ebaf Assay, is
recorded by the Company as R&D expense.
New Accounting Standards
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" and SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information"
during 1998. The Company has no comprehensive income items during 2000 or 1999.
Therefore, net loss equals comprehensive income. The Company operates in only
one business segment. The Company will adopt SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" during 2001. Currently, the
Company does not engage in hedging activities or transactions involving
derivatives.
Note 2-- Gentest Merger
On May 11, 1998, the Company entered into an Agreement and Plan of Merger with
Gentest, Inc., a Florida corporation, whereby the Company agreed to issue
1,000,000 shares of its common stock for all the issued and outstanding common
stock of Gentest, Inc. Gentest was formed in March 1998 for the purpose of
securing the License Agreement and Sponsored Research Agreement related to the
Ebaf Assay. Under the terms of the Agreement and Plan of Merger, the Company
issued to UTEK Corporation ("UTEK"), the sole shareholder of Gentest, 1,000,000
shares of common stock of Lexon. Gentest ceased to exist by reason of the
merger, and the assets and liabilities of Gentest, including those rights and
obligations associated with the exclusive License Agreement and the Sponsored
Research Agreement, became assets and liabilities of Lexon. The obligations of
Gentest were to pay $105,000 for the exclusive license, $311,250 to develop the
test kit and $55,000 for services rendered in connection with securing the
agreements. Lexon paid the obligations in full on July 8, 1998. The Gentest
merger was accounted for as a purchase. The purchase price of $1,000 was based
on the number of shares issued at par value of $0.001 per share.
Par value per share was used to value the purchase because all previous share
issuances, consisting solely of issuances to founders, were based on par value,
and there was no public market for the Company's stock. Gentest had only
recently been formed for the purpose of entering into the License and Sponsored
Research Agreements. The value assigned to the License and Sponsored Research
Agreements and the related obligations, were therefore based on Gentest's cost.
Since Gentest had no prior operations, no pro forma financial information is
presented.
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The Gentest assets acquired and liabilities assumed are summarized as follows:
License Agreements $161,000
Sponsored Research Agreement 311,250
----------------
Total Cost of Assets Acquired $472,250
Obligations Assumed $(471,250)
----------------
Purchase Cost $1,000
================
Note 3-- Exclusive License--Ebaf Assay
On July 8, 1998, the Company paid $100,000 to the University of South Florida
Research Foundation ("USFRF") and $5,000 to North Shore University Hospital
Research Foundation ("North Shore") for the exclusive worldwide license to
develop and market the cancer screening test kits. In addition, the Company paid
$55,000 to UTEK for services rendered in connection with securing the license
agreements. The exclusive license is being amortized over 17 years using the
straight-line method. At September 30, 2000, the amount of accumulated
amortization related to the Exclusive License was $21,309.
Note 4-- Sponsored Research Contract--Ebaf Assay
On July 8, 1998, the Company paid $311,250 to North Shore under the terms of a
Sponsored Research Agreement to develop the cancer screening test kits. The
contract specifies a 24-month development period with costs not to exceed
$311,250. The Sponsored Research Agreement is amortized over 2 years using the
straight-line method, with amortization costs recorded as R&D expenses. At
September 30, 2000, the amount of accumulated amortization related to the
Sponsored Research Agreement was $311,250.
Note 5-- Purchase of Cancer Diagnostics, Inc.
On January 29, 2000, Lexon purchased 100% of the common stock of Cancer
Diagnostic, Inc. ("CDI"), a Florida corporation, according to the terms of a
Stock Purchase Agreement. By reason of the stock purchase, CDI became a
wholly-owned subsidiary of Lexon. CDI owns the exclusive worldwide license to
the Telomerase Assay, a patent-pending blood test for lung cancer being
developed at the University of Maryland, Baltimore ("UMB"). CDI is party to a
two-year sponsored research agreement to fund the development and
commercialization of the Telomerase Assay for the ELISA format at the University
of Maryland, Baltimore.
Lexon purchased all of the outstanding common stock of CDI from CDI's sole
shareholder UTEK Corporation ("UTEK") for a total of $200,000. Lexon paid
$50,000 in cash and gave UTEK a secured promissory note for $150,000. The
secured promissory note bears interest at 10% per year and is payable in three
monthly installments of $50,000 each, due on April 30, May 31 and June 30, 2000.
The Company has paid $50,000 to UTEK to date. The interest rate will increase to
12% per year on any unpaid principal balance after June 30, 2000. To secure the
promissory note, Lexon pledged all of the shares of common stock of CDI pursuant
to a Pledge and Security Agreement. The shares were placed in escrow and will be
released upon payment in full of Lexon's obligation to UTEK. On July 14, 2000,
UTEK Corporation agreed to extend the due date for the secured promissory note
to December 31, 2000. The rate of interest on the $80,000 balance is 12%.
UTEK, a Florida corporation, is a technology merchant that specializes in the
transfer of technology from universities and government research facilities to
the private sector. UTEK has relationships with major universities and
government research facilities in the U.S. and in Europe. UTEK owns
approximately 1,000,000 shares (or about 12.9% of the outstanding shares) of
Lexon Common Stock.
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Note 6-- Exclusive License--Telomerase Assay
Lexon owns the exclusive worldwide license to the Telomerase Assay through its
wholly-owned subsidiary CDI. In exchange for the license, CDI agreed to pay UMB
a royalty of 4% of Net Sales of products sold using the Telomerase Assay
technology. The exclusive license is being amortized over 15 years using the
straight-line method. At September 30, 2000, the amount of accumulated
amortization related to the exclusive license was $3,754.
Note 7-- Sponsored Research Contract--Telomerase Assay
On August 27, 1999, CDI agreed to pay University of Maryland, Baltimore $249,458
to fund the development of the Telomerase Assay for the ELISA format over a two
year period beginning January 4, 2000 and ending January 3, 2002. CDI paid
$124,921 upon signing the sponsored research agreement. The balance of $124,537
is due on or before January 1, 2001. The Sponsored Research Agreement is being
amortized over 2 years using the straight-line method, with amortization costs
recorded as R&D expenses. At September 30, 2000, the amount of accumulated
amortization related to the Sponsored Research Agreement was $93,547.
Note 8-- Notes Payable
During 1998, the Company borrowed $50,000 from an officer and $180,000 from a
shareholder. The Company executed notes payable which were due December 31, 1998
at an interest rate of 12% per year, which increased to 14% per year after the
due date. The notes payable and accrued interest were paid in full during 1999.
On October 15, 1998, in connection with these notes, the Board granted 50,000
options to the officer and 180,000 options to the shareholder, each at an
exercise price of $1.20 per share. Because no trading market for the common
stock was yet established, the option exercise price of $1.20 per share was
determined by the Board based on the most recent offering price of $2.00 per
share less a 40% discount. The discount was determined to be appropriate as
stock issued when these options are exercised may be restricted.
The Company recorded no compensation cost for the options granted to the
officer. For the year ended December 31, 1998, the Company recorded $356,346 as
interest expense for the options granted to the shareholder based on an
estimated fair value of $1.98 per share. The fair value of $1.98 per share was
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions: exercise price of $1.20 per share, stock price of
$2.00 per share, risk-free interest rate of 6.0%, expected dividend yield of
0.0; expected life of ten years; and estimated volatility of 151%.
During 1998, the Company borrowed $1,377 from a related party. As of September
30, 2000, the balance on this loan was $1,377.
During 1999, the Company borrowed $118,250 from non-affiliated shareholders. The
Company executed notes payable, which are due December 31, 2000 at an interest
rate of 10% per year. As of September 30, 2000, the balance on these loans was
$18,250.
During 2000, the Company borrowed $76,500 from its shareholders. The Company
executed notes payable, which are due December 31, 2000 at an interest rate of
10% per year. As of September 30, 2000, the remaining balance on these notes was
$71,500
Note 9-- Commitments and Contingencies
Future Royalty Obligations Under Exclusive License Agreement--Ebaf Assay
In connection with the exclusive license agreement, the Company agreed to pay to
USFRF a royalty equal to the greater of (a) five percent (5%) of revenue from
the sale of products based on the concept for the diagnosis of selected
adenocarcinomas and any additions, extensions and improvements thereto or as a
minimum (b) zero (0) dollars for the first twenty four (24) months; $75,000 at
the end of year three (3); $100,000 at the end of year four (4); $125,000 at the
end of year five (5); $150,000 at the end of year six (6) and for each
successive year thereafter during the term of the exclusive license agreement.
The royalty obligation will expire after the longer of twenty (20) years or the
expiration of the last to expire patent that covers the licensed intellectual
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property. The Company also agreed to pay to North Shore a royalty equal to
one-half percent (0.5%) of revenue from the sale of such products and ten
percent (10%) of any consideration received by the Company from granting
sublicenses. No minimum royalty payments are required under the License
Agreement with North Shore.
Future Royalty Obligations Under Exclusive License Agreement--Telomerase Assay
In exchange for the exclusive license agreement, CDI agreed to pay UMB a royalty
of 4% of Net Sales of products sold using the Telomerase Assay technology. The
license agreement provides for minimum annual royalties for the life of the
license agreement, which coincides with the life of the last to expire patent
covering the licensed technology. The minimum annual royalties range from $2,500
per year beginning in 2002 to a maximum of $4,000 per year beginning in 2006 and
continuing each year thereafter for the life of the license agreement. In
addition, the license agreement provides for royalties of 2% of Net Sales of
products sold by sublicensees of CDI and 50% of all consideration received by
CDI for up-front, milestone or other payments from sublicensees.
Future Obligations to North Shore University
On March 8, 1999, the Company agreed to fund an additional $81,162 to North
Shore in six equal installments of $13,257 each, payable on or before October 1,
1999, December 1, 1999, February 1, 2000, April 1, 2000, June 1, 2000 and August
1, 2000. At September 30, 2000, the balance on the Company's obligation is
$13,527.
Statutory Rights of the National Institutes of Health ("NIH")
The Patent & Trademark Act (Public Law 96-517), also known as the Bayh-Dole Act
created a uniform patent policy among Federal agencies that fund research.
Bayh-Dole enables small businesses and non-profit organizations, including
universities, to retain title to materials and products they invent with Federal
funding. In return, the U.S. government retains a nonexclusive right to make or
use the invention for government purposes. Dr. Tabibzadeh's research was funded
in part with grants from the National Institutes of Health. If the U.S.
government decided to make or use Dr. Tabibzadeh's invention for government
purposes, then it would not be obligated to pay license fees or royalties. In
addition, the U.S. government is protected from lawsuits and infringement
claims.
Foreign Patent Protection
The U.S. patent covering the Ebaf Assay does not extend to foreign countries and
the Company does not presently have any foreign patent protection for its
product.
Leases
The Company's executive office is leased from a third party under the terms of a
lease agreement that expires March 31, 2002. The office is shared with other
companies controlled by the officers and directors of the Company. During 1999
and 1998, the Company recorded $9,600 and $11,531, respectively, for rent
expense. The minimum annual lease payments pursuant to the lease agreement and
the Company's estimated share are scheduled as follows:
For the Periods Ended Minimum Annual Lease Company's Estimated
December 31 Payments Share
---------------------------- ------------------------ ---------------------
2000 $44,594 $9,600
2001 45,587 9,600
2002 11,462 2,292
Swartz Investment Agreement
The Company entered into an investment agreement on May 19, 2000 with Swartz
Private Equity, LLC to raise up to $30 million through a series of sales of
Lexon's common stock. The dollar amount of each sale is limited by our common
stock's trading volume, and a minimum period of time must elapse between each
sale. Each sale will be to Swartz. In turn, Swartz will either sell Lexon's
stock in the open market, place Lexon's stock through negotiated transactions
with other investors, or hold Lexon's stock in their own portfolio.
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Lexon may terminate its right to initiate puts or terminate the Investment
Agreement at any time by providing Swartz with notice of such intention to
terminate; however, any such termination will not affect any other rights or
obligations Lexon has concerning the Investment Agreement or any related
agreement. Should Lexon terminate the Investment Agreement prior to initiating
puts in the amount of $2,000,000 during the 36 month period of the Investment
Agreement, the Company may be required to pay a Non-Usage fee of a maximum of
$200,000.
Note 10-- Common Stock and Paid in Capital
During the year ended December 31, 1998, the following common stock transactions
occurred:
o Under the terms of an offering dated April 1, 1998, the Company sold
5,000,000 shares of its common stock to the founders at par value for
$5,000 cash.
o On July 8, 1998, the Company issued 1,000,000 shares of its common stock in
connection with the Gentest merger.
o On May 18, 1998, Lexon commenced its Rule 504 private offering at $2.00 per
share. This price was determined by the Board of Directors. There were
125,205 shares of common stock sold to third-party investors for $250,410
in cash. The $2.00 offering was terminated on July 31, 1998, when Lexon's
15c211 application was filed with the NASD. The Company's common stock
began trading on November 4, 1998 at $2.50 per share. On November 6, 1998,
Lexon commenced a Rule 504 private offering at $3.00 per share, which price
was greater than the closing price of the Company's common stock on
November 6, 1998 (the date of the offering memorandum). There were 39,416
shares of common stock sold to third-party investors for $118,248 in cash.
The Company incurred expenses of $48,287 in connection with the offerings.
On January 18, 1999, the Company terminated the $3.00 offering and
commenced an offering at $1.50 per share, which was equal to the closing
price of the Company's common stock on January 19, 1999. Although there
were no obligations to do so, the Board determined that the investors who
paid cash in the $2.00 and $3.00 private offerings should be treated as if
they had purchased their shares at $1.50 per share. Accordingly, the
Company issued an additional 81,151 shares to those investors (41,735
shares to the $2.00 investors and 39,416 shares to the $3.00 investors).
The issuance of the additional shares was treated as a capital transaction,
with no effect on stockholders' equity.
o During 1998, the Company issued 33,541 shares of its Common Stock at $2.00
per share for services rendered in connection with the Offering. The $2.00
per share value was determined by the Board of Directors based on the most
recent offering price of $2.00 per share.
During the year ended December 31, 1999, the following common stock transactions
occurred:
o The Company sold 385,700 shares of common stock to third party investors
for $557,550 in cash.
o The Company issued a total of 89,500 shares of common stock for services
rendered by outside consultants. The shares were valued based on the
closing price of the Company's common stock on the date the services were
rendered or agreements were signed. Of the shares issued, 80,000 were
issued at $2.50 per share to a consultant to develop and market an Internet
web site and to prepare and distribute via e-mail a detailed profile report
on the Company. An additional 7,500 shares were issued at $2.34 per share
to a public relations specialist in connection with the Company's colon
cancer awareness activities. The remaining 2,000 shares were issued at
$4.875 per share for legal services.
o The Company issued 55,000 shares of common stock to an employee who
exercised stock options at $1.5625 per share. The Company received $85,938
in cash. The exercise price was equal to the closing price of the Company's
common stock on the date the options were granted.
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During the nine months ended September 30, 2000, the following common stock
transactions occurred:
o The Company issued 150,000 shares of common stock pursuant to the exercise
of employee stock options, for which the Company received $234,375 in cash.
The employees exercised their options at $1.5625 per share. The exercise
price was equal to the closing price of the Company's common stock on the
date the options were granted.
o The Company issued a total of 293,222 shares of common stock for services
rendered by outside consultants. The shares were valued based on the
closing price of the Company's common stock on the date the services were
rendered or agreements were signed. Of the shares issued, 190,000 were
issued at $.9375 per share to consultants for services rendered in
connection with accounting and legal services; 65,000 shares were issued at
$.9375 per share for general business consulting services; and 22,222
shares were issued at $1.125 per share to a consultant to develop and
maintain an Internet web site for the Company. In connection with the
issuance of stock for services, the Company recorded $484,727, $284,727 and
$67,500, respectively, as G&A expense for the period from inception
(December 16, 1997) through September 30, 2000, and for the nine months
ended September 30, 2000 and 1999.
o The Company sold 250,000 restricted shares of stock to a third-party
investor in conjunction with a consulting agreement signed on May 23, 2000.
The purchase price for the shares was $.001 and the stock is restricted for
a period of 10 months. The $554,250 difference between the purchase price
of the stock and the fair market value of the stock on the date of purchase
was recorded as a general and administrative expense on the income
statement.
o The Company sold 260,160 shares of stock to a third party investor pursuant
to an investment banking agreement sign on May 17, 2000. The purchase price
for the shares was $0.75, which was the purchase price calculated using the
formulas outlined in the investment banking agreement.
Lexon is authorized to issue 45,000,000 Shares of Common Stock, par value $0.001
per share, of which 7,502,735 shares were outstanding as of June 30, 2000. Lexon
is also authorized to issue 5,000,000 Shares of Preferred Stock, par value
$0.001 per share, of which there are no shares presently outstanding. There is
no present intent to issue any Preferred Stock.
Voting Rights
Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders. Shares of Common Stock do not
have cumulative voting rights, which means that the holders of a majority of the
shareholder votes eligible to vote and voting for the election of the Board of
Directors can elect all members of the Board of Directors. Holders of a majority
of the issued and outstanding shares of Common Stock may take action by written
consent without a meeting.
Dividend Rights
Holders of record of shares of Common Stock are entitled to receive dividends
when and if declared by the Board of Directors. To date, Lexon has not paid cash
dividends on its Common Stock. Holders of Common Stock are entitled to receive
such dividends as may be declared and paid from time to time by the Board of
Directors out of funds legally available therefor. Lexon intends to retain any
earnings for the operation and expansion of its business and does not anticipate
paying cash dividends in the foreseeable future. Any future determination as to
the payment of cash dividends will depend upon future earnings, results of
operations, capital requirements, Lexon's financial condition and such other
factors as the Board of Directors may consider.
Liquidation Rights
Upon any liquidation, dissolution or winding up of Lexon, holders of shares of
Common Stock are entitled to receive pro rata all of the assets of Lexon
available for distribution to shareholders after liabilities are paid and
distributions are made to the holders of Lexon's Preferred Stock.
Preemptive Rights
Holders of Common Stock do not have any preemptive rights to subscribe for or to
purchase any stock, obligations or other securities of Lexon.
12
<PAGE>
Note 11 Stock Options
Employee Stock Options
On August 15, 1998, the Board of Directors and shareholders approved the
adoption of the Lexon Option Plan, pursuant to which 3,000,000 shares of Common
Stock were reserved. Stock options granted under the Plan expire ten years from
the date of grant.
On October 15, 1998, the Board granted 50,000 options to an officer at an
exercise price of $1.20 per share in connection with a loan made by the officer
to the Company. The Company recorded no compensation cost for the options
granted to the officer.
On March 4, 1999, the Board granted 1,692,500 options to purchase common stock
at an exercise price of $1.5625 per share to employees of the Company. The
exercise price was equal to the closing price of the Company's common stock on
the date of grant. No compensation cost was recorded.
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") provides an
alternative method of determining compensation cost for employee stock options,
which alternative method may be adopted at the option of the Company. Had
compensation cost for the 1,692,500 options granted to employees on March 4,
1999 been determined consistent with SFAS 123, the Company's net loss for the
quarter ended September 30, 2000 would have been increased and EPS would have
been reduced to the following pro forma amounts:
From Inception Nine Months
through Ended
September 30, 2000 September 30, 2000
------------------ ------------------
Net loss:
As reported $(5,384,557) $(2,028,753)
Pro forma (6,948,089) (3,592,285)
Basic and diluted EPS:
As reported $ (0.91) $ (0.29)
Pro forma (1.17) (0.51)
Non-Employee Options
On October 15, 1998, the Board granted 300,000 options to a consultant at an
exercise price of $1.20 per share. In exchange for the options, the consultant
provided the Company financial and investment consulting services for a one-year
period. Compensation cost was based on an estimated fair value of $1.98 per
share, which was calculated using the Black-Scholes option pricing model with
the following assumptions: exercise price of $1.20 per share; stock price of
$2.00 per share; risk-free interest rate of 6.0%; expected dividend yield of
0.0; expected life of ten years; and estimated volatility of 151%. During 1998
the Company recorded $593,910 as a prepaid consulting expense and an increase to
paid in capital. The Company amortized the prepaid expense over a 12-month
period, which was the life of the agreement. Amortization expense included in
general and administrative expense was $494,925 in 1999 and $98,985 in 1998.
On October 15, 1998, the Board granted 50,000 options at an exercise price of
$1.20 per share to the inventor of the ebaf screening process. Compensation cost
was based on an estimated fair value of $1.98 per share, which was calculated
using the Black-Scholes option pricing model with the following assumptions:
exercise price of $1.20 per share; stock price of $2.00 per share; risk-free
interest rate of 6.0%; expected dividend yield of 0.0; expected life of ten
years; and estimated volatility of 151%. The Company recorded the compensation
cost of $98,985 as R&D expense on the date the options were granted.
On October 15, 1998, the Board granted 180,000 options a shareholder at an
exercise price of $1.20 per share in connection with a loan made by the
shareholder to the Company. Compensation cost was based on an estimated fair
value of $1.98 per share, which was calculated using the Black-Scholes option
pricing model with the following assumptions: exercise price of $1.20 per share,
stock price of $2.00 per share, risk-free interest rate of 6.0%, expected
dividend yield of 0.0; expected life of ten years; and estimated volatility of
151%. The Company recorded compensation cost of $356,346 as interest expense on
the date the options were granted.
13
<PAGE>
On November 1, 1998, the Company entered into an agreement with an investor
relations firm whereby the Board granted the firm options to purchase up to
1,000,000 shares of common stock over a two-year period. Amounts and exercise
prices are as follows:
Number of Exercise Price
Vesting Period Options Per Share
------------------------------------------ ---------------- ----------------
January 1, 1999 to March 31, 1999 45,000 $1.20
April 1, 1999 to June 30, 1999 70,000 $1.50
July 1, 1999 to September 30, 1999 95,000 $1.75
October 1, 1999 to December 31, 1999 120,000 $2.00
January 1, 2000 to March 31, 2000 135,000 $2.25
April 1, 2000 to June 30, 2000 160,000 $2.50
July 1, 2000 to September 30, 2000 175,000 $2.75
October 1, 2000 to December 31, 2000 200,000 $3.00
----------------
Total 1,000,000
----------------
The options are eligible to vest on a quarterly basis, subject to the
achievement of certain market conditions surrounding the Company's stock. If the
vesting conditions are not met, the options eligible for vesting are forfeited.
Compensation cost will be recorded for the options when and if they become
vested. Only vested options are exercisable. All vested options are exercisable
until October 27, 2008. On June 30, 1999, 70,000 options exercisable at $1.50
per share became vested. To determine compensation cost, the 70,000 vested
options were valued at $3.26 per share based on the Black-Scholes option pricing
model and the Company recorded $228,200 as G&A expense. The following
assumptions for the Black-Scholes option pricing model were used: exercise price
of $1.50 per share, market price on vesting date of $3.375, risk- free interest
rate of 5.87%, expected dividend yield of 0.0; expected life of ten years; and
estimated volatility of 117%. During the year ended December 31, 1999, 260,000
options at exercise prices ranging from $1.20 to $2.00 per share were forfeited
During the nine months ended September 30, 2000, the remaining 670,000 options
at exercise prices ranging from $2.50 to $3.00 per share were forfeited.
On March 4, 1999, the Board granted 250,000 options to purchase common stock at
an exercise price of $1.5625 per share to Dr. Tabibzadeh, inventor of the Ebaf
Assay screening process. The exercise price was equal to the closing price of
the common stock on the date of grant. The options were valued at $1.49 per
share based on the Black-Scholes option-pricing model and the Company recorded
$372,500 as R&D expense. The following assumptions for the Black-Scholes option
pricing model were used: exercise price of $1.5625, market price of $1.5265,
risk- free interest rate of 5.87%, expected dividend yield of 0.0; expected life
of ten years; and estimated volatility of 117%.
On March 28, 2000, the Board granted 280,000 warrants to purchase common stock
at an exercise price of $2.062 per share to Swartz Institutional Finance
pursuant to the Equity Line Letter of Agreement signed on that day. The exercise
price was equal to the lowest closing price for 5 trading days prior to the date
of execution of all Closing Documents on May 19, 2000. The warrants were valued
at $1.575 per share based on the Black-Scholes option pricing model and the
Company recorded $441,000 as consulting expense. The following assumptions for
the Black-Scholes option pricing model were used: exercise price of $2.062,
market price of $2.625, risk-free interest rate of 8.00%, expected dividend
yield of 0.0, expected life of one year, and estimate volatility of 142%.
On May 23, 2000, the Board granted 500,000 warrants to purchase common stock at
an exercise price of $1.625 per share to Goodbody International, Inc. for
consulting services and guidance on any matters relating to investor relations,
financial relations, stock enhancement and public relations and to CEO
responsibilities, including any financing mergers, acquisitions, contract
negotiations and the possible sale of the Company. The term of the agreement is
three years and is being amortized using the straight-line method. The exercise
price was equal to the closing price of the common stock on May 10, 2000. The
warrants were valued at $2.0595 per share based on the Black-Scholes option
pricing model and the Company recorded $114,422 as consulting expense and
$915,328 as prepaid consulting expense. The following assumptions for the
Black-Scholes option pricing model were used: exercise price of $1.625, market
price of $2.218, risk-free interest rate of 8.00%, expected dividend yield of
0.0, expected life of five years, and estimated volatility of 146%.
14
<PAGE>
A summary of the status of the Company's stock options at September 30, 2000,
and changes during the nine months then ended is presented below:
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 2000
-------------------------------------
Weighted Average
Shares Exercise Price
----------------- -------------------
Employees
Outstanding, beginning of period 1,687,500 $1.56
Granted --- ---
Exercised (150,000) 1.56
Forfeited --- ---
----------------- -------------------
Outstanding, September 30, 2000 1,537,500 $1.56
----------------- -------------------
Exercisable, September 30, 2000 1,487,500 $1.56
----------------- -------------------
September 30, 2000
-------------------------------------
Weighted Average
Shares Exercise Price
----------------- -------------------
Non-employees
Outstanding, beginning of period 1,520,000 $1.89
Granted or Vested 780,000 1.78
Exercised --- ---
Forfeited (670,000) 2.66
----------------- -------------------
Outstanding, September 30, 2000 1,630,000 $1.36
Exercisable, September 30, 2000 1,630,000 $1.36
----------------- -------------------
Weighted average fair value of options granted $1.78
-----------------
</TABLE>
The following table summarizes information about fixed stock options outstanding
at September 30, 2000:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
------------------------------------------ ------------------------------
Weighted
Average Weighted
Number Remaining Average Number Weighted
Range of exercise Outstanding Contractual Exercise Exercisable Average
prices at 09/30/00 Life Price at 09/30/00 Exercise Price
---------------------- -------------- -------------- ------------ -------------- ---------------
Employees
$1.20-$1.5625 1,537,500 9.64 years $1.5518 1,487,500 $1.5518
Non-employees
$1.20-$1.625 1,630,000 5.27 years $1.3552 1,630,000 $1.7819
</TABLE>
15
<PAGE>
Note 12-- Income Taxes
The components of deferred income tax are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Inception (December
16, 1997) to Nine Months Ended Nine Months
September 30, 2000 September 30, 2000 Ended September
30, 1999
--------------------- ------------------- -----------------
Net operating loss $ 825,104 $ 115,070 $ 413,291
Stock-based compensation 562,892 374,425 188,467
Valuation allowance (1,387,996) ( 489,495) (601,758)
--------------------- ------------------- -----------------
Net deferred tax asset $ --- $ --- $ ---
--------------------- ------------------- -----------------
</TABLE>
From inception to September 30, 2000 the Company had a net operating tax loss
carryforward of approximately $5,400,000, which expires 2019 and 2020, and
temporary differences related to stock-based compensation of $1,655,565. A
valuation allowance fully offsets the benefit of the net operating loss, since
the Company does not meet the "more probable than not" criteria of FASB 109.
Note 13-- Earnings per Share
Basic and Diluted EPS Computation: September 30, September 30,
2000 1999
---------------- ---------------
Net loss applicable to common stockholders $(2,028,753) $(2,203,627)
---------------- ---------------
Weighted average shares outstanding 7,103,422 6,659,988
---------------- ---------------
Basic and Diluted EPS $ (0.29) $ (0.33)
---------------- ---------------
For the nine months ended September 30, 2000 and 1999, all options were excluded
from the EPS calculation, as their effect was anti-dilutive.
Note 14-- Uncertainties
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is in the early stages of
development and has not established sources of revenues sufficient to fund the
development of business and pay operating expenses, resulting in a net loss of
$2,028,753 for the nine months ended September 30, 2000. Management intends to
provide the necessary development and operating capital through sales of its
common stock and increasing revenues by gaining FDA approval for the Ebaf Assay
test kit and marketing the test kit to laboratories, research institutions,
hospitals, clinics, doctors and other medical professionals throughout the
world. The ability of the Company to continue as a going concern during the next
year depends on the successful completion of the Company's efforts to raise
capital and gain FDA approval. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
Note 15-- Subsequent Events
On November 7, 2000 the Company sold 52,365 shares to a third party investor
pursuant to an investment banking agreement signed on May 17, 2000. The purchase
price for the shares was $0.40, which was the market price calculated using the
formulas outlined in the investment banking agreement.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included in this report which are not historical facts
are forward looking statements, including the information provided with respect
to future business opportunities, expected financing sources and related
matters. These forward looking statements are based on current expectations,
estimates, assumptions and beliefs of management, and words such as "expects",
"anticipates", "intends", "believes", "estimates", and similar expressions are
intended to identify such forward looking statements. Since this information is
based on current expectations that involve risks and uncertainties, actual
results could differ materially from those expressed in the forward looking
statements. We assume no obligation to update any forward-looking statements or
reason why actual results might differ.
Plan of Operation Over the Next Twelve Months
We have no operating history prior to December 16, 1997. We have no
revenues from the sale of products to date and have funded our activities
through the sale of our common stock and through loans by our shareholders.
Product Development
Lexon has recently negotiated two contracts with DOCRO for the completion
of the development of both the Ebaf Assay and the Telomerase Assay. DOCRO is a
commercial medical research organization specializing in the design and conduct
of clinical trials of in vitro diagnostic products. DOCRO specializes in
obtaining marketing clearance and approval from the U.S. FDA.
DOCRO has demonstrated expertise and real-world experience in the
development, clinical validation, and market-making introduction of several new
and innovative tests in the field of diagnostic oncology. DOCRO's name is
somewhat of a misnomer in that the company provides research and services
outside of the field of diagnostic oncology and tumor marker assays. DOCRO has
extensive experience with a wide variety of protein- and molecular biology-based
diagnostic tests. In addition to tumor marker assays, DOCRO has worked
extensively in infectious, perinatal, prenatal, and gynecologic diseases and has
participated in over 47 past and present clinical trials for in vitro diagnostic
tests in these areas. Due to its established reputation and outstanding track
record DOCRO is a strong partner for Lexon in the final developmental stages of
both diagnostic tests.
Investment Agreement with Swartz
On May 19, 2000, We entered into an Investment Agreement with Swartz. The
Investment Agreement entitles us to issue and sell our common stock to Swartz
for up to an aggregate of $30 Million from time to time during the three year
period ending on May 18, 2003. Each election by us to sell stock to Swartz is
referred to as a "put right".
Put Rights. In order to invoke a put right, We must have an effective
registration statement on file with the SEC registering the resale of the shares
of common stock that may be issued as a consequence of the exercise of that put
right. We must also give at least ten (10) but not more than twenty (20)
business days' advance notice to Swartz of the date on which We intend to
exercise a particular put right and We must indicate the maximum number of
shares of common stock that We intend to sell to Swartz.
The number of common shares sold to Swartz may not exceed the lesser of 15%
of the aggregate daily reported trading volume during a period that begins on
the business day immediately following the day We exercise the put right and
ends on and includes the day that is twenty (20) business days after the date We
exercise the put right, or 9.9% of the total number of shares of common stock
that would be outstanding upon completion of the put.
17
<PAGE>
For each share of common stock, Swartz will pay us the lesser of:
o The market price for such share, minus $0.15, or o 91% of the market price for
the share;
provided, however, that Swartz may not pay us less than the designated minimum
per share price, if any, that We indicate in our notice.
Market price is defined as the lowest closing bid price for the common
stock on its principal market during the pricing period. The pricing period is
defined as the twenty (20) business days immediately following the day We
exercise the put right.
Purchase Warrants. Within five (5) business days after the end of each
pricing period, We are required to issue and deliver to Swartz a warrant to
purchase a number of shares of common stock equal to 10% of the common shares
issued to Swartz in the applicable put. Each warrant will be exercisable at a
price that will initially equal 110% of the market price on the date on which We
exercised the put right. Each warrant will be immediately exercisable and have a
term beginning on the date of issuance and ending five (5) years thereafter.
Limitations and Conditions Precedent to Our Put Rights. Swartz is not
required to acquire and pay for any shares of common stock with respect to any
particular put for which, between the date We give advance notice of an intended
put and the date the particular put closes:
o We have announced or implemented a stock split or combination of our common
stock;
o We have paid a common stock dividend;
o We have made a distribution of all or any portion of our assets or
evidences of indebtedness to the holders of our common stock; or
o We have consummated a major transaction, such as a sale of all or
substantially all of our assets or a merger or tender or exchange offer
that results in a change of control of Lexon.
Short sales. Swartz and its affiliates are prohibited from engaging in
short sales of our common stock unless Swartz has received a put notice under
which shares have not yet been issued and the amount of shares involved in the
short sale does not exceed the number of shares specified in the put notice.
Cancellation of puts. We must cancel a particular put between the date of
the advance put notice and the last day of the pricing period if:
o We discover an undisclosed material fact relevant to Swartz's investment
decision;
o The registration statement registering resale of the common shares becomes
ineffective; or
o Our shares are delisted from the then primary exchange.
If a put is canceled, it will continue to be effective, but the pricing
period for the put will terminate on the date notice of cancellation of the put
is given to Swartz. Because the pricing period will be shortened, the number of
shares Swartz will be required to purchase in the canceled put will be smaller
than it would have been had the put not been canceled.
Shareholder Approval. Under the Investment Agreement, We may sell Swartz a
number of shares that is more than 20% of our shares outstanding on the date of
the SB-2 registration. If We become listed on the Nasdaq Small Cap Market or
Nasdaq National Market, We may be required to obtain shareholder approval to
issue some or all of the shares to Swartz.
18
<PAGE>
Termination of Investment Agreement. We may terminate our right to initiate
further puts or terminate the Investment Agreement at any time by providing
Swartz with notice of such intention to terminate; however, any such termination
will not affect any other rights or obligations We have concerning the
Investment Agreement or any related agreement. Should Lexon terminate the
Investment Agreement prior to initiating puts in the amount of $2 Million during
the thirty-six (36) month period of the Investment Agreement, we may have to pay
a Non-Usage Fee of a maximum of $200,000.
Restrictive Covenants. During the term of the Investment Agreement and for
a period of one year after the Investment Agreement is terminated, We must
obtain the prior written approval from Swartz prior to issuing, selling, or
agreeing to issue and sell equity securities for cash in private capital raising
transactions. These transactions include the issuance of any common stock or
other equity securities, or debt securities convertible into equity securities,
or any private equity line type agreements similar to the Investment Agreement.
Right of First Refusal. Swartz has right of first refusal to participate in
any private capital raising transaction of equity securities that closes from
the date of the Investment Agreement (May 19, 2000) through one year after the
Investment Agreement is terminated.
Swartz's Right of Indemnification. We have agreed to indemnify Swartz
(including its stockholders, officers, directors, employees, investors and
agents) from all liability and losses resulting from any misrepresentations or
breaches We make in connection with the Investment Agreement, our registration
rights agreement, other related agreements, or the registration statement.
We plan to seek business alliance partners in the pharmaceutical industry
with existing manufacturing, distribution and marketing capabilities. We have no
such partners at this time. There is no assurance that we will be successful in
making acceptable arrangements for business alliances.
Cash Requirements
We require substantial additional working capital to finish development of
the Ebaf Assay, to begin collecting data, and to commence and complete clinical
trials required for FDA approval. We estimate that we will require approximately
$5.0 million in additional capital during the year 2000. There is no assurance
that the additional capital required will be available to us on acceptable terms
when needed, if at all. Any additional capital may involve substantial dilution
to the interests of our then existing shareholders.
Product Development and Research Plan for the Next Twelve Months
Ebaf Assay
It is anticipated that during the next 12 months, Dr. Tabibzadeh will make
a small number of Ebaf Assay ELISA test kits and will sample the blood of
persons who have colon cancer and of persons who do not have colon cancer. The
blood samples will then be tested using the Western Blot method and the ELISA
method to determine whether the ELISA method produces results similar to the
Western Blot method. We estimate that the comparative analysis of tests using
the Western Blot and ELISA methods will be completed by the end of the end
quarter of 2000. The data from these tests will then be used as the basis for
our preliminary proposal for clinical trials to the FDA. We do not know how much
data the FDA will require and consequently, how long the clinical trials will
take.
Telomerase Assay
It is anticipated that during the next 12 months, Dr. Highsmith and his
team will develop a series of monoclonal antibodies to telomerase (estimated
time to complete: 8-10 months) and will develop an immunoassay (ELISA format
test) to detect telomerase in human blood (estimated time complete: 2-4 months
after development of the monoclonal antibodies)
Expected Purchase or Sale of Plant and Significant Equipment
None.
Expected Significant Changes in Number of Employees.
None.
19
<PAGE>
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27.0 Financial Data Schedule (for electronic filers only)
Reports on Form 8-K
None
20
<PAGE>
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.
LEXON, INC.
/s/ GIFFORD M. MABIE
--------------------
President
Date: November 20, 2000
21
