SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1999
Commission File Number 02474
LEXON Technologies, Inc.
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(Exact Name of Registrant, as Specified in its Charter)
Delaware 87-0502701
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(State or other Jurisdiction of (I.R.S Employer
Incorporation or Organization) Identification Number)
1401 Brook Drive, Downers Grove, Illinois 60515
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(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (630) 916-6196
Rexford, Inc.
7777 East Main Street, Suite 201, Scottsdale, AZ, 85251
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(Former Name, Address, or Fiscal Year, if Changed Since Last Report)
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 ___
On November 5, 1999 there were 11,583,000 shares of the Registrant's
Common Stock outstanding.
<PAGE>
LEXON TECHNOLOGIES, INC.
Index
PART 1. FINANCIAL INFORMATION: Page No.
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - September 30,
1999 and December 31, 1998 3
Condensed Consolidated Statements of Income - Three
and Nine Months Ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows -
Three and Nine Months Ended September 30, 1999
and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in the Rights of the Company's Security Holders
Item 3. Default by the Company in its Senior Securities
Item 4. Submission of Matters to a Vote of Securities Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 13
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<TABLE>
LEXON TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1999 1998
---------------------
<S> <C> <C>
ASSETS
Current assets
Cash $202,048 $71,526
Accounts receivable, net 75,962 98,175
Inventories 3,508 8,013
Prepaid expenses 3,445 -
---------------------
Total current assets 284,963 177,714
---------------------
Property and equipment 313,939 111,762
Accumulated depreciation 107,264 79,625
---------------------
Property and equipment, net 206,675 32,137
---------------------
Other assets
Computer software costs, net 253,128 54,845
Unamortized debt issue costs 71,988 -
Deferred charges 61,940 -
Deposit 15,000 -
---------------------
Other assets, net 402,056 54,845
---------------------
$893,694 $264,696
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Notes payable $1,123,000 $ -
Accounts payable 129,052 5,740
Accrued distributions 209,774 -
Other accrued liabilities 19,904 7,731
---------------------
Total current liabilities 1,481,730 13,471
---------------------
Stockholders' equity (deficit)
Common stock 11,583 11,500
Additional paid-in capital 26,017 -
Retained earnings (deficit) (625,636) 239,725
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Total stockholders' equity (deficit) (588,036) 251,225
---------------------
$893,694 $264,696
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LEXON TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Sales $201,175 $197,248 $566,396 $822,947
Cost of sales 32,732 65,930 153,975 236,024
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Gross profit 168,443 131,318 412,421 586,923
Selling and administrative expense 362,850 200,043 994,152 545,273
-------------------------------------------
Income (loss) from operations (194,407) (68,725) (581,731) 41,650
Other income (expense)
Interest income 2,073 - 2,073 -
Interest expense (30,097) - (35,154) -
Loss on disposition of assets (15) - (3,338) (13,100)
Miscellaneous - - 6,372 -
-------------------------------------------
Net income (loss) ($222,446) ($68,725) ($611,778) $28,550
======== ======= ======== ======
Basic and diluted net income
(loss) per share ($0.02) ($0.01) ($0.05) $0.00
======== ======= ======== ======
Shares used in computing basic
and diluted net income
(loss) per share 11,546,130 11,500,000 11,515,546 11,500,000
========== ========== ========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LEXON TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
----------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($611,778) $28,550
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 28,272 10,188
Amortization 49,712 9,945
Loss on disposition of assets 3,338 13,100
Change in assets decrease: 23,273 21,080
Change in liabilities increase (decrease): 94,936 (2,535)
----------------------
Net cash provided by (used in)
operating activities (412,247) 80,328
----------------------
Cash flows from investing activities:
Proceeds from sale of equipment - 425
Capital expenditures (206,148) (6,314)
Payment of computer software costs (242,458) (38,070)
Payment of debt issue costs (77,525) -
Payment of deferred charges (61,940) -
Payment of deposit (15,000) -
----------------------
Net cash used in investing activities (603,071) (43,959)
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Cash flows from financing activities:
Proceeds from issuance of notes payable 1,123,000 -
Proceeds from issuance of common stock 26,600 -
Cash distibutions paid to stockholders (3,760) (55,640)
----------------------
Net cash provided by (used in)
financing activities 1,145,840 (55,640)
----------------------
Net increase (decrease) in cash 130,522 (19,271)
Cash at beginning of period 71,526 76,091
----------------------
Cash at end of period $202,048 $56,820
========= ========
Supplemental disclosures of cash
flow information:
Cash paid for interest $15,250
=========
Cash paid for income taxes $927
=========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
LEXON TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These financial statements include the accounts of LEXON Technologies,
Inc. and its wholly-owned subsidiary, Chicago Map Corporation. All
material intercompany accounts and transactions have been eliminated in
consolidation.
The condensed consolidated financial information as of September 30,
1999 and for the three and nine month periods ended September 30,
1999 and 1998 is unaudited and has been prepared by the Company in
accordance with generally accepted accounting principles and reflects
all adjustments, consisting only of normal recurring adjustments, which
in the opinion of management are necessary to state fairly the
Company's financial position, results of operations and cash flows for
the periods presented. The condensed consolidated balance sheet at
December 31, 1998 was derived from audited financial statements at that
date.
Certain information and note disclosures normally included in the
Company's annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. These condensed consolidated financial statements should
be read in conjunction with the Company's financial statements and
notes thereto for the year ended December 31, 1998. The results of
operations for the three and nine month periods ended September 30,
1999 are not necessarily indicative of the results to be expected for
the full year ending December 31, 1999.
NOTE 2. ORGANIZATION AND PRESENTATION
On July 21, 1999, LEXON Technologies, Inc. (formerly Rexford, Inc.)
(Rexford) acquired all of the issued and outstanding common stock of
Chicago Map Corporation (Chicago Map) in exchange for 10,500,000 shares
of common stock of Rexford. The shares issued in the acquisition
resulted in the owners of Chicago Map having operating control
of Rexford immediately following the acquisition. Therefore, for
financial reporting purposes, Chicago Map is deemed to have acquired
Rexford in a reverse acquisition accompanied by a recapitalization.
The surviving entity reflects the assets and liabilities of Rexford and
Chicago Map at their historical book values and the historical
operations of the Company are those of Chicago Map. The issued common
stock is that of Rexford. The statements of income (loss) include
operations of Chicago Map for the three and nine month periods ended
September 30, 1999 and 1998 and operations of Rexford from July 21,
1999 (date of acquisition) through September 30, 1999.
<PAGE>
NOTE 3. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted
average number of common shares outstanding during the periods.
Diluted net income (loss) per share is computed using the weighted
average number of common shares and dilutive common share equivalents
outstanding during the periods. All of the common share equivalents
have an antidilutive effect on net loss per share and, therefore, have
not been used in determining the total weighted average number of
shares outstanding used in calculating diluted net loss per share.
NOTE 4. INVENTORIES
Inventories consist of finished goods which are priced at the lower of
cost, determined by the first-in, first-out method, or market.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Some of the information in this Quarterly Report may be forward-looking
statements under the federal securities laws. Such statements can be
identified by the use of words such as "anticipates," "intends,"
"seeks," "believes," "estimates," and "expects." These statements
discuss expectations for the future, contain projections concerning the
results of our operations or our future financial condition or state
other forward-looking information. Such statements are subject to a
number of risks and uncertainties that have been identified in previous
filings with the Securities and Exchange Commission. Our actual
results, performance or achievements could differ substantially from
the results expressed in, or implied by, those statements. We assume no
responsibility for revising forward-looking statements in light of
future events or circumstances.
Results of Operations:
Net sales increased for the three month period ended September 30, 1999
to $201,175 from $197,248 for the three month period ended September
30, 1998. During the first nine months of fiscal 1999 net sales
decreased to $566,396 from $822,947 compared to the same period in the
prior year. The primary factor in the general decrease of the year to
date sales is the Company's shift from the retail market to the more
profitable commercial market and its new focus on the National Atlas
project.
Gross profit increased during the three month period ended September
30, 1999 to $168,443 or 83.7% of net sales, compared to $131,318 or
66.6% of net sales for the same period in the prior fiscal year. For
the nine month period ended September 30, 1999 gross profit decreased
from $586,923 or 71.3% of net sales to $412,421 or 72.8% of net sales.
The variation in gross profit for the nine months ended September 30,
1999 compared to the same period in the prior year is primarily related
to a reduction in revenues in the retail market.
Selling and administrative expenses increased to $362,850 or 180.4% of
net sales for the three month period ended September 30, 1999 compared
to $200,043 or 101.4% of sales in the third quarter of fiscal 1998.
Selling and administrative expense for the nine month period ended
September 30, 1999 increased to $994,152 compared to $545,273 in the
same period in the prior fiscal year. The increases are primarily
attributable to the additional staffing and other expenses necessary to
implement the National Atlas of the United States of America project.
Interest expense for short-term financing obligations for the three
month period ended September 30, 1999 was $30,097 compared to $0 for
the same period in the prior year. For the nine month period ended
September 30, 1999 interest expense was $35,154 compared to $0 for the
same period in fiscal 1998. This increase was attributable to various
interim working capital loans.
<PAGE>
As a result of the factors described above, net income decreased to
($222,446) for the three month period ended September 30, 1999 from
($68,725) for the same period in the prior year. Basic earnings per
share for the third fiscal quarter of 1999 were ($0.02) compared to
($0.01) for the same period in the prior year. For the first nine
months of fiscal 1999 net income was a loss of ($611,778) compared to a
profit of $28,550 for the same period in the prior year. Basic earnings
per share for the nine month period ended September 30, 1999 were
($0.05) compared to $0.00 for the same period in fiscal 1998.
Liquidity and Capital Resources:
For the nine months ended September 30, 1999 the primary source of
liquidity was cash provided by short-term notes and income from
operations. The net cash used in operations was $412,247 for the nine
months ended September 30, 1999 compared to net cash provided by
operations of $80,328 for the same period in the prior year.
Net cash used in investing activities was $603,071, which was mainly
due to capital expenditures of $206,148, payment of computer software
costs of $242,458 and other costs associated with procuring short and
long-term capital. For the same period in the prior year net cash used
in investing activities was $43,959.
Net cash provided by financing activities was $1,145,840 for the nine
month period ended September 30, 1999 compared to $55,640 used in the
prior year.
In April, the Company entered into a Cooperative Research and
Development Agreement with the U. S. Geological Survey agency to
produce the next National Atlas of the United States of America. The
Company views this product to be a high gross margin business, sold on
a subscription basis, with an 80% level of recurring revenue. Although
the project is consistent with the company's technological capabilities,
the development and distribution of a product of this significance
(initially to be sold to all schools and libraries in the United
States) will require significant external financing. The Company has
engaged the services of a financial advisory firm to assist in
addressing its capital requirements and is currently conducting
discussions with several potential sources.
Five short-term notes have been executed in favor of affiliated
individuals with varying terms and amounts, from March 26, 1999 through
July 10, 1999, totaling $373,000 in principal. On August 10, 1999, the
Company obtained additional financing through short-term loans totaling
$750,000 in principal due December 10, 1999. In all cases, warrants to
purchase the Company's common stock at $2.50 per share were granted as
part of these loan agreements. It is anticipated that these loans will
be either extended for a similar time period or repaid entirely when
permanent financing is obtained.
<PAGE>
Year 2000 Compliance:
Background
Many currently installed computer systems are not capable of correctly
processing 21st century dates. As a result, computer systems, software
and other computer controlled processes used by many companies in a
very wide variety of applications will experience operating
difficulties unless they are modified or upgraded to adequately process
information involving, related to, or dependent upon the century
change. Significant uncertainty exists concerning the scope and
magnitude of problems associated with the century change.
What the Company is Doing
The Company recognizes the need to take appropriate action so that its
operations will not be adversely impacted by Year 2000 computer
failures and has established a project team, consisting of dedicated
employees, to address Year 2000 risks. The project team is
coordinating the identification and implementation of changes to
computer hardware and software applications that will attempt to ensure
availability and integrity of the Company's information systems,
operational systems and critical business processes. An appropriate
program of assessment, remediation and testing for both products and
internal systems is underway, but is not yet complete. The Company is
also assessing the potential overall risks of the impending century
change on its business partners, results of operations and financial
position.
Status of Company Products
The Company's saleable products do not rely on external software
applications. The Company has designed and tested the most current
versions of its saleable products and believes that such products are
Year 2000 compliant, as they do not use or access date-based files. It
should be noted that despite these efforts, there can be no assurances
that the Company's current products do not contain undetected errors or
defects associated with Year 2000 date functions that may result in
additional costs to the Company.
Status of Internal Systems
The Company is in the process of conducting a company-wide assessment
of its internal computer systems and operations infrastructure to
identify computer hardware, software and process control systems that
are not Year 2000 compliant. Based on this assessment, the Company
believes that its principal accounting system is Year 2000 compliant.
Tha Company has received statements of verification from its accounting
system vendor that the application has been properly tested and found
to be compliant. Many systems will be remediated as a consequence of
normal and previously planned business improvement and system
replacement projects. Other systems, such as personal computers and
office productivity software, will be remediated specifically for Year
2000 issues, in many cases through low cost or free upgrades provided
by the product vendors. The Company presently believes that its
business-critical computer systems that are not presently Year 2000
compliant will be replaced, upgraded or modified prior to 2000.
<PAGE>
Status of the Company's Customers and Partners
The Company faces risk to the extent that suppliers of products,
services and systems important to its business operations, and others,
with whom the Company transacts business on a worldwide basis, may not
comply with Year 2000 requirements. The Company has initiated formal
communications with significant suppliers to determine the extent to
which these parties have addressed their own Year 2000 issues. To
date, all inquiries have responded that year 2000 compliance is in
process and should be completed prior to 2000.
The Company also faces risk to the extent that major customers or
channel partners do not comply with Year 2000 requirements in their own
organizations and suffer business disruption as a result. To the
extent Year 2000 issues cause significant delays in or cancellation of
purchases of the Company's products or services, the Company's
business, results of operations and financial position could be
materially adversely affected. The Company has initiated formal
communications with its largest customers and channel partners to
determine the extent to which the Company is vulnerable to any such
third-party's failure to remediate their own Year 2000 issues.
Costs to Address the Company's Year 2000 Issues
The Company has not yet completed its estimate of Year 2000 costs at
this stage of the project, but expects to complete the estimates as the
assessment and remediation planning tasks are completed in the near
term. It is currently estimated that the aggregate cost of the
Company's Year 2000 efforts will be approximately $10,000 to $20,000
over calendar year 1999, of which less than $3,000 has been expended to
date. To the extent that equipment is deemed obsolete as a result of
the Year 2000 issue, the applicable costs and accumulated depreciation
will be removed from the accounts and the resulting loss, if any, will
be recognized in the income statement. The Year 2000 costs have not
been, and are not anticipated to be, material to the Company's
financial position or its results of operations. The Company does not
have any products being used by customers that are not Year 2000
compliant.
Risks of the Company's Year 2000 Issues
The Company expects to complete its Year 2000 project during 1999.
Based on currently available information and remediation plans, the
Company does not believe any material exposure to significant business
interruption exists as a result of Year 2000 compliance issues.
Although the Company does not believe that it will incur any material
costs or experience material disruptions in its business associated
with preparing its internal systems for the year 2000, there can be no
assurances that the Company will not experience serious unanticipated
negative consequences and/or material costs caused by undetected errors
or defects in the technology used in its internal systems, which are
composed of third-party software, third-party hardware that contains
embedded software and the Company's own software products. The most
reasonably likely worst case scenario would include: (i) corruption of
data contained in the Company's internal information systems, (ii)
hardware failure, and (iii) delays in shipping the Company's saleable
products.
<PAGE>
The Company's Contingency Plans
The Company is in the process of developing a contingency plan to
address situations that may result if the Company is unable to achieve
Year 2000 readiness of its critical operations, as anticipated, in a
timely manner.
These costs are considered minimal and the timing in which the Company
plans to complete its Year 2000 modification and testing processes are
based on management's best estimates. However, there can be no
assurance that the Company will timely identify and remediate all
significant Year 2000 problems, that remedial efforts may not involve
significant time and expense, or that such problems will not have a
material adverse effect on the Company's business, results of
operations or financial position.
The discussion of the Company's efforts, and management's expectations,
relating to Year 2000 compliance are forward-looking statements. The
Company's ability to achieve Year 2000 compliance and the level of
incremental costs associated therewith, could be adversely impacted by,
among other things, the availability and cost of programming and
testing resources, vendors' ability to modify proprietary software, and
unanticipated problems identified in the ongoing compliance review.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not Applicable
<PAGE>
LEXON TECHNOLOGIES, INC.
PART II - OTHER INFORMATION
September 30, 1999
Item 1. Legal Proceedings.
The management of the Company is not aware of any material pending
or threatened litigation.
Item 2. Changes in the Rights of the Company's Security Holders None.
Item 3. Default by the Company on its Senior Securities. None.
Item 4. Submission of Matters to a Vote of Securities Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
Forms 8-K were filed during the quarter ended September 30, 1999
on July 21, July 31, and August 10, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LEXON TECHNOLOGIES, INC..
/s/ Steven J. Peskaitis November 11, 1999
_______________________________________ _________________
Steven J. Peskaitis Date
President and CEO (Principal Executive Officer)
/s/ John B. McLean November 10, 1999
_______________________________________ _________________
John B. McLean Date
Senior Vice President, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY OF FINANCIAL
INFORMATION EXTRACTED FROM FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 202,048
<SECURITIES> 0
<RECEIVABLES> 75,962
<ALLOWANCES> 0
<INVENTORY> 3,508
<CURRENT-ASSETS> 284,963
<PP&E> 313,939
<DEPRECIATION> 107,264
<TOTAL-ASSETS> 893,694
<CURRENT-LIABILITIES> 1,481,730
<BONDS> 0
0
0
<COMMON> 11,583
<OTHER-SE> (599,619)
<TOTAL-LIABILITY-AND-EQUITY> 893,694
<SALES> 566,396
<TOTAL-REVENUES> 566,396
<CGS> 153,975
<TOTAL-COSTS> 153,975
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,154
<INCOME-PRETAX> (611,778)
<INCOME-TAX> 0
<INCOME-CONTINUING> (611,778)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (611,778)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
