<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter Ended September 30, 2000
Commission File Number 02474
LEXON TECHNOLOGIES, INC.
-----------------------------------------------------
(Exact Name of Registrant, as Specified in its Charter)
Delaware 87-0502701
------------------------------- ----------------------------------
(State or other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
1401 Brook Drive, Downers Grove, Illinois 60515
-----------------------------------------------
(Address of Principle Executive Offices)
(630)916-6196
--------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate, by check mark, whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.001 par value 14,592,561
----------------------------- ----------------------------
Title of Class Number of Shares Outstanding
as of November 15, 2000
<PAGE>
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying financial statements have been prepared by the
Company, without audit, in accordance with the instructions to Form 10-QSB
pursuant to the rules and regulations of the Securities and Exchange
Commission and, therefore may not include all information and footnotes
necessary for a complete presentation of the financial position, results of
operations, cash flows, and stockholders' equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
(which include only normal recurring accruals) necessary to present fairly the
financial position and results of operations for the periods presented have
been made. These financial statements should be read in conjunction with the
accompanying notes, and with the historical financial information of the
Company.
<PAGE>
<PAGE> 3
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
Current assets
Cash $ 533 $ 20,892
Accounts receivable, less allowance for
doubtful accounts of $2,500 in 2000 and 1999 80,671 18,153
Inventories 1,656 1,656
Prepaid expenses 187,500 12,570
----------- ----------
Total current assets 270,360 53,271
----------- ----------
Property and equipment
Leasehold improvements 5,371 29,744
Furniture and equipment 147,730 178,452
Capital leases - 105,458
----------- ----------
153,101 313,654
Accumulated depreciation and amortization (108,387) (116,631)
----------- ----------
Net property and equipment 44,714 197,023
----------- ----------
Other assets
Computer software production costs, net of
accumulated amortization of $116,002
in 2000 and $76,875 in 1999 465,474 325,279
Debt issue costs, net of accumulated
amortization of $27,458 in 1999 - 38,442
Deferred charges - 72,440
Deposits - 17,762
----------- ----------
Total other assets 465,474 453,923
----------- ----------
$ 780,548 $ 704,217
=========== ==========
See notes to consolidated financial statements.
<PAGE>
<PAGE> 4
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
Current liabilities
Current maturities of long-term capital
lease obligations $ - $ 19,286
Notes payable 973,000 1,123,000
Stockholder advances 115,000 -
Accounts payable 496,781 217,618
Accrued liabilities:
Salaries 159,106 51,600
Interest 61,189 23,219
Other 46,002 -
Distributions 209,774 209,774
------------- ------------
Total current liabilities 2,060,852 1,644,497
Capital lease obligations, net of
current maturities - 82,499
------------- ------------
Total liabilities 2,060,852 1,726,996
------------- ------------
Stockholders' equity (deficit)
Common stock, par value $0.001 per
share; authorized 100,000,000 shares in 2000
and 1999; issued and outstanding 14,592,561
shares in 2000 and 12,441,561 shares in 1999 14,593 12,442
Additional paid-in capital 603,968 68,119
Retained earnings (accumulated deficit) (1,898,865) (1,103,340)
------------- ------------
Total stockholders' deficit (1,280,304) (1,022,779)
------------- ------------
$ 780,548 $ 704,217
============= ============
See notes to consolidated financial statements.
<PAGE>
<PAGE> 5
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 204,507 $ 201,175 $ 633,460 $ 566,396
Cost of sales 13,891 32,732 54,829 153,975
---------- ---------- ---------- ----------
Gross profit 190,616 168,443 578,631 412,421
Selling, general and administrative
expenses 319,514 362,850 1,389,792 994,152
---------- ---------- ---------- ----------
Loss from operations (128,898) (194,407) (811,161) (581,731)
---------- ---------- ---------- ----------
Other income (expense)
Interest income - 2,073 457 2,073
Interest expense (27,590) (30,097) (100,955) (35,154)
Other income - - 150,000 6,372
Loss on sale of assets - - (42,932) -
Loss on abandonment of leasehold
improvements - (15) (27,876) (3,338)
Forgiveness of debt - - 36,942 -
---------- ---------- ---------- ----------
Other income (expense), net (27,590) (28,039) 15,636 (30,047)
---------- ---------- ---------- ----------
Loss before income tax expense (156,488) (222,446) (795,525) (611,778)
---------- ---------- ---------- ----------
Income tax expense - - - -
---------- ---------- ---------- ----------
Net loss $ (156,488) $ (222,446) $ (795,525) $ (611,778)
========== ========== ========== ==========
Weighted average common shares
outstanding 13,920,279 11,546,130 13,621,751 11,515,546
========== ========== ========== ==========
Basic and diluted loss per common
share $ (.01) $ (.02) $ (.06) $ (.05)
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE> 6
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Retained Total
Additional Earnings Stockholders'
Common Stock Paid-In (Accumulated Equity
Shares Amount Capital Deficit) (Deficit)
---------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 11,500,081 $ 11,500 $ - $ 239,725 $ 251,225
Stockholders' deficit
assumed in reverse
acquisition of Rexford,
Inc. by Chicago Map
Corporation - - - (40,549) (40,549)
Issuance of common stock 941,480 942 68,119 500 69,561
Net loss - - - (1,089,482) (1,089,482)
Distributions to
stockholders:
Cash - - - (3,760) (3,760)
Accrued - - - (209,774) (209,774)
---------- --------- ---------- ---------- ----------
Balance, December 31, 1999 12,441,561 12,442 68,119 (1,103,340) (1,022,779)
---------- --------- ---------- ---------- ----------
Issuance of common stock 2,151,000 2,151 535,849 - 538,000
Net loss - - - (795,525) (795,525)
---------- --------- ---------- ---------- ----------
Balance, September 30, 2000 14,592,561 $ 14,593 $ 603,968 $(1,898,865) $(1,280,304)
========== ========= ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE> 7
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(Unaudited)
September 30, September 30,
2000 1999
------------- -------------
Cash flows from operating activities:
Net loss $ (795,525) $ (611,778)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 108,865 77,984
Write off of deferred charges 72,440 -
Loss on disposition and abandonment of
assets 70,808 3,338
Forgiveness of debt (36,942) -
Change in assets (increase) decrease (49,948) 23,273
Change in liabilities increase
(decrease) 491,441 94,936
------------- ------------
Total adjustments 656,664 199,531
------------- ------------
Net cash used in operating activities (138,861) (412,247)
------------- ------------
Cash flows from investing activities:
Capital expenditures (11,185) (206,148)
Payment of computer software costs (179,322) (242,458)
Proceeds from sale of assets 55,590 -
Payment of debt issue costs - (77,525)
Payment of deferred charges - (61,940)
Payment of deposits - (15,000)
------------- ------------
Net cash used in investing activities (134,917) (603,071)
------------- ------------
Cash flows from financing activities:
Proceeds from issuance of notes payable - 1,123,000
Stockholder advances 115,000 -
Principal payments of notes payable (150,000) -
Principal payments under capital lease
obligations (62,081) -
Proceeds from issuance of common stock 350,500 26,600
Cash distributions paid to stockholders - (3,760)
------------- ------------
Net cash provided by financing
activities 253,419 1,145,840
------------- ------------
Net increase (decrease) in cash (20,359) 130,522
Cash at beginning of period 20,892 71,526
------------- ------------
Cash at end of period $ 533 $ 202,048
============= ============
See notes to consolidated financial statements.
<PAGE>
<PAGE> 8
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED
(Unaudited)
September 30, September 30,
2000 1999
------------- -------------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 59,235 $ 15,250
Income taxes - -
Supplemental disclosure of noncash
investing and financing activities:
Security deposits applied against
accounts payable and capital lease
obligations $ 17,762 $ -
Proceeds from sale of assets applied
against accounts payable 5,800 -
Proceeds from issuance of common stock
applied to prepaid expenses 187,500 -
See notes to consolidated financial statements.
<PAGE>
<PAGE> 9
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of LEXON Technologies, Inc. (Company) and its wholly-owned
subsidiary, Chicago Map Corporation. All material intercompany accounts and
transactions have been eliminated in consolidation.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Inventories - Inventories consist of finished goods which are priced at the
lower of cost, determined by the first-in, first-out method, or market.
Property and Equipment - Property and equipment are recorded at cost.
Expenditures for renewals and betterments which extend the life of such assets
are capitalized. Maintenance and repairs are charged to expense as incurred.
Differences between amounts received and net carrying value of assets retired
or disposed of are charged or credited to income.
Depreciation and Amortization - Depreciation and amortization of property and
equipment are charged to income using straight-line and accelerated methods
based on the estimated useful lives of the assets.
Computer Software Production Costs - Costs related to the purchase and
development of computer software are capitalized from the time technological
feasibility is established until the software is ready for use. Upon the
general release of the software to consumers, capitalized costs are amortized
on a straight-line basis over the estimated economic life of the software,
generally twenty-four months. Amortization expense was $9,958 and $30,262 for
the three months ended September 30, 2000 and 1999, respectively.
Amortization expense was $39,127 and $44,175 for the nine months ended
September 30, 2000 and 1999, respectively. Unamortized computer software
production costs determined to be in excess of the net realizable value of the
software are expensed immediately.
Debt Issue Costs - Costs related to the issuance of notes payable are being
amortized on a straight-line basis over the term of the notes. Amortization
expense was $5,492 for the three months ended September 30, 2000, and $38,442
for the nine months ended September 30, 2000. No amortization was charged to
income in 1999.
Deferred Charges - Deferred charges consisted of incremental costs incurred in
connection with a proposed offering of securities. The offering was rescinded
during the three months ended March 31, 2000, and these costs, totaling
$72,440, were expensed.
Revenue Recognition - The Company records sales and related profits as
products are shipped. Revenue from licensing of software is based on sales of
copies of software products in accordance with distribution agreements with
licensed developers and recognized as licensing fees accrue. Revenue for
post-contract customer support, upgrades and enhancements is recognized
ratably over the term of the related agreements, which in most cases is one
year.
<PAGE>
<PAGE> 10
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
1. SUMMARY OF ACCOUNTING POLICIES (Continued)
Income Taxes - Prior to July 21, 1999, Chicago Map Corporation had elected S
corporation status for income tax purposes. Under this election, the Company
was not liable for federal income taxes, but was liable for certain state
income and replacement taxes. Federal taxable income (loss) and tax credits
flowed through to the stockholders to be reported on their individual income
tax returns. Upon acquisition by Rexford, Inc., Chicago Map Corporation
terminated its S corporation election.
Earnings (Loss) Per Share - Basic earnings (loss) per share is computed using
the weighted average number of common shares outstanding during the year.
Diluted earnings (loss) per share is computed using the weighted average
number of common shares and dilutive common share equivalents outstanding
during the year. The common share equivalents have a weighted average of
5,873,410 and 1,138,834 for the nine months ended September 30, 2000 and 1999,
respectively. All of the common share equivalents have an antidilutive effect
on earnings (loss) per share and, therefore, have not been used in determining
the total weighted average number of common shares outstanding used in
calculating diluted earnings (loss) per share.
2. NATURE OF OPERATIONS
The Company creates digital map technologies, which provide for the design and
development of advanced geographic and mapping software applications for
institutional, governmental, corporate, and individual consumers throughout
the world.
3. NAME CHANGE
Effective July 21, 1999, the name of the Company was changed from REXFORD,
INC. to LEXON TECHNOLOGIES, INC.
4. 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 and the retained earnings (deficit) is that of Chicago Map.
The statements of income (loss) include operations of Chicago Map for the
three and nine months ended September 30, 2000 and 1999 and operations of
Rexford for periods after July 21, 1999 (date of acquisition).
5. ACQUISITION
On March 12, 1999, Chicago Map Corporation acquired certain assets of TRIUS,
Inc. for $62,300 in cash and 2,198 shares of common stock of Chicago Map
Corporation. The principal business of TRIUS, Inc. is the development of
computer software technologies.
<PAGE>
<PAGE> 11
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
CASH
The Company maintains its cash in bank accounts which at times exceed the
federally insured limit of $100,000. Management believes there is no
significant concentration of credit risk with respect to these accounts.
DEPRECIATION
Depreciation was charged to income, based on the estimated useful lives of the
assets, in the following amounts:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30, Estimated
2000 1999 2000 1999 Life-Years
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Leasehold improvements $ 33 $ 32 $ 894 $ 96 5 40
Furniture and equipment 4,533 13,877 17,489 28,176 3 7
Capital leases - - 12,913 - 7
-------- -------- -------- --------
$ 4,566 $ 13,909 $ 31,296 $ 28,272
======== ======== ======== ========
</TABLE>
8. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Promissory notes payable to stockholders due on
November 10, 2000 with interest payable monthly
at 12% per annum (18% prior to February 1, 2000). $ 600,000 $ 750,000
Promissory note payable to a stockholder due on
September 26, 2000 with interest payable at
maturity at 12% per annum. 100,000 100,000
Promissory notes payable to stockholders and
employees due on various dates through July 29,
2000. Interest at 12% per annum is payable
at maturity 273,000 273,000
------------------ -----------------
Total $ 973,000 $ 1,123,000
</TABLE>
The promissory notes due on November 10, 2000 are secured by all of the assets
of the Company, the common stock of Chicago Map Corporation, and the
guarantees of Chicago Map Corporation and an officer/stockholder of the
Company. In addition, if the Company does not receive debt or equity
financing proceeds in an aggregate amount of $3,600,000 during the period from
December 30, 1999 to November 10, 2000, the promissory notes will be payable
in six equal monthly installments of principal and interest commencing
November 10, 2000, as stated in the loan agreements.
On September 21, 2000, the Company entered into a Sixth Supplemental Agreement
to amend the terms of the note. Under the terms of the Agreement, the
maturity date of the loan was extended from September 10, 2000 to November 10,
2000.
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<PAGE> 12
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
8. NOTES PAYABLE (Continued)
In addition, the Agreement required an officer/stockholder of the Company
(personal guarantor) to sell to the lender, an investor group, 750,000
restricted shares of the Company's common stock in exchange for $10. The
officer/stockholder also was required to transfer an additional 100,000
restricted shares to the lender as payment in full for the consideration
offered by another officer/stockholder in the Fifth Supplemental Agreement to
the loan. The total 850,000 shares were taken from the 1.5 million shares
held in escrow as collateral for the loan. Other terms of the Agreement
include the condition that all proceeds from the sale of the Company's
subsidiary, if it is sold, will be applied as a principal reduction of the
loan.
The promissory notes due on July 29, 2000 and through September 26, 2000 are
secured by the accounts receivable of Chicago Map Corporation.
9. LEASE COMMITMENTS
The Company leases office facilities under an operating lease expiring in
April, 2002. Under terms of the lease, the Company is responsible for
insurance, utilities, repairs and maintenance. Future minimum lease
commitments under all noncancelable leases in effect as of September 30, 2000
are as follows:
Operating
Year ending December 31, Leases
------------------------ -----------
2000 (three months) $ 12,569
2001 50,278
2002 30,000
2003 7,162
2004 3,036
-----------
Net minimum lease payments $ 103,045
During the three months ended June 30, 2000, the Company negotiated an early
buyout option on both of its capital leases. The buy-out resulted in the
forgiveness of debt of $36,942, which is included in other income in the
Consolidated Statements of Income (Loss). Total lease-related expenses for
the capital leases for the three and nine months ended September 30, 2000 and
1999 were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
---------- ----------- ----------- ------------
Depreciation - - $ 12,913 -
Interest expense - - 5,760 -
---------- ----------- ----------- ------------
- - $ 18,673 -
Rent expense for operating leases for the three months ended September 30,
2000 and 1999 was $18,816 and $29,365, respectively. During the first nine
months of 2000 and 1999 rent expense was $77,560 and $55,832, respectively.
<PAGE>
<PAGE> 13
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
CONSULTING AGREEMENT COMMITMENT
10. CONSULTING AGREEMENT COMMITMENT
On September 12, 2000, the Company entered into an agreement to receive
consulting services, including stockholder communications and relations and
marketing strategies, for a minimum of 12 months. In return, total
compensation of approximately $336,250 will be paid through the issuance of
stock options under the 2000 Stock Option Plan. As of September 30, 2000,
$187,500 of such fees have been incurred and paid. See Notes 12 and 14.
11. REVERSE STOCK SPLIT
On July 20, 1999, the stockholders of Rexford, Inc. approved a one-for-seventy
reverse stock split whereby the issued and outstanding shares of common stock
of the Company were reduced from 70,000,000 to 1,000,081. The reverse stock
split did not affect the authorized shares of common stock of the Company.
12. STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation expense for stock-based employee compensation at fair
value. The Company has chosen to account for stock-based employee
compensation using the intrinsic value method described in Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Under APB No. 25, compensation
expense is measured as the excess of market price over the price the employee
must pay to acquire the stock on the grant date. As required by SFAS No. 123
the Company accounts for stock-based non-employee compensation using the fair
value method. See Notes 10 and 14.
During 1999 and 2000, the Company issued 4,849,096 stock options, of which
4,098,096 and 3,504,096 were outstanding and exercisable as of September 30,
2000 and 1999, respectively. The options were granted at market price and, as
a result, no compensation expense was recognized in 2000 or 1999. The
weighted average exercise price of the options outstanding as of September 30,
2000 is $2.09 per share. The weighted average life of the options outstanding
as of September 30, 2000 is 7.81 years.
Pro forma information regarding net income (loss) and earnings (loss) per
common share is required by SFAS No. 123 and has been determined as if the
Company had accounted for its stock options under the fair value method
defined in that Statement. The weighted average fair value of stock options
granted during 1999 was $.61 per share. The fair value of the stock options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following assumptions: risk-free interest rate of 6.08%, dividend
yield of 0%, expected volatility factor of 10%, and an expected life of 5
years. The Company's pro forma information for the nine months ended
September 30, 2000 follows:
Pro Forma As Reported
------------ --------------
Net loss $ (795,525) $ (795,525)
Loss per common share
Basic (0.06) (0.06)
Diluted (0.06) (0.06)
These pro forma amounts may not be representative of the effects of such
disclosures in future years.
<PAGE>
<PAGE> 14
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
13. STOCK PURCHASE WARRANTS
In connection with the issuance of common stock and notes payable during 2000
and 1999, the Company issued stock purchase warrants that are convertible into
shares of common stock. Each warrant represents the right to purchase one
share of the Company's common stock. Stock purchase warrants outstanding as
of September 30, 2000 consist of the following:
Warrants convertible at an exercise price
of $2.50 per share with expiration dates
ranging from October 2000 to August 2004 548,000
Warrants convertible at an exercise price
of $.25 per share with expiration dates
of February 2001 1,000,000
Warrants convertible at an exercise price
of $.50 per share with expiration dates
ranging from February 2001 to August 2001 1,023,000
----------
2,571,000
==========
14. 2000 STOCK OPTION PLAN AND NONMONETARY TRANSACTION
On September 14, 2000, the Company implemented a stock option plan for the
purpose of maintaining and developing a management team, attracting qualified
officers and employees capable of assisting in future success of the Company,
and rewarding those individuals who have contributed to the success of the
Company.
The options are subject to various types of restrictions as determined by the
Company's board of directors, including vesting periods, exercise rights of
the options, and limits on the terms of up to five years. If an option
holder's employment is terminated within six months of the grant of the
options, any unexercised options become null and void.
In accordance with the terms of the plan, the Company registered 2,500,000
shares of stock to be available for issuance by the Plan. As of September 30,
2000, 1,345,000 options have been granted in connection with a consulting
agreement dated September 12, 2000, of which 750,000 options have been
exercised. No gain or loss on the transaction was recognized. See Notes 10
and 12.
15. EMPLOYEE BENEFIT PLAN
During 1999, the Company implemented a defined contribution plan pursuant to
Section 401(k) of the Internal Revenue Code. The plan covers all employees
meeting eligibility and service requirements. Eligible participants may elect
salary deferral contributions up to 15% of compensation, or the maximum amount
allowed under the Internal Revenue Code. The plan does not provide for
discretionary matching contributions by the Company.
<PAGE>
<PAGE> 15
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
16. INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the financial
reporting basis and tax basis of the Company's assets and liabilities.
Measurement of deferred tax assets and liabilities is based upon the
provisions of enacted tax laws and the effects of future changes in tax laws
or rates. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
Deferred tax assets and liabilities as of September 30, 2000 consist of the
following:
Deferred tax assets attributable to:
Allowance for doubtful accounts $ 1,030
Net operating loss carryforwards 750,007
------------
Gross deferred tax assets 751,037
Valuation allowance (747,062)
------------
Net deferred tax assets 3,975
------------
Deferred tax liability attributable to
Depreciation (3,975)
------------
Net deferred tax asset (liability) $ -
============
As of September 30, 2000, the Company has net operating loss carryforwards for
tax purposes of $1,821,289 expiring as follows:
Year Amount
---- ---------
2002 $ 7,342
2003 49,380
2004 34,314
2005 7,609
2006 6,144
2008 4,073
2009 3,497
2010 2,746
2011 42,794
2017 46,350
2018 365,433
2019 456,082
2020 795,525
----------
$1,821,289
17. TRANSACTIONS WITH RELATED PARTIES
On September 18, 2000 the Company entered into a Development Licensing
Agreement for a term of four years. The licensee subsequently became a
stockholder of the Company (Note 10). The fee for the non-exclusive software
license totaled $87,500, of which $52,500 is receivable as of September 30,
2000.
<PAGE>
<PAGE> 16
LEXON TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
17. TRANSACTIONS WITH RELATED PARTIES (Continued)
During May and June, 2000, the Company leased space from an entity owned by an
officer and director for $2,400 per month. In addition, in June 2000 the
Company sold certain assets to an entity owned by an officer and director for
a total of $61,390.
During 1999, Chicago Map Corporation leased office facilities on a month-to-
month basis from a stockholder at a monthly rental of $3,000. Rent expense
charged to income amounted to $0 and $12,000 for the three and nine months
ended September 30, 1999.
See Note 8 for additional related party transactions.
18. OTHER EVENTS
In February 2000, a new equity investor acquired voting control of the
Company's issued and outstanding shares of common stock. Thereafter, a major
reorganization of the Company and its board of directors was implemented. A
new management team was installed and administrative staff was reduced
significantly. The Company negotiated the transfer of its lease to a related
party at a reduced rent. These changes are expected to reduce employment
costs significantly and result in other cost savings on an annualized basis.
In addition, management is reviewing other financial alternatives available to
the Company to increase liquidity, including restructuring its debt and
raising additional capital.
19. MANAGEMENT PLANS
The Company incurred a net loss of $156,488 and $795,525 in the three and
nine months ended September 30, 2000 and used substantial amounts of working
capital in its operations. As of September 30, 2000, current liabilities
exceeded current assets by $1,790,492 and total liabilities exceeded total
assets by $1,280,304. As a result of these losses, management has executed
changes in its operations to reduce its cash requirements and is working
towards raising additional capital to fund its operations. Continued
operations of the Company are dependant upon the success of these strategies
and its ability to meet its financing requirements.
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<PAGE> 17
ITEM 2. 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
---------------------
Three and Nine Months ended September 30, 2000 compared to September 30, 1999
-----------------------------------------------------------------------------
Net sales increased for the three months ended September 30, 2000 to $204,507
from $201,175 for the three months ended September 30, 1999. During the first
nine months of 2000 net sales increased to $633,460 from $566,396 compared to
the same period in the prior year. The primary factor in the general increase
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 months ended September 30, 2000 to
$190,616 or 93.2% of net sales, compared to $168,443 or 83.7% of net sales for
the same period in the prior year. For the nine month period ended September
30, 2000 gross profit increased to $578,631 or 91.3% of net sales from
$412,421 or 72.8% of net sales for the same period in 1999. The increase in
gross profit for the nine months then ended September 30, 2000 compared to the
same period in the prior year is primarily related to the decrease in
development costs incurred on Chicago Map Corporation products being sold in
the retail market.
Selling, general and administrative expenses decreased to $319,514 or 156.2%
of net sales for the three months ended September 30, 2000 compared to
$362,850 or 180.4% of sales for the same period in 1999. Selling and
administrative expenses for the nine month period ended September 30, 2000
increased to $1,389,792 or 219.4% of net sales compared to $994,152 or 175.5%
of sales for the same period in 1999. The increase for the nine months in
fiscal 2000 is primarily attributable to the expenses necessary to implement
the National Atlas of the United States of America project.
Interest expense for the three months ended September 30, 2000 was $27,590
compared to $30,097 for the same period in 1999. For the nine month period
ended September 30, 2000 interest expense was $100,955 compared to $35,154 for
the same period in 1999. This increase was attributable to various interim
working capital loans.
As a result of the factors described above, net loss decreased to $156,488 for
the three months ended September 30, 2000 from $222,446 for the same period in
1999. Basic loss per share for the third fiscal quarter of 2000 was $0.01
compared to $0.02 for the same period in the prior year. For the first nine
months of 2000, the net loss was $795,525 compared to a loss of $611,778 for
the same period in the prior year. Basic loss per share for the nine month
period ended September 30, 2000 was $.06 compared to $.05 for the same period
in 1999.
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<PAGE> 18
Liquidity and Capital Resources
-------------------------------
For the nine months ended September 30, 2000 the primary source of liquidity
was cash provided by equity investments and stockholder advances. In
addition, in the first quarter of fiscal 2000, the Company received $150,000
cash in settlement of a pending lawsuit. The net cash used in operations was
$138,861 for the nine months ended September 30, 2000 compared to net cash
used in operations of $412,247 for the same period in 1999.
Net cash used in investing activities was $134,917, which was mainly due to
payments of computer software costs of $179,322. For the same period in the
prior year net cash used in investing activities was $603,071.
Net cash provided by financing activities was $253,419 for the nine months
then ended September 30, 2000 compared to $1,145,840 provided in the same
period in the prior year.
The Company incurred a net loss of $156,488 and $795,525 in the three and nine
months ended September 30, 2000 and used substantial amounts of working
capital in its operations. As of September 30, 2000, current liabilities
exceeded current assets by $1,790,492. Additionally, at the date of this
filing, the Company is delinquent on notes payable to certain stockholders and
employees in amounts totaling $973,000 plus accrued interest (See Note 8 to
the financial statements). The Company is currently negotiating extensions
for the repayment of the notes, but cannot say at this date if the extensions
will be granted.
While the Company believes it could generate substantial profits and cash flow
through distribution of the National Atlas of the United States, completing
development of this product will require significant additional funding for
which the Company currently has no commitments. The Company has retained the
services of a financial advisory firm to address its need to raise additional
capital to satisfy its liquidity requirements, but there can be no assurance
that such capital will be available on terms acceptable to the Company, if at
all. Cash generated from the Company's operations is currently significantly
insufficient to fund the development of the National Atlas project and satisfy
the Company's other working capital requirements. In addition, the Company is
required to make significant payments of principal and interest on its
outstanding indebtedness. In light of these factors, there can be no
assurance that the Company will be able to continue its operations on a going-
forward basis if it is unable to obtain additional capital.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
LEXON does not currently possess a significant or material investment
portfolio due to limitations on its cash resources. To the extent that
LEXON's cash resources are invested in interest-bearing or investment-type
accounts, LEXON's investment portfolio would be exposed to market risk as it
relates to interest rates. Investments are comprised of certificates of
deposit, commercial paper, U.S. Treasury securities, asset-backed securities,
and money market accounts. Only high credit quality issuers are used and
exposure to any one issuer is limited by policy. Maturities and average lives
are laddered up to a maximum term of three years. These investments are
considered available for sale and are recorded on the balance sheet at fair
value.
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<PAGE> 19
PART II - OTHER INFORMATION
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
In September 2000, Anthony Perino resigned as a Chief Executive Officer and as
a director of the Company. Kenneth J. Eaken, the President, was appointed as
Chief Executive Officer, and as Chairman of the Board.
In September 2000, the Company implemented a stock option plan (the "2000
Stock Option Plan")for the purpose of maintaining and developing a management
team, attracting qualified officers and employees capable of assisting in
future success of the Company, and rewarding those individuals who have
contributed to the success of the Company. In accordance with the terms of
the plan, the Company registered 2,500,000 shares of stock to be available for
issuance by the Plan. As of September 30, 2000, 1,345,000 options have been
granted in connection with a consulting agreement. See Notes 10 and 12.
In September 2000, the Company entered into an agreement to receive consulting
services, including stockholder communications and relations and marketing
strategies, for a minimum of 12 months. In return, total compensation of
approximately $336,250 will be paid through the issuance of stock options
under the 2000 Stock Option Plan. See Notes 12 and 14.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None.
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<PAGE> 20
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.
Date: November 14, 2000
/S/Kenneth J. Eaken, President and Chief Executive Officer
