LEXICON UNITED INCORPORATED
4500 Steiner Ranch Blvd.
Suite # 1708, Austin, Texas 78732
May 15, 2007
By EDGAR Transmission and by Hand Delivery
Larry Spirgel
Assistant Director
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: | Lexicon United Incorporated Amendment No. 2 to Registration Statement on Form SB-2 Filed April 25, 2007 File No. 333-130271 Form 10-KSB for the year ended December 31, 2006 Filed April 17, 2007 File No. 0-33131 |
Dear Mr. Spirgel:
On behalf of Lexicon United Incorporated (“Lexicon”), we hereby submit this Amendment No. 3 (the “Amendment”) to our Registration Statement on Form SB-2 (the “Registration Statement”) in response to the general comments of the staff (the Staff) of the Securities and Exchange Commission (the “Commission”) set forth in the Staff’s letter, dated May 4, 2007, with respect to the Registration Statement.
We understand and agree that:
- Lexicon is responsible for the adequacy and accuracy of the disclosures in the filings.
- The Commission’s comments or changes to disclosures in response to Lexicon’s comments do not foreclose the Commission from taking any action on the filings.
- Lexicon may not assert the Commission’s comments as a defense in any proceedings initiated by the Commission or any person under the United States’ federal securities laws.
Larry Spirgel
Page 2 of 8
May 14, 2007
General
1. | We note your changes made and response to prior comment 1 and are unable to agree. Although the number of shares offered by affiliates is a factor in the primary versus secondary analysis, it is only one factor. The total amount of securities being offered by all selling shareholders as a percentage of the total number of shares outstanding not held by affiliates must also be considered, as well as factors mentioned in our prior comment (that the purpose of the offering is to create a market and the bullet points from our prior comment). Please revise the offering so that the terms are consistent with a primary offering or provide us your analysis in your response letter as to why the offering should be considered a secondary offering. |
RESPONSE:
We note your comment and the shares owned by affiliates of the Company are no longer being offered for sale in the Amendment. We believe that the remaining selling stockholders may offer their shares under Rule 415.
Prospectus Cover Page
2. | We note your changes made and response to prior comment 4 and are unable to agree. If the offering is deemed to be a primary offering, then all the selling shareholders are deemed to be underwriters. Please revise accordingly. |
RESPONSE:
Please see our response to Comment No. 1 above.
Prospectus Summary, page 1
3. | As requested in prior comment five, please clarify your status as a SEC reporting company, including the date your reporting obligation commenced. In the section titled “Where You Can Find More Information,” provide the correct address of the Commission: 100 F Street, NE. |
RESPONSE:
We have corrected the address for the SEC’s public reference library in the Amendment.
Larry Spirgel
Page 3 of 8
May 14, 2007
Plan of Distribution, page 14
4. | Revise the disclosure to make clear that selling shareholders will offer their shares at a fixed price of $ l.00. |
RESPONSE:
Please see our response to Comment No. 1 above.
Management’s Discussion and Analysis or Results of Operation, page 25
5. | As requested in prior comment 15, disclose the company’s success rate in securing receivables and the impact of existing as a public company with true operations, including both cost and management resources. |
RESPONSE:
We have revised the Amendment to disclose that ATN’s long period of operations and its demonstrated capacity to process millions of receivables, large and small, have made ATN an attractive resource for customers desiring to secure their receivables.
Larry Spirgel
Page 4 of 8
May 14, 2007
6. | We note reference to various sources on page 25. Provide us with marked copies of any reports substantiating these claims or remove them. |
RESPONSE:
Our claims regarding the growth of the credit card sector in Brazil are generally known to be true among industry groups in Brazil. However, we have revised the disclosure to reference a report on Credit Card Services in Brazil prepared by the US Department of Commerce’s U.S. Commercial Service in Brazil. The report is attached hereto as Exhibit A.
7. | Expand the disclosure to address ATN’s “10-year collections track record.” |
RESPONSE:
We have revised the Amendment to disclose that ATN has been an successful operating company for the last ten years and has developed a database of consumers and credit collection experience over these years.
Liquidity and Capital Resources, page 31
8. | As requested in prior comment 19 allocate the amounts necessary over the next 12 months to cover all budgeted expenses deemed material. Discuss the anticipated milestones in implementing your plan of operation over the next l2 months and the time frame and cost for beginning and completing each milestone. |
RESPONSE:
Our Company is able to cover its normal and operating expenditures through its normal operations. The Company does not anticipate any unusual material expenditures, and if such an event should arise, the Company has approximately $750,000 in cash in its US bank accounts to cover such an event. Since the Company operates through its subsidiary, ATN which has been in existence for over 10 years, the Company does not anticipate any changes in operations in its normal course of business and the Company has no major plans to change its current mode of operations.
9. | Please ensure that you discuss and disclose the terms of all material notes and debt obligations. In this regard, reference is made to page F-13 and to your balance sheet as of December 31, 2006. |
RESPONSE:
We have revised our disclosures under “Liquidity and Capital Resources” to include the following disclosures:
Larry Spirgel
Page 5 of 8
May 14, 2007
Short Term Debt
The Company has several loans with various Brazilian banks and financial institutions. The loans are secured by personal guarantees of the Company’s principal shareholders and bear interest at rates ranging from 6% to 36%. The balance of the loans at December 31, 2006 was $621,052.
Long Term Debt
On April 17, 2006, the Company closed on a real estate transaction to purchase the 8th floor of an executive office building for ATN Capital E Participações Ltda.’s executive offices. The purchase price of approximately $176,489 was funded with a 20% down payment payable over four months and an 8 year adjustable rate mortgage currently at 12%.
In August, 2006, the Company purchased new computer equipment from DELL Brazil. The equipment valued at approximately $38,395 is financed over a three year period at 14.4% per year.
In August, 2006, the Company borrowed a working capital loan from Banco Bradesco. The loan is valued at approximately $93,100 and is payable in 24 monthly installments at 2.7% per month, commencing September 17, 2006. The loan is guaranteed by a promissory note signed by ATN’s directors. At December 31, 2006, the balance is $78,921.
In September, 2006, the Company purchased new furniture. The furniture valued at approximately $112,161 is financed over a five year period at 5.69% per year plus the inflation index. The loan is payable in 48 monthly installments commencing October 8, 2007. The loan is secured by the furniture.
Larry Spirgel
Page 6 of 8
May 14, 2007
An analysis of the current and long-term portion of the debt at December 31, 2006 is as follows:
Total loans outstanding | $ | 405,966 | ||
Less: current portion | 76,254 | |||
Long-term portion | $ | 329,712 |
At December 31, 2006, maturities of long term debt are as follows:
2008 | $ | 96,708 | ||
2009 | 72,471 | |||
2010 | 50,100 | |||
2011 | 43,074 | |||
2012 and thereafter | 67,359 | |||
Total | $ | 329,712 |
Our financial statements have been prepared on the basis that we will continue as a going concern, which contemplates the realization and satisfaction of our liabilities and commitments in the normal course of business.
We believe that our increased revenues and our cash on hand will be sufficient to sustain our operations at our current levels for the next twelve months.
Financial Statements
Lexicon United Incorporated and Subsidiary Financial Statements, page F-1
Consolidated Statements of Operations, page F-4
10. | Please reclassify your “loss on disposal of fixed assets” for the year ended December 31, 2006 to reflect it as a component of operating costs and expenses in your statements of operations. |
RESPONSE:
We have reclassified the loss on disposal of fixed assets to operating.
Consolidated Statements of Cash Flows, page F-5
11. | Revise your statement of cash flows to present the activity associated with “loans from financial institutions” on a gross basis by separately disclosing new borrowings and repayments, as required by SFAS 95. |
Larry Spirgel
Page 7 of 8
May 14, 2007
RESPONSE:
We have revised the statement of cash flows to record gross borrowings and repayments separately.
Note D — Acquisition of ATN Capital E Participacoes, Ltda. page F-11
12. | We note your response to prior comment 20. Please disclose the pro forma information required by paragraph 54 of SFAS 141 for the year ended December 31, 2005, reflecting the acquisition as if it had occurred at January 1,2005. |
RESPONSE:
We have provided the additional disclosures required by paragraph 54 of SFAS 141 for the year ended December 31, 2005.
Form 10-KSB for Fiscal Year Ended December 31 2006
13. | Please revise your Form 10-KSB to comply with the above comments, as applicable. |
RESPONSE:
The Company’s will file an amended Form 10KSB for fiscal year 2006 to include the changes for comments 10 to 12 on or about the date of the filing of this Amendment.
Larry Spirgel
Page 8 of 8
May 14, 2007
If you would like to discuss Registration Statement or if you would like to discuss any other matters, please contact the undersigned at (512) 266-3507 or Louis A. Bevilacqua, Esq. of Thelen Reid Brown Raysman & Steiner LLP, our outside special securities counsel at (202) 508-4281.
Sincerely, LEXICON UNITED INCORPORATED By: /s/Elie Saltoun Elie Saltoun Chief Executive Officer |
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Exhibit A