Accres Holding (ACCE) 10-Q 2010 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2010

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

For the transition period from ____________ to _____________

Commission File No. 0-33131

LEXICON UNITED INCORPORATED

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

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

4500 Steiner Ranch Blvd.

Suite # 1708, Austin, Texas 78732

(Address of Principal Executive Offices)

(512) 266-3507

(Registrant’s Telephone Number, Including Area Code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.          Yes o No x  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every interactive Data  File  required to be submitted and posted pursuant to Rule 405 of Regulation  S-T  during  the preceding 12 months (or  for  such  shorter  period  that  the  registrant  was required to submit and post such files).  o Yes  No o

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

 Yes o   No  x

The numbers of shares outstanding of each of the issuer’s classes of common equity, as of May 1, 2010, are as follows:

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	8,828,134

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
ITEM 1.	INTERIM FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION	10
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	16
ITEM 4A(T).	CONTROLS AND PROCEDURES	16
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	17
ITEM 1A	RISK FACTORS	17
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES	17
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	17
ITEM 4.	(REMOVED AND RESERVED)	17
ITEM 5.	OTHER INFORMATION	17
ITEM 6.	EXHIBITS	17
		17
SIGNATURES		18

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PART I - FINANCIAL INFORMATION

ITEM 1.                INTERIM FINANCIAL STATEMENTS

LEXICON UNITED INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31			December 31
	2010			2009
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	237,011		$	136,308
Accounts receivable		288,628			387,392
Other  receivables		160,216			209,728
Prepaid expenses		80,406			79,547
Total current assets		766,261			812,975
FIXED ASSETS
Building, equipment, and leasehold improvements, net of accumulated depreciation of $371,477 and $343,648 at March 31, 2010 and December 31, 2009, respectively		1,199,219			1,264,180
OTHER ASSETS
Investment in receivable portfolios		45,215			91,872
Customer Lists,  net of amortization of $218,331 and $205,488 at March 31, 2010 and December 31, 2009, respectively		295,402			308,245
Tradenames, net of amortization of $93,571 and $88,067 at March 31, 2010 and December 31, 2009, respectively		126,600			132,104
Goodwill		693,141			693,141
Security deposit		-			1,350
Total other assets		1,160,358			1,226,712
TOTAL ASSETS	$	3,125,838		$	3,303,867
��
CURRENT LIABILITIES
Loans payable to banks	$	26,184		$	82,319
Current portion of long term debt		439,276			473,828
Bank Overdrafts		169,088			321,594
Current portion of notes payable to individuals		185,666			38,378
Accounts Payable		234,999			269,894
Loans payable to officer		237,420			249,863
Accrued Expenses		889,610			979,027
Accrued Municipal Service Taxes		45,775			46,791
Accrued Payroll and related taxes		396,942			405,726
Accrued Employee Benefits		56,487			57,818
Total Current Liabilities		2,681,447			2,925,238
LONG TERM LIABILITIES
Long term debt		384,674			426,322
Long term portion of notes payable to individuals		97,954			-
Total Long Term Liabilities		482,628			426,322
TOTAL LIABILITIES		3,164,075			3,351,560
STOCKHOLDERS' DEFICIT
Preferred stock $0.001 par value, 10,000,000 shares authorized, none issued and outstanding		-			-
Common stock $0.001 par value, 40,000,000 shares authorized, 8,828,134 and 8,696,134 shares issued and outstanding at March 31, 2010 and December 31, 2009 respectively		8,828			8,708
Paid in capital		3,082,544			3,057,664
Accumulated other comprehensive loss		(272,617	)		(293,624	)
Accumulated deficit		(3,067,519	)		(3,032,228	)
Total Lexicon Stockholders' Deficit		(248,764	)		(259,480	)
Non-Controlling Interest		210,527			211,787
Total Deficit		(38,237	)		(47,693	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	3,125,838		$	3,303,867

See accompanying notes to financial statements.

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LEXICON UNITED INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended
	March 31,
	2010			2009
REVENUES
Service revenue	$	1,168,175		$	779,836
Revenue from receivable portfolios		-			30,309
Total revenues		1,168,175			810,145
COST OF SERVICES		558,774			490,790
GROSS PROFIT		609,401			319,355
COSTS AND EXPENSES
Selling, general and administrative		476,983			350,901
Depreciation		37,198			22,424
Amortization		18,347			18,347
Total costs and expenses		532,528			391,672
OPERATING INCOME (LOSS)		76,873			(72,317	)
OTHER INCOME (EXPENSE)
Interest expense		(122,955	)		(163,596	)
Foreign exchange and other		14,600			(5,372	)
Total Other Income (expense)		(108,355	)		(168,968	)
NET LOSS BEFORE INCOME TAXES		(31,482	)		(241,285	)
Provision for income taxes		-			-
NET  LOSS		(31,482	)		(241,285	)
Less: Net income (loss) attributable to noncontrolling interest		3,806			(48,257	)
NET LOSS ATTRIBUTABLE TO LEXICON UNITED INCORPORATED	$	(35,288	)		(193,028	)
NET LOSS  PER COMMON SHARE (Basic and Diluted)	$	(0.004	)	$	(0.02	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Basic and Diluted)		8,736,134			8,705,334

See accompanying notes to financial statements.

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LEXICON UNITED INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months Ended
	March 31,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(31,482	)	$	(241,285	)
Noncash items included in net loss:
Depreciation		37,199			22,424
Amortization of intangibles		18,347			18,347
Stock based compensation		25,000			24,000
Decrease (increase) in assets:
Accounts receivable		90,106			(24,973	)
Other receivables		44,826			130,164
Prepaid expenses		(2,636	)		(687	)
Security deposit		1,350			-
Increase (decrease) in liabilities:
Accounts payable		(28,893	)		3,436
Accrued interest on loans to individual		2,215			18,829
Accrued expenses		(69,618	)		74,820
NET CASH PROVIDED BY  OPERATING ACTIVITIES		86,414			25,075
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(898	)		-
Investment in receivable portfolio		37,062			30,976
NET CASH PROVIDED BY INVESTING ACTIVITIES		36,164			30,976
CASH FLOWS FROM FINANCING ACTIVITIES
Loan from related party		421			30,235
Loan from an individual		269,512			-
Proceeds of new loans		63,327			-
Repayment of loans		(351,933	)		(119,689	)
NET CASH USED IN  FINANCING ACTIVITIES		(18,673	)		(89,454	)
EFFECT OF EXCHANGE RATE OF CASH		(3,202	)		748
NET INCREASE (DECREASE) IN CASH		100,703			(32,655	)
CASH, BEGINNING OF PERIOD		136,308			291,453
CASH, END OF PERIOD	$	237,011		$	258,798
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	122,955		$	163,596
Non cash items
Issuance of common stock for consulting services	$	25,000

See accompanying notes to financial statements.

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LEXICON UNITED INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE A – BASIS OF PRESENTATION

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included.  Results for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.  For further information, refer to the financial statements and footnotes thereto included in the Lexicon United Incorporated annual report on Form 10-K for the year ended December 31, 2009 filed May 17, 2010.

NOTE B- GOING CONCERN

As indicated in the accompanying financial statements, the Company has an accumulated deficit of $3,067,519 and negative working capital of $1,915,186 at March 31, 2010. Management’s plans include raising adequate capital through the equity markets to fund future operations and generating of revenue through its businesses. Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE C-PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Lexicon United Incorporated, its 80% owned subsidiary, ATN Capital E Participacoes Ltda and its 100% owned subsidiaries Engepet Energy Enterprises, Inc. (“Engepet”) and United Oil Services, Inc. (“United”).  All material intercompany transactions have been eliminated in consolidation.  Engepet and United were newly founded in 2008 and their transactions in 2008 were not deemed to be significant.  In 2009, Engepet and United were inactive.  At December 30, 2009, the minority shareholders transferred the second floor office facilities to the Company at current fair market value.  The Company was also to infuse additional working capital to keep the ownership ratio intact.  As of the date of this report, such infusion has not occurred.

NOTE D – RECENT ACCOUNTING PRONOUNCEMENTS

The Company adopted the provisions of ASC Topic No. 855, “Subsequent Events” (“ASC 855”), on a prospective basis.  The provisions of ASC 855 provide guidance related to the accounting for the disclosure of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued.  Effective February 24, 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements” which revised certain disclosure requirements. ASU No. 2010-09 did not have a significant impact on the Company’s consolidated financial statements. The Company evaluated subsequent events, which are events or transactions that occurred after March 31, 2010 through the issuance of the accompanying consolidated financial statements.

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LEXICON UNITED INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE D – RECENT ACCOUNTING PRONOUNCEMENTS (CON’T)

FASB ASC Topic 810, “Consolidation”.  New authoritative accounting guidance (Accounting Standards Update No 2010-10) under ASC Topic 810 amends prior guidance to change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.  The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.  The new authoritative accounting guidance requires additional disclosures about the reporting entity’s involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its effect on the entity’s financial statements.  This new authoritative accounting guidance under ASC Topic 810 was effective January 1, 2010 and did not have a significant impact on the Company’s financial statements.

NOTE E-FAIR VALUE MEASUREMENTS

On January 1, 2008, The Company adopted the provisions of ASC Topic 820 “Fair Value Measurements and Disclosures” for financial assets and liabilities.  On January 1, 2009, the Company adopted the provisions of Topic 820 for non-financial assets and non-financial liabilities that are recognized and disclosed at fair value on a nonrecurring basis.  Topic 820 defines fair-value, provides guidance for measuring fair value and requires certain disclosures.  It does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements.

Topic 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The Company’s financial instruments measured at fair value on a recurring basis are summarized below:

		Fair
	Fair	Value at		Fair Value at
	Value	March 31,		December 31,
Financial Instruments	Hierarchy	2010		2009
Cash and cash equivalents	Level 1	$	237,011	$	136,508

The Company does not have any non-financial assets or liabilities that are measured at fair value on a non-recurring basis.

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LEXICON UNITED INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE F  - INVESTMENT IN RECEIVABLE PORTFOLIO

The Company’s subsidiary ATN Capital e Participacoes Limitada (“ATN”) has extensive experience in the field of distressed credit card and consumer loan receivable collections.  It had previously only collected distressed debt for large credit card companies and financial institutions in Brazil, on a commission basis.  In 2008, in addition to working for the large institutions, it decided to purchase its own portfolio (“Portfolio”) of distressed debt.  The portfolio was purchased for R$1,299,458 (approximately US $816,294) on June 2, 2008.  The portfolio includes past due and unpaid debt from more than 41,000 Brazilian consumers and has a face value of approximately R$500,000,000 (or US$305 million as of the purchase date).

The Company has adopted FASB ASC Subtopic 310-30 (“Subtopic 310-30”) “Loans and Debt Securities Acquired with Deteriorated Credit Quality”.  In accordance with Subtopic 310-30, The Company can account for its investments in Portfolios using either the interest method or the cost recovery method. The interest method applies an effective interest rate to the cost basis of the pool.  Subsequent increases in cash flows expected to be collected generally should be recognized prospectively through adjustment of the loan’s yield over its remaining life while any decreases in cash flows expected to be collected should be recognized as impairments. The Company used the interest method through June 30, 2009 and has determined that the amount and timing of future cash collections on the Portfolios are not reasonably predictable, and therefore, beginning July 1, 2009, commenced using the cost recovery method.  Under the cost recovery method of accounting, no income is recognized until the purchase price of the portfolio has been fully recognized.

An analysis of the portfolio activity under the cost recovery method at March 31, 2010 is as follows:

Portfolio carrying value at December 31, 2009	$	91,872
Portfolio collections for the period January 1, 2010 to March 31, 2010		(37,062	)
Change in currency rates for the period		(9,595	)
Balance, March 31, 2010	$	45,215

NOTE G – USE OF ESTIMATES

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

NOTE H– REVENUE RECOGNITION

The Company derives its revenue primarily from collection of distressed debt by entering into non binding agreements with financial institutions to collect their delinquent debt.  Once an agreement is reached with the debtor of the financial institution based upon established parameters, an installment agreement is established.  The Company is then entitled to a commission on the agreed settlement.  The Company earns and records the pro rata commission for each installment, when the installment payments are received from the debtors.  Revenue from the collection of distressed debt owned by the Company is recognized based on FASB ASC Subtopic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” using the cost recovery method commencing July 1, 2009 and the interest method prior to July 1, 2009. (See Note F).

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LEXICON UNITED INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE I– RELATED PARTY

At various times during the year 2009, two shareholders have advanced funds to the Company for working capital. The advances are unsecured and bear interest at the rate of 2% per month.  The loans have no stated maturity date and should either party terminate the loans, the loans are repayable within 30 days.  At March 31, 2010, the balance outstanding on the loans was $237,420.

NOTE J – NOTES PAYABLE TO INDIVIDUALS

In December, 2009, the Company borrowed $29,000 from an individual for working capital.  The loan is due on June 22, 2010 and bears interest at the rate of 18% per year.  The balance of the loan at March 31, 2010 is $13,470.

In January, 2010, the Company borrowed approximately $270,000 from several individuals for working capital.  The loans are due in January, 2012 and bear interest at the rate of 18% per year.  The balance of the loans at March 31, 2010 is $270,150.

NOTE K - STOCKHOLDERS’ EQUITY

On March 10, 2010, the Company has included 120,000 of its common shares as issued and outstanding for consulting fees incurred.  The shares were valued at $1.25 per share.  Consulting expense charged to operations as of March 31, 2010 was $25,000.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND USE OF TERMS

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

· our potential inability to raise additional capital;

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

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

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

· changes in economic conditions;

· lack of resources compared to our competitors;

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

· fluctuations in currency exchange rates;

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

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

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

· other risks and uncertainties.

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

· “Lexicon,” “we,” “us,” “our,” or the “Company,” are references to Lexicon United Incorporated, and its consolidated subsidiary, including, after February 27, 2006, ATN;

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

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

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

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

10

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

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

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

Overview

Our Background and History

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

Critical Accounting Policies

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

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

Revenue Recognition

We derive our revenues primarily from collection of distressed debt by entering into non-binding agreements with financial institutions to collect their debt. Once an agreement is reached with the debtor of the financial institution based upon established parameters, an installment agreement is established. We are then entitled to a commission on the agreed settlement. We earn and record the pro rata commission for each installment, when the installment payments are received from the debtors.

Revenue from the collection of distressed debt owned by the Company is recognized based on FASB ASC Subtopic 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” using the cost recovery method commencing July 1, 2009 and the interest method prior to July 1, 2009.  Under the cost recovery method, revenues are only recognized after the initial investment has been recovered.

Goodwill and Intangible Impairment

The company accounts for goodwill in accordance with FASB ASC Topic 350 “Intangibles-Goodwill and Other”.  As required, the Company tests for impairment of goodwill annually (at year-end) or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.  The required two-step approach uses accounting judgments and estimates of future operating results.  Changes in estimates or the application of alternative assumptions could produce significantly different results.  Impairment testing is done at a reporting unit level.  The company performs this testing for its Brazilian operating segment which is considered a reporting unit under FASB ASC Topic 350. An impairment loss generally is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit.  The fair value of the company’s reporting unit was estimated using the expected present value of future cash flows using estimates, judgments, and assumptions that management believes were appropriate in the circumstances.  The estimates and judgments that most significantly affect the fair value calculation are assumptions related to revenue growth, collection processes, and the discount rate.  There was no impairment of assets at March 31, 2010.

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Industry Wide Factors that are Relevant to Our Business

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

Uncertainties that Affect our Financial Condition

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

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

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

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

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

Charged-off receivables accounted for more approximately 99% of our business in 2009, while semi-performing and performing receivables each accounted for less than 1% of our business in the period.  ATN’s long period of operations and its demonstrated capacity to process millions of receivables, large and small, have made ATN an attractive resource for customers desiring to secure their receivables.  Our success rate is measured by how long an outstanding debt is past due as well as whether such debt has been categorized as a performing, semi-performing or charged-off item.  On average we recover between 2.5% and 8% of face value of our debt. Due to our level of professionalism and our successful performance we believe that we are in the top 5% of businesses in this field in Brazil.  

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

Investment in Receivable Portfolio

The Company’s subsidiary ATN Capital e Participacoes Limitada (“ATN”) has extensive experience in the field of distressed credit card and consumer loan receivable collections.  It had previously only collected distressed debt for large credit card companies and financial institutions in Brazil, on a commission basis.  In 2008, in addition to working for the large institutions, it decided to purchase its own portfolio of distressed debt.  The portfolio was purchased for R$1,299,458 (approximately US$816,294) on June 2, 2008.  The portfolio includes past due and unpaid debt from more than 41,000 Brazilian consumers and has a face value of approximately R$500,000,000 (or US$305 million as of the purchase date).  

The Company has adopted FASB ASC Subtopic 310-30 (“Subtopic 310-30”) “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (prior authoritative literature: AICPA Statement of Position 03-3 (“SOP 03-3”), “Accounting for Loans or Certain Securities Acquired in a Transfer”).  In accordance with Subtopic 310-30, The Company can account for its investments in receivable portfolios using either the interest method or the cost recovery method. The interest method applies an effective interest rate to the cost basis of the pool.  Subsequent increases in cash flows expected to be collected generally should be recognized prospectively through adjustment of the loan’s yield over its remaining life while any decreases in cash flows expected to be collected should be recognized as impairments. The Company used the interest method through June 30, 2009 and has determined that the amount and timing of future cash collections on the receivable portfolios are not reasonably predictable, and therefore, beginning July 1, 2009, commenced using the cost recovery method.  Under the cost recovery method of accounting, no income is recognized until the purchase price of the portfolio has been fully recognized.

An analysis of the portfolio activity under the cost recovery method at March 31, 2010 is as follows:

Portfolio carrying value at December 31, 2009	$	91,872
Portfolio collections for the period January 1 to March 31, 2010		(37,062	)
Change in currency rates for the period		(9,595	)
Balance, March 31, 2010	$	45,215

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Results of Operations 

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009.

The following table summarizes the results of our operations during the three months ended March 31, 2010, and 2009 and provides information regarding the dollar and percentage increase or (decrease) from the three month period ended March 31, 2010 to the same period of 2009.

	3/31/10			3/31/09			Increase (Decrease)			Percentage Increase (Decrease)
Revenues		1,168,175			810,145			358,030			44.2
Cost of Services		558,774			490,790			67,984			13.86
Selling, General and Administrative Expense		476,983			350,901			126,082			35.93
Interest expense		122,955			163,596			(40,641	)		(24.85	)
Depreciation & amortization		55,545			40,771			14,774			36.24
Foreign Exchange & other		14,600			(5,372	)		19,972			371.78
Net income (loss) –Lexicon United		(35,288	)		(193,028	)		157,740			81.72
Earnings (Loss) per common share		(.004	)		(.02	)		.016			80.0

We had revenues of $1,168,175 for the three months ended March 31, 2010, compared to revenues of $810,145 during the same period in 2009.  Our revenues increased 44.2% in the three months ended March 31, 2010 primarily due to an increase in collections of receivables in addition to the effect of changes in the foreign exchange rate.

Our cost of services for the three months ended March 31, 2010 was $558,774 as compared to $490,790 during the same period in 2009.  This increase of $67,984 is primarily the result of net decrease of approximately $40,458 in employee related expenses, postal and mail services and internship program expenses, offset by  the effect of changes in the foreign exchange rate of approximately $108,442.

Selling, general and administrative expenses increased by $126,082 or 35.93 %, to $476,983 in the three months ended March 31, 2010 compared to $350,901 in the same period in 2009.  The change is the result of a net increase of approximately $36,265 in telephone, account services and software rent offset by decreases in agreement losses and professional fees and the effect of changes in the foreign exchange rate of approximately $89,817.

Interest expense for the three months ended March 31, 2010 was $122,955 and interest expense in the same period of 2009 was $163,596.  Interest expense decreased 24.85% in the three months ended March 31, 2010 due to a reduced amount of total debt which resulted in a decrease of approximately $58,300 in interest offset by the changes in the foreign exchange rate of approximately $17,659.

During the three months ended March 31, 2010 we incurred a net loss of $(35,288) compared with $(193,028) for the same period in the prior year.  The decrease in our loss is primarily due to the changes in expenses and revenues as described above, the effect of the change in the foreign exchange rate in addition to the adoption of FASB ASC Topic 810, which allocated $3,806 gain to the non-controlling interest.

Loss per common share for the three months ended March 31, 2010 was $(.004) as compared to a loss of $(.02) during the same period of 2009.  

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Cash Flow Items

The following table provides the statements of net cash flows for the three months ended March 31, 2010.

	Three Months Ended March 31,
	2010			2009
Net Cash Provided By Operating Activities		86,414			25,075
Net Cash Provided By Investing Activities		36,164			30,976
Net Cash Used In Financing Activities		(18,673	)		(89,454	)
Net increase  in Cash and Cash Equivalents		100,703			(32,655	)
Cash and Cash Equivalents - Beginning of Period		136,308			291,453
Cash and Cash Equivalents - End of Period		237,011			258,798

We provided $86,414 of cash from our operating activities during the three months ended March 31, 2010 as compared to $25,075 cash provided during the three months ended March 31, 2009.  The difference of $61,339 is mainly attributable to a decrease in net loss of $209,803 offset by decreases in accounts payable and accrued expenses of $176,767.

We provided $36,164 in cash from our investing activities during the three months ended March 31, 2010, as compared to $30,976 in the prior period ending March 31, 2009.  The increase in funds is primarily due to the collections from our investment in receivable portfolio. 

We used a net of $18,673 from financing activities during the three months ended March 31, 2010 as compared to using funds of $89,454 during the three months ended March 31, 2009.  The change is primarily due to an increase in borrowings from individuals and an increase in the repayment of loans.

Balance Sheet Items

As of March 31, 2010, we had total current assets of $766,261 as compared to $713,334 as of March 31, 2009.  Our total assets as of March 31, 2010 were $3,125,838 as compared to $2,888,586 as of March 31, 2009.  We had total current liabilities of $2,681,447 as of March 31, 2010 as compared to $3,227,282 as of March 31, 2009, and we had total liabilities of $3,164,075 as of March 31, 2010 as compared to $3,385,842 as of March 31, 2009.

The increase in total assets is primarily due the increase in fixed assets of approximately $631,402 a decrease in the investment in receivable portfolio of $479,138, a decrease in customer lists and tradenames of $73,389 and the effects of changes in the foreign exchange rates. The decrease in total liabilities is due to an increase accounts payable and accrued expenses of $444,609 offset by a decrease in accrued municipal service and payroll taxes of $680,528 and the effects of the change of the foreign exchange rates.

As of March 31, 2010, our total Stockholders’ Equity (deficit) was $(38,237) as compared to $(497,256) at March 31, 2009.  

Liquidity and Capital Resources   

We believe that we will be able to pay our normal and operating expenditures during the next twelve months with our cash reserves and additional cash generated from operations, and by reducing our accrued municipal services and payroll tax liabilities by restructuring such debt.  We do not have any material capital commitments during the next twelve months, other than repayment of debt as it comes due, and we do not anticipate the issuance of additional debt (other than to refinance existing debt).  We also do not anticipate any material changes in our operations during the next twelve months.  As such, we believe that our current cash position is sufficient to retire our current short-term debt as it comes due and, if we are successful in adequately restructuring our municipal services tax liability we believe that cash generated from operations will be sufficient to pay our operating expenses during the next twelve months.  We had cash and cash equivalents of approximately $237,011 as of March 31, 2010 and we had short-term liabilities in the amount of $2,681,447, as well as long-term liabilities in the amount of $482,628 as of March 31, 2010.  The Company intends to use its cash to retire current debt as it comes due as well as to pay operating expenses as necessary. During 2009, the Company evaluated their payroll tax and related accruals and reduced amounts previously recorded by approximately $712,958. The reduction in 2009 is the result of recalculating the employee withholding taxes under Brazilian guidelines.

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

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As of March 31, 2010, we had total current assets of $766,261 as compared to $713,334 as of March 31, 2009.  Our total assets as of March 31, 2010 were $3,125,838 as compared to $2,888,586 as of March 31, 2009.  We had total current liabilities of $2,681,447 as of March 31, 2010 as compared to $3,227,282 as of March 31, 2009, and we had total liabilities of $3,164,075 as of March 31, 2010 as compared to $3,385,842 as of March 31, 2009. We have a $(1,915,186) negative working capital at March 31,2010 of which $499,204 relates to municipal taxes and payroll expenses in connection with ATN’s prior and ongoing operations.

Loans Payable to Banks

The Company has several loans with various Brazilian banks and financial institutions.  The loans are secured by personal guarantees of the Company’s principal shareholders.  The loans mature at various months throughout the year and are generally renewed at maturity.  The interest rates are fixed and bear interest at rates ranging from 26% to 42% per year.  The balance of the loans at March 31, 2010 was $26,184.   

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 Participacoes, 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 13.29%.  

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. 

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

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

In July, 2008, the Company borrowed approximately $77,000 from Banco ITAU. The loan is payable in 18 monthly installments plus interest of 2.28% per month, commencing August, 2008. The loan is personally guaranteed by ATN’s directors.

In July, 2008, the Company borrowed approximately $3,500 from Officer Distribution Production. The loan is payable in 36 monthly installments plus interest of 1.15% per month, commencing August, 2008. The loan is personally guaranteed by ATN’s directors. 

During the year ended December 31, 2008, the Company purchased new computer equipment from DELL Brazio. The equipment valued at approximately $15,500 is financed over a three year period plus interest at rates ranging from 11.4% to 13.8% per year. The loan is secured by the computer equipment.

In June, 2009, the Company borrowed approximately $25,000 from Banco Mercantile do Brasil.  The loan is payable in 12 monthly installments plus interest of 3.2% per month, commencing July, 2009.  The loan is personally guaranteed by ATN’s directors.  

In July, 2009, the Company borrowed approximately $42,500 from Banco Santander.  The loan is payable in 18 monthly installments plus interest of 2.53% per month, commencing August, 2009. The loan is personally guaranteed by ATN’s directors.

In October, 2009, the Company borrowed approximately $432,000 from BNP Banco Brasil.  The loan is payable in 46 monthly installments plus interest of 2.00% per month, commencing December, 2009.  The loan is personally guaranteed by ATN’s directors.  

In October, 2009, the Company borrowed approximately $81,000 from Banco Bradesco.  The loan is payable in 12 monthly installments plus interest of 2.30% per month, commencing December, 2009.  The loan is personally guaranteed by ATN’s directors.  

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In December, 2009, the Company borrowed approximately $87,450 from Banco Real.  The loan is payable in 24 monthly installments plus interest of 2.00% per month, commencing January, 2010.  The loan is personally guaranteed by ATN’s directors.  

In December, 2009, the Company borrowed approximately $33,000 from HSBC Capital.  The loan is payable in 12 monthly installments plus interest of 2.00% per month, commencing January, 2010.  The loan is personally guaranteed by ATN’s directors.  

In December, 2009 the Company assumed the note payable related to the contribution of the 9th floor office space by the minority shareholders. The loan is payable at $4,129 per month which includes interest which is adjustable annually.  .

In January, 2010, the Company borrowed approximately $63,000 from Caixa Economica.  The loan is payable in 24 monthly installments plus interest of 1.43% per month, commencing February, 2010.  The loan is personally guaranteed by ATN’s directors.

An analysis of the current and long-term portion at March 31,2010 is as follows:

Total loans outstanding	$	823,950
Less: current portion		439,276
Long-term portion	$	384,674

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

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

Off-Balance Sheet Arrangements

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

Seasonality

Our operating results are not affected by seasonality.

Inflation

Our business and operating results are not affected in any material way by inflation.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), Elie Saltoun, and Vice President and Secretary, Jeffrey Nunez, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Report (March 31, 2010).  Based on such evaluation, our CEO, CFO and Vice President have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s CEO, CFO and Vice President, as appropriate to allow timely decisions regarding required disclosure.  The material weakness identified by the Company is its inability to produce financial statements in a timely manner in order to facilitate a timely filing of its required reports to the U.S. Securities and Exchange Commission. Additionally, the Company has only two directors; no outside directors and no audit committee. The Company is undertaking to resolve these issues in a manner which will permit timely disclosure and filing of required reports in the future.  

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Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended March 31, 2010 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

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

ITEM 1A.    RISK FACTORS.

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

ITEM 2.  UNREGISTERED SHARES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the fiscal quarter ended March 31, 2010 that were not previously disclosed in a report that was filed during that period.  

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.  

Not applicable.

ITEM 4.  (REMOVED AND RESERVED)

ITEM 5.  OTHER INFORMATION.  

None.

ITEM 6. EXHIBITS

Exhibit
Number	Description
31.1.	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2.	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATED:  May 24, 2010

LEXICON UNITED INCORPORATED
By:	/s/ Elie Saltoun
	Elie Saltoun
	Chief Executive Officer,

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EXHIBIT LIST

31.1.	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2.	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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