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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 1, 2004
AGU ENTERTAINMENT CORP.
(Exact Name of Registrant as Specified in its Charter)
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Colorado 005-79752 84-1557072
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
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1107 Biscayne Boulevard, Suite 101
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Miami, Florida 33161
(Address of principal executive offices, including zip code
(305) 899-6100 Registrant's telephone number,
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Including area code
Lexington Barron Technologies, Inc.
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102 Tejon Street, Suite 1100
Colorado Springs, Colorado 80903
(Former name or former address,
if changed since last report)
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ITEMS 1 AND 2. CHANGES IN CONTROL OF REGISTRANT; ACQUISITION OR DISPOSITION OF
ASSETS
Lexington Barron Technologies, Inc. (the "Company") was incorporated in
the State of Colorado on August 23, 2000 for the purpose of addressing the
specific needs of small businesses and startup organizations by providing a
broad range of consulting and advisory services, ranging from market research
and analysis to business plan and systems development to financial consulting.
Recently, the Company's management determined that their business model was not
progressing as they wished and that the Company should either merge with or
acquire an operating company with an operating history and assets. On March 15,
2004, the Company entered into a Stock Exchange Agreement with Pyramid Music
Corp., a Florida corporation ("PMC"). Under the terms of the Stock Exchange
Agreement, the Company acquired 100% of the stock of PMC in exchange 16,922,464
shares of common stock of the Company (the "Stock Exchange"). As a result of the
Stock Exchange, which was consummated on April 1, 2004, the former shareholders
of PMC, owned on a fully diluted basis, approximately 80% of the then issued and
outstanding shares of common stock of the Company.
On March 26, 2004, the Company changed its name to AGU Entertainment Corp.
Following the completion of the Stock Exchange, the Company had issued and
outstanding 21,053,076 shares of common stock. See "Security Ownership of
Certain Beneficial Owners and Management." As of April 1, 2004, the former
principal owners of Lexington Barron Technologies, Inc.'s common stock owned
4,130,612 shares, or approximately 20% of the outstanding common stock of the
Company.
In connection with the Stock Exchange, the Company's directors appointed
the nominees of the former shareholders of PMC to fill the existing vacancies on
the board of directors and then resigned as members of the board.
As a result of the Stock Exchange, the Company has the following
wholly-owned subsidiaries:
o Pyramid Music Corp, a Florida corporation, which in turn wholly owns
the following subsidiaries:
o The Tube Music Network, Inc., a Florida corporation, and
o Pyramid Records International, Inc., a Florida corporation.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the
Securities and Exchange Commission (the "SEC"), AGU Entertainment Corp. is the
successor issuer to Lexington Barron Technologies, Inc. for reporting purposes
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
DESCRIPTION OF BUSINESS.
In this section, the terms "Company," "we," "us" or "our" refer to AGU
Entertainment Corp. as it exists following completion of the Stock Exchange,
unless the context otherwise indicates. The Company is headquartered at 11077
Biscayne Blvd., Suite 100, Miami, Florida 33161 and its telephone number is
(305) 899-6100.
GENERAL
As a result of the Stock Exchange, the Company, through its subsidiary
PMC, has two wholly-owned operating entities that are or will become engaged in
the following services: (i) the formation and operation of a television network,
The Tube Music Network, Inc. ("The Tube"), that plans to air traditional music
video archives and live concert DVDs of contemporary music material that is
derived from archived video and music collection libraries, and (ii) a
production, marketing and distribution record company, Pyramid Records
International, Inc. ("Pyramid Records"), that has merged audio, visual and
Internet content into one corporate concept.
The Tube:
The Tube is creating a television network that will air audio and video of
archived and current adult music material. It is our intent that the television
network will have the ability to simultaneously broadcast live radio, television
and Internet concerts. It will be the Company's critical distribution channel
and platform to market and sell CD's, DVD's and other merchandise. We anticipate
that The Tube will also receive revenues from advertising by third parties.
Unlike other television networks, such as MTV and VH1, which are focused
on reality programming and music directed at a young audience, The Tube's focus
will be music for the adult market, ages 30 and above. Demographically, it is
this adult market that purchases most of the music in the United States today,
yet no other television network exists to serve this market. The Company
anticipates that it will commence broadcasting its television network in the
second quarter of 2004.
Pyramid Records:
Pyramid Records is a newly formed production, marketing and distribution
record company. This record company currently has a distribution agreement with
Ark 21 Records, L.P., an affiliate of Universal Music, the largest record
company distributor in the world.
Pyramid Records generates and will generate revenues from a variety of
sources, including sales of records to mass merchandisers and other retail
outlets, the Internet, television and film soundtracks, theme song sales,
greatest hits live albums, filmed live concerts, and merchandising in
non-traditional retail outlets. Pyramid Records had revenues of approximately
$60,000 from inception through December 31, 2003.
COMPETITION
The Tube and Pyramid Records are both in industries that are highly
competitive, with many national and international firms competing in the areas
served by the Company. Many of these competitor firms are well established in
these markets and many have greater financial resources and managerial
capabilities than the Company. The Company expects to encounter substantial
competition in its efforts to grow its business.
EMPLOYEES
The Company and its subsidiaries employ, on a full time basis, 20
employees, consisting of five employees in administration, sales and management,
five employees within The Tube division, and ten employees of the Pyramid Record
division. The Company considers its relationship with its employees to be good.
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RISK FACTORS
The following is a summary of the principal risks associated with the
ownership of our common stock. You should consider carefully these risk factors,
together with all of the other information in this report.
Risks Inherent to this Company:
WE ARE A DEVELOPMENT STAGE COMPANY WITH A LIMITED OPERATING HISTORY AND WE
ANTICIPATE THAT WE WILL HAVE OPERATING LOSSES IN THE FORESEEABLE FUTURE.
Pyramid Music Corp. was incorporated on May 20, 2003. We have spent our
time and money on developing the business concept, establishing relationships
within the industry, locating the video and music content needed to launch the
television network, acquiring distribution rights, and otherwise developing a
foundation for our business concept. We have no existing income and a very
limited operating history from which to evaluate our business prospects. We
cannot assure you that we will ever achieve profitable operations or generate
significant revenues. Our future operating results depend on many factors,
including demand for our products, the level of competition, and the ability of
our officers to manage our business and growth. Our limited operating history
and the emerging nature of the market in which we will compete make it difficult
to forecast revenues or earnings accurately. As a result, we anticipate that we
will have operating losses for the foreseeable future.
WE WILL NEED ADDITIONAL CAPITAL AND IT MAY NOT BE AVAILABLE ON AFFORDABLE TERMS,
IF AT ALL.
We have very limited financial resources. We anticipate that we will
require additional capital to fund our operations. Since we will require
additional capital to implement our business strategy, we will need to seek
external debt or equity financing. Although we anticipate that we will have
limited lines of credit available to us, the sources of funds or other financing
may not be available for us in light of our financial condition or may not be
available in amounts we require to operate our business. Our failure to obtain
additional capital to finance our working capital needs at acceptable terms will
negatively impact our business, financial condition and liquidity.
OUR SUCCESS IS DEPENDENT ON OUR SENIOR MANAGEMENT TEAM AND OUR ABILITY TO HIRE
AND RETAIN QUALIFIED EMPLOYEES.
We believe that our success is substantially dependent on: (1) our ability
to retain and motivate our senior management team and other key employees; and
(2) our ability to identify, attract, hire, train, retain and motivate other
qualified personnel. The development of our business and operations is dependent
upon the efforts and talents of our executive officers. We cannot assure you
that we will be successful in retaining the services of any of the members of
our senior management team or other key personnel, or in hiring qualified
technical, managerial, marketing and customer service personnel. We do not have
"key person" life insurance policies on any of our key personnel, so in the
event of a tragic incident during the development phase of the Company, we would
find ourselves in a very precarious position without the financial ability or
management skill to overcome it. If we do not succeed in retaining our employees
and in attracting new employees, our business could suffer significantly.
-3-
EXISTING SHAREHOLDERS MAY SUFFER SUBSTANTIAL DILUTION IN FUTURE ISSUANCES OF OUR
COMMON STOCK.
We anticipate issuing a substantial amount of common stock in future
issuances. These issuances could be related to an equity incentive plan for
members of management, directors, officers, employees, and key consultants. It
is also likely that we will issue additional shares of common stock in future
capital financings. Any grants or sales of additional shares of our common stock
will have a dilutive effect on the existing shareholders, which could adversely
affect the value of our common stock.
THERE ARE POTENTIAL CONFLICTS OF INTERESTS AND AGREEMENTS THAT ARE NOT SUBJECT
TO ARM'S LENGTH NEGOTIATIONS.
Several shareholders of the Company have provided bridge financing for
start-up costs. These bridge loans totaled approximately $300,000 at April 1,
2004. We intend to repay these bridge loans out of the proceeds raised from
future offerings of our securities or any operating revenues. Additionally,
several of the shareholders are affiliated with entities that may receive
brokerage fees, consulting fees and other compensation related to the
performance of services for the Company. The Company is also responsible for a
payment of approximately $350,000 on behalf of Pyramid Media Group, Inc., of
which Allen Jacobi, president of Pyramid Records International, is an owner and
shareholder. See "Certain Relationships and Related Transactions."
WE ADOPTED PROVISIONS LIMITING THE LIABILITY OF MANAGEMENT TO SHAREHOLDERS.
We have adopted provisions, and will maintain provisions, to our articles
of incorporation and by-laws that limit the liability of officers, directors,
and employees, and provide for indemnification by the Company of officers,
directors, and employees to the full extent permitted by Colorado law. Colorado
law provides that officers and directors have no personal liability to a Company
or its shareholders for monetary damages for breach of fiduciary duties as
officers or directors, except for a breach of their duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director or officer derives an
improper personal benefit. Such provisions substantially limit the shareholders'
ability to hold officers and directors liable for breaches of fiduciary duty,
and may require us to indemnify our officers and directors.
WE MAY NOT BE ABLE TO ADEQUATELY MANAGE FUTURE GROWTH.
If we are successful in developing our business plan, the anticipated
future growth of the business could place a significant strain on our
managerial, operational and financial resources. We cannot assure you that
management would effectively manage a significant growth in our business. The
failure to adequately manage any growth would adversely effect our business
operations and financial results.
WE DO NOT HAVE AN ESTABLISHED TRADING MARKET FOR OUR COMMON STOCK.
There is no established trading market for the common stock of the
Company. Accordingly, an investment in the Company should presently be regarded
as illiquid as well as highly speculative, and is suitable only for persons who
can hold their investment in the Company indefinitely. We may seek to apply to
have our common stock listed, but we cannot assure you that we will undertake to
have our common stock trade on a regulated market, or if we do apply that we
will be successful in our attempt.
-4-
OUR MANAGEMENT, THROUGH ITS SIGNIFICANT OWNERSHIP OF OUR COMMON STOCK, HAS
ULTIMATE CONTROL OVER OUR OPERATIONS.
Our management owns a majority of the total outstanding shares of our
common stock and therefor has ultimate control over the operations of the
Company. These officers and employees will be able to control or otherwise
significantly influence all matters requiring approval by our shareholders,
including the election of directors and the approval of mergers or other
business combination transactions.
WE HAVE NEVER PAID DIVIDENDS AND DO NOT ANTICIPATE PAYING ANY IN THE FORESEEABLE
FUTURE.
We have never declared or paid a cash dividend and we do not expect to
have any cash with which to pay cash dividends in the foreseeable future. If we
do have available cash, we intend to use it to grow our business.
Risks Related to the Nature of the Proposed Business:
WE MAY BE UNABLE TO IMPLEMENT OUR BUSINESS AND GROWTH STRATEGY.
Our growth strategy is dependent upon our ability to generate sales and
profit margins through the achievement of our business plan. This includes, but
is not limited to, (i) successful integration of new products from time to time;
(ii) establishment and maintenance of sales and distribution channels, including
the successful launch of our television network, (iii) development of new
business opportunities; (iv) maintenance of existing clients and the
organization and systems to support these clients; (v) the establishment of
strong financial and management systems; and (vi) the ability to attract, retain
and hire highly skilled management and consultants. Implementation of this
strategy will depend in large part on the Company's ability to: (i) obtain
adequate financing on favorable terms to fund this growth strategy in the
future; (ii) develop and expand our client and customer bases; (iii) develop and
expand our product offerings, (iv) hire, train and retain skilled employees; (v)
establish corporate brand identity and successfully implement our marketing
campaigns; (vi) continue to expand in the face of increasing competition; (vii)
continue to negotiate agreements on terms that increase or maintain the
Company's current profit margins; (viii) leverage existing creditor
relationships to improve terms of business and extend additional credit; (ix)
create sufficient demand for our products; and (x) maintain a strong management
team. Our failure with respect to any or all of these factors could impair our
ability to successfully implement our growth strategy, which could have a
material adverse effect on our results of operations and financial condition.
WE INTEND TO LAUNCH NEW PRODUCTS IN A VOLATILE MARKET AND WE MAY BE
UNSUCCESSFUL.
We intend to launch new products, which include a television network
featuring classic rock music and video focused on the adult market, and an
international distribution of the Havana Bridge project, an album and DVD
featuring internationally renowned artists performing with Cuban artists. The
consumer retail market and the television industry are volatile marketplaces and
we may not be able to successfully penetrate and develop either sector. We
cannot assure you that we will be able to find, purchase and maintain the
airwave space necessary to carry and successfully launch a new television
network. Even if we are able to find such airwave space, we will be successful
only if consumers establish a loyalty to our network and purchase the products
advertised on the network, including those products offered by our subsidiary,
Pyramid Records. We will have no control over consumer reaction to our network
or product offerings. If we are not successful in building a strong and loyal
consumer following, we may not be able to generate sufficient sales to achieve
profitability.
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WE DO NOT HAVE THE ABILITY TO CONTROL THE VOLATILITY OF SALES.
Our business is dependent on selling our products in a volatile consumer
oriented marketplace. The retail consumer industry, by its nature, is very
volatile and sensitive to numerous economic factors, including competition,
market conditions, and general economic conditions. None of these conditions are
within our control. There can be no assurance that we will have stable or
growing sales of our record company products and advertising space of our
television network, and maintain profitability in the volatile consumer
marketplace.
WE MAY NOT BE ABLE TO PURCHASE AND/OR LICENSE ASSETS THAT ARE CRITICAL TO OUR
BUSINESS.
We intend to purchase and/or license archived video and music collection
libraries to fulfill the programming needs of The Tube. The acquisition or
licensure of these assets is critical to accomplishing the business plan of the
Company. We cannot assure you that we will be successful in obtaining these
assets or that if we do acquire them, that we will be able to do so at a
reasonable cost. Our failure to purchase and/or license these libraries at a
reasonable cost would have a material adverse effect on our business, results of
operations and financial condition.
WE MAY NOT BE ABLE TO MAINTAIN OUR CLIENT RELATIONSHIPS THAT WE HAVE DEVELOPED.
Our clients in our record division, Pyramid Music, are artists and
celebrities. This clientele is fragmented and requires a great deal of servicing
to maintain strong relationships. Our ability to maintain client loyalty will be
dependent on our ability to successfully market and distribute their products,
as well as our ability to service their needs. We cannot assure you that we will
be successful in maintaining the relationship with our artists. Our inability to
maintain these relationships could prevent us from becoming profitable.
OUR FAILURE TO DEVELOP ADVERTISING REVENUES COULD PREVENT US FROM GENERATING
REVENUE.
We intend to generate a significant portion of our revenue from our
television network, The Tube, through advertising. It is unlikely that we will
be able to obtain long-term commitments from advertisers due to the start-up
nature of our business. Advertisers generally may cancel, reduce or postpone
orders without penalty. Cancellations, reductions or delays in purchases of
advertising could occur as a result of a strike, or a general economic downturn
in one or more industries or in one or more geographic areas. If we are unable
to generate significant revenue from advertising, it will have a material
adverse effect on our financial condition and results of operations.
WE MAY ENCOUNTER INTENSE COMPETITION FROM SUBSTANTIALLY LARGER AND BETTER
FINANCED COMPANIES.
Our success will depend upon our ability to penetrate the consumer market
for media oriented products and establish a television network with sufficient
ratings to cover the costs associated with operating the network and providing a
profit for our investors. Our television network and record company will compete
with more established and better financed companies that have longer operating
histories and more recognition in the market place than we do. It is also
possible that previously unidentified competitors may enter the market place and
decrease our chance of acquiring the requisite market share. Our future success
will depend on our ability to penetrate the market quickly and efficiently. Our
ability to respond to competitive product offerings and the evolving demands of
the marketplace will play a key role in our success. Our failure to develop,
maintain and continually improve our distribution process could prevent us from
attaining sufficient market share. If we are unable to respond and compete in
these markets, it will have a material adverse effect on our business, results
of operations and financial condition.
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WE MAY BE UNABLE TO ADEQUATELY REACT TO MARKET CHANGES.
Our success is partially dependent upon our ability to develop our market
and change our business model as may be necessary to react to changing market
conditions. Our ability to modify or change our business model to fit the needs
of a changing market place is a critical factor in our success, and our
inability to do this could have a material adverse affect on our business and
financial condition.
COPYRIGHT LAWS MAY NEGATIVELY AFFECT THE VALUE OF CERTAIN OF OUR ASSETS.
Under existing United States copyright law, sound recordings may be
protected. United States copyright law, however, also gives individual authors
the inalienable right to recapture the rights to their copyrighted material by
terminating any transfer of interest in his or her copyright. For example, for
transfers given on or after January 1, 1978, the author may terminate the
transfer after 35 years, or perhaps earlier if the performer has shorter
reversion provisions within their agreements. A more complex timeline applies to
termination of transfers conveyed on or before December 31, 1977. Strict rules
of notice (i.e., a notice of intent to terminate given from the author to the
publisher) must be followed by the author to validate the termination. As a
result, certain of our assets may be lost if challenged by authors seeking to
recapture their copyrighted material, thereby potentially negatively affecting
the results of operations and financial condition of the Company and its future
prospects.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion should be read in conjunction with the financial
statements and notes thereto.
The Company is comprised of two operating subsidiaries, The Tube and
Pyramid Music. From inception through March 31, 2004, the Company has engaged in
organizational activities, incurred start-up expenses in connection with the
implementation of its business plan, had minimal revenues, and incurred
operating losses. We plan to focus our efforts on launching The Tube and
expanding Pyramid Music, and we expect that our operating expenses will increase
significantly in the foreseeable future as a result. The Company must raise
additional funds as a result of the planned significant increases in its
operating expenditures. The Company does not expect to receive revenues for the
foreseeable future and expects to continue to incur operating losses. The
Company is currently exploring additional financing alternatives, including the
possibility of private equity or debt offerings.
The Company has a limited operating history upon which to base an
evaluation of its business. The Company's business and prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the early stages of development.
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FORWARD-LOOKING STATEMENTS
This report includes a number of "forward-looking statements" as that term
is defined in Section 27A of the Securities Act and Section 21E of the Exchange
Act. Those statements reflect management's current views with respect to future
events and financial performance and include statements regarding the intent,
belief or current expectations of us and members of our management team, as well
as the assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made
by us in this report and in our other reports filed with the Securities and
Exchange Commission. Important factors currently known to management could cause
actual results to differ materially from those in forward-looking statements.
See "Risk Factors" for a discussion of such factors. We undertake no obligation
to update or revise forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes in the future operating
results over time. We believe that our assumptions are based upon reasonable
data derived from and known about our business and operations. No assurances are
made that actual results of operations or the results of our future activities
will not differ materially from our assumptions.
DESCRIPTION OF PROPERTY.
We do not own any real estate and we lease all of our operating space. As
of April 1, 2004, we leased the following office locations:
o approximately 1,500 square feet of office space located at 11077
Biscayne Boulevard, Suite 100, Miami, Florida 33161; this office
space was leased for a term of one year expiring on September 20,
2004 at an annual rental of $21,600;
o approximately 3,000 square feet of office space located at 11077
Biscayne Boulevard, Suite 200, Miami, Florida; this office space was
leased for a term of two years expiring on September 30, 2005 at an
annual rental of $46,110;
o approximately 8,900 square feet of recording studio space located at
12390 NE 13th Place, North Miami, Florida 33181 for a term of 36
months expiring on September 30, 2006, at a current annual rental of
$35,967.36; and
o approximately 532 square feet of office space located at 2040
Sherman Street, Suite 16, Hollywood, Florida 33020; this office
space was leased month to month at a monthly rental of $1,749.
Management considers our office space adequate for our present
requirements. In the event that expansion of our business requires that we
obtain additional space, management believes that such space would be available
on commercially reasonable terms.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of April 1, 2004, adjusted
to reflect the Stock Exchange, by:
o each person known by the Company to own beneficially more than 5% of
the Company's common stock;
o each of the Company's named executive officers;
o each director of the Company; and
o all of the executive officers and directors as a group.
The amount and percentage of common stock beneficially owned are reported
on the basis of regulations of the SEC governing the determination of beneficial
ownership of securities. Under the rules of the SEC, a person is deemed to be a
beneficial owner of a security if that person has or shares voting power, which
includes the power to dispose of or to direct the disposition of the security.
Unless otherwise indicated below, each beneficial owner named in the table below
has sole voting and sole investment power with respect to all shares owned
beneficially. The percentage of beneficial ownership of common stock after the
Stock Exchange is based on 21,153,075 shares outstanding.
SHARES BENEFICIALLY OWNED PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) AFTER THE STOCK EXCHANGE OUTSTANDING SHARES
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Michael Jay Solomon
Director of the Company ........................... 400,000(2) 1.9%
Les Garland
President of The Tube and Director of the
Company ......................................... 1,542,000 7.3%
Allen Jacobi
President of Pyramid Records ...................... 123,750(3) *
David Levy
President of the Company and Director of
the Company ..................................... 2,330,500(4)(5) 11.1%
Gregory Catinella
Director of the Company ........................... 736,500 3.5%
Rachel Levy
7014 DelCorso Lane
Delray, FL 33446 ..................................... 1,300,784(5)(6) 6.1%
Ned Siegel
500 T-Rex Ave., Suite 150
Boca Raton, FL 33431 ................................. 1,460,086 6.9%
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SHARES BENEFICIALLY OWNED PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) AFTER THE STOCK EXCHANGE OUTSTANDING SHARES
- ---------------------------------------- ------------------------ ------------------
Neil Strum
3849 Rambla Pacifico
Malibu, California 90265 ............................. 1,460,086 6.9%
VLC Holdings, LLC
2455 E. Sunrise Blvd., Suite 502
Ft. Lauderdale, FL 33304 ............................. 2,300,000(5)(7) 10.9%
All executive officers and directors as a
group ................................................ 5,132,750 24.4%
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* Less than 1%
(1) Unless otherwise indicated, the address of record for the owner is 11077
Biscayne Blvd., Suite 100, Miami, Florida 33161
(2) Held by Solomon Family Trust, dated December 21, 1989, 14 Beverly Park,
Beverly Hills, CA 90210.
(3) Includes 18,750 shares owned by Cheri Jacobi, Allen Jacobi's wife.
(4) Includes 20,000 shares owned by David Levy and excludes 1,300,784 shares
owned by Rachel Levy, David Levy's mother. Also includes shares owned by
VLC Holdings and 10,500 shares owned by Victoria Levy, David Levy's
daughter.
(5) The aggregate holdings of David Levy, Victoria Levy, Rachel Levy and VLC
Holdings total 3,631,284 and represent approximately 17.2% of the
Company's outstanding common stock.
(6) Excludes shares held by David Levy and Victoria Levy.
(7) The principal owners of VLC Holdings, LLC are the wife and daughter of
David Levy, the President and a director of the Company. Excludes shares
held by David Levy, Victoria Levy and Rachel Levy.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The members of the board of directors of the Company serve until the next
annual meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the board of directors.
From the Company's inception until the Stock Exchange, Phillip Kilgore
served as Chairman, President, Chief Financial Officer and Secretary of the
Company. Jeffrey Neal served as Vice President, and David Goller served as
Executive Vice President. Upon the consummation of the Stock Exchange, Mr.
Kilgore, Mr. Neale and Mr. Goller resigned.
The following table sets forth information regarding the Company's
directors and executive officers as of April 1, 2004. There are no family
relationships among any of our directors and officers.
NAME AGE POSITIONS
- ---- --- ---------
Michael Jay Solomon........... 67 Director
David Levy.................... 52 Director and President of the Company
Les Garland................... 51 Director and President of The Tube
Allen Jacobi.................. 56 President of Pyramid Records
Gregory R. Catinella.......... 53 Director
John Poling................... 58 Director
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Michael Jay Solomon has an employment agreement to serve as Chairman of PMC upon
the occurrence of certain financing conditions. Prior to joining PMC, Mr.
Solomon was Chairman and Chief Executive Officer of El Camino Entertainment
Group, Inc. from 2002 to April 2004. El Camino Entertainment Group, Inc. is a
company dedicated to building a live family entertainment company on a national
basis through the consolidation of family run companies that operate rides,
games and food at state and county fairs and carnivals throughout the United
States. Mr. Solomon became a director of the Company upon the consummation of
the Stock Exchange.
David Levy has served as President of PMC since 2003 and will continue to serve
as President of the Company. Prior to joining PMC, Mr. Levy was the vice
president of business development of Northwestern Bell Phones, a manufacturing
and marketing company of consumer electronics from 1995 to 2003. Mr. Levy became
the president and a director of the Company upon the consummation of the Stock
Exchange.
Les Garland has served as President of The Tube since 2003. Prior to joining The
Tube, Mr. Garland was President of Afterplay Marketing, Inc., a Nevada company
from 1998 to 2003. From 1998 to 2000, Mr. Garland was consultant to the College
Television Network, a television network on college campuses across the United
States. Mr. Garland became a director of the company upon the consummation of
the Stock Exchange.
Allen Jacobi founded Pyramid Media Group, Inc., a record label, in 1990. Mr.
Jacobi joined PMC when certain assets of Pyramid Media Group were acquired by
PMC in 2003.
Gregory R. Catinella has been the owner of Catinella Realty, a small boutique
real estate company since January 2004. Prior to owning Catinella Realty, Mr.
Catinella was Chairman and President of Catinella Consulting Inc., a provider of
consulting, marketing and business development services to public and private
companies, from 1986 to 2004. Mr. Catinella became a director of the Company
upon the consummation of the Stock Exchange.
John Poling is a partner at Tatum Partners, LLP, which he joined in 2002. Tatum
Partners, LLP provide financial services on a permanent, interim or project
basis to emerging growth, middle market and multinational companies. Prior to
joining Tatum Partners, LLP, Mr. Poling served as Chief Financial Officer of
U.S. Plastic Lumber Corp. from 1999 to 2002. Mr. Poling serves on the board of
directors of Kreisler Manufacturing Corporation, SystemOne Technology, Inc. and
National Earth Services, Inc. Mr. Poling became a director of the Company upon
the consummation of the Stock Exchange.
EXECUTIVE COMPENSATION.
Compensation of management is determined by the compensation committee of
the board of directors. The stockholders of the Company will not have the
opportunity to vote on or approve such compensation. Except as set forth in the
table below, prior to December 31, 2003, no compensation was paid to any officer
or director of the Company or its predecessor entities. No officer or director
has received stock options or non-cash compensation.
The following table sets forth all cash compensation paid to the president
for the year ended December 31, 2003 and other most highly compensated executive
officer.
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ANNUAL COMPENSATION
---------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION COMPENSATION
--------------------------- ---- ------ ------------ ------------
David Levy................................. 2003 $3,607 $11,934(1) $0
President
Les Garland................................ 2003 $64,421 $0 $0
President of The Tube
(1) Includes compensation for an automobile allowance.
EMPLOYMENT AGREEMENTS
David Levy. Under an employment agreement, dated as of April 1, 2004, David Levy
serves as our President. The agreement terminates on March 23, 2009 and may be
extended for subsequent one-year periods by both parties signing an extension
prior to 30 days of the expiration date. Under the agreement, Mr. Levy is
entitled to receive an annual salary of $350,000 or such greater amount as the
board of directors may determine. This annual salary increases 5% on March 23,
2005. Under the agreement, Mr. Levy deferred any salary in excess of $2,500 per
week until the Company raises a minimum of $5,000,000 in equity or equity
equivalents. If Mr. Levy is terminated without cause, the Company must pay him
any of his annual salary that has accrued, and an amount equal to the lesser of
his annual salary for the number of months remaining in the term of the
agreement or his monthly salary multiplied by 24.
Michael Jay Solomon. Under an employment agreement, dated as of October 1, 2003
and amended as of December 1, 2003, Michael Jay Solomon will serve as our
Chairman beginning on the date of the closing of a debt and/or equity financing
with gross proceeds to the Company of approximately $6,000,000. The agreement
terminates on the fifth anniversary of the commencement date and renews
automatically for successive two-year periods, unless either party provides
written notice 90 days prior to the termination of the agreement. Under the
agreement, Mr. Solomon is entitled to an annual salary of $400,000 or such
greater amount as the board of directors may determine. This annual salary
increases annually by an amount equal to the greater of 7.5% per year or by an
amount equal to the consumer price index. If, during the term of the agreement
or within 18 months after its termination, the Company undergoes a change of
control, the Company must pay Mr. Solomon a bonus in amount equal to the greater
of $3,000,000 or 5% of the total consideration paid, received or contributed by
or to the Company in the change of control. The maximum of such bonus is
$10,000,000, unless Mr. Solomon introduced the Company to the other party
involved in the change of control. Mr. Solomon is entitled to a performance
bonus at the end of each fiscal year based upon the Company attaining financial
performance targets set by the board of directors. Mr. Solomon is also entitled
to an expense allowance of $4,000 per month. If the Company terminates Mr.
Solomon without cause or Mr. Solomon resigns for good reason, then in addition
to his annual salary, the Company must pay Mr. Solomon severance equal to two
years annual salary.
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Allen Jacobi. Under an employment agreement, dated as of April 1, 2004, Allen
Jacobi serves as President of Pyramid Records International, Inc. The agreement
terminates on March 23, 2009 and may be extended for subsequent one-year periods
by both parties signing an extension prior to 30 days of the expiration date.
Under the agreement, Mr. Jacobi is entitled to receive an annual salary of
$200,000 or such greater amount as the board of directors may determine. This
annual salary increases 5% on March 23, 2005. If Mr. Jacobi is terminated
without cause, the Company must pay him any of his annual salary that has
accrued, and an amount equal to the lesser of his annual salary for the number
of months remaining in the term of the agreement or his monthly salary
multiplied by 18.
Les Garland. Under an employment agreement, dated July 2003, Les Garland serves
as Chief Operating Officer of The Tube Music Network, Inc. Under the agreement,
Mr. Garland is entitled to receive an annual salary of $350,000. If Mr. Garland
is terminated without cause or resigns for good reasons, the Company must pay
him monthly installments during the severance period in amount equal to
one-twelfth of his base salary. If the Company undergoes a change of control,
the Company must pay Mr. Garland a fee equal to 3% of the aggregate market value
of the business combination, with a minimum of $3 million and a maximum of $10
million. If Mr. Garland introduces the transaction to the Company, there is no
maximum.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On March 3, 2004, we acquired an assignment for a Distribution Agreement,
dated May 1, 2003, by and between Ark 21 Records, L.P. and Pyramid Media Group,
Inc., a non affiliated company owned and controlled by Allen Jacobi, the
president of Pyramid Records. In exchange for the assignment of this agreement,
we provided the following consideration to Pyramid Media Group, Inc: (1)
employment of Mr. Jacobi and (2) the assumption of a debt totaling approximately
$350,000.
DESCRIPTION OF SECURITIES.
GENERAL
The Company's authorized capital stock consists of 100,000,000 shares of
common stock, having no par value per share, and 10,000,000 shares of preferred
stock, having no par value per share. As of April 1, 2004, 21,153,075 shares of
common stock and no shares of preferred stock were outstanding. We presently act
as the transfer agent for our common stock.
COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common stock, no
par value per share. The issued and outstanding shares of common stock are fully
paid and nonassessable. Except as provided by law or the Company's articles of
incorporation with respect to voting by class or series, shareholders of common
stock are entitled to one vote on each matter submitted to a vote at a meeting
of shareholders.
Notwithstanding any prior rights to receive dividends to which the holders
of preferred stock may be entitled, the holders of common stock will be entitled
to receive dividends, if and when declared payable, from time to time, by the
board of directors. Upon liquidation or dissolution, shareholders of common
stock will be entitled to share proportionally in all assets available for
distribution to such holders. There are no preemptive, subscription, conversion
or redemption rights pertaining to the common stock of the Company.
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PREFERRED STOCK
The board of directors has the authority, without further action by the
shareholders of the Company, to issue up to 10,000,000 shares of preferred
stock, in one or more series, and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series or the designation of such series. The issuance of
preferred stock could adversely affect the voting power of holders of common
stock and could have the effect of delaying, deferring or preventing a change of
the Company's control.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
As of April 1, 2004, the Company had 102 shareholders of record of its
common stock. There is no established public trading market for our common
stock, nor is it listed or traded on any stock exchange or with NASDAQ. The
Company has no outstanding options or warrants to purchase shares of its common
stock, nor are there any outstanding securities convertible into its common
stock. There is no common equity of the Company that is being, or has been
proposed to be, publicly offered by the Company that could have a material
effect on the market price of the Company's common equity.
Under certain circumstances, restricted shares may be sold without
registration, pursuant to the provisions of Rule 144 of the Securities Act. In
general, under Rule 144, a person (or persons whose shares are aggregated) who
has satisfied a one-year holding period may, under certain circumstances, sell
within any three-month period a number of restricted securities which does not
exceed the greater of one percent of the shares outstanding or the average
weekly trading volume during the four calendar weeks preceding the notice of
sale required by Rule 144. In addition, Rule 144 permits, under certain
circumstances, the sale of restricted securities without any quantity
limitations by a person who is not an affiliate of ours and has satisfied a
two-year holding period. Any sales of shares by shareholders pursuant to Rule
144 may have a depressive effect on the price of our common stock. No shares of
our common stock can be sold pursuant to Rule 144.
The Company has never paid a dividend. We intend to retain any earnings
for future growth and do not anticipate paying any dividends in the foreseeable
future. Holders of our common stock are entitled to receive any dividends as may
be declared and paid by our board of directors.
The Company does not have an equity compensation plan.
LEGAL PROCEEDINGS.
From time to time, we are involved as a plaintiff or defendant in various
legal proceedings arising in the usual course of our business. At the current
time, there is no pending litigation or legal action against the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
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RECENT SALES OF UNREGISTERED SECURITIES.
In March 2001, the Company issued 750,000 shares of its common stock to
Jaime Luis Perez Marquez in exchange for financial consulting services valued at
$15,000. On the transaction date, the Company's common stock had no reliable
market value. The shares issued were valued by the amount of services provided
at $.02 per share. As a result, the Company recognized a stock-based
compensation expense totaling $15,000. The transaction was exempt from
registration under Section 4(2) as the recipient of the shares is a
sophisticated investor and was provided with access to the officers of the
Company so as to receive all material information regarding the Company that the
recipient requested. The shares were issued with a restrictive legend and the
transactions did not include a public distribution or offering.
In March 2001, the Company issued 1,250,000 shares of its common stock to
Graciella Ballesteros De Colomer in exchange for consulting services that
included sales leads, marketing lists and materials as well as advertising
advice valued at $25,000. On the transaction date, the Company's common stock
had no reliable market value. The Company valued the shares issued by the value
of the marketing expenditure at $.02 per share. As a result, the Company
recognized a stock-based compensation expense totaling $25,000. The transaction
was exempt from registration under Section 4(2) as the recipient of the shares
is a sophisticated investor and was provided with access to the officers of the
company so as to receive all material information regarding the company that the
recipient requested. The shares were issued with a restrictive legend and the
transactions did not include a public distribution or offering.
In March 2001, the Company issued 625,000 shares of its common stock to
Ruben Garduno in exchange for systems and software consulting services valued at
$12,500. On the transaction date, the Company's common stock had no reliable
market value. The shares issued were valued by the amount of services provided
at $.02 per share. As a result, the Company recognized a stock-based
compensation expense totaling $12,500. The transaction was exempt from
registration under Section 4(2) as the recipient of the shares is a
sophisticated investor and was provided with access to the officers of the
Company so as to receive all material information regarding the Company that the
recipient requested. The shares were issued with a restrictive legend and the
transactions did not include a public distribution or offering.
In September 2001, the Company issued 250,000 shares of its common stock
to the Law Office of James G. Dodrill II, PA for legal services related to the
Company's proposed Form SB-2 registration statement. The transaction was valued
at $.04 per share in accordance with contemporaneous stock sales in January
2002. As a result, the Company recognized deferred offering costs totaling
$5,714 for the proposed offering through Registration Statement on Form SB-2 and
$4,286 in stock-based legal fees for the selling shareholders. The transaction
was exempt from registration under Section 4(2) as the recipient of the shares
is a sophisticated investor and was provided with access to the officers of the
Company so as to receive all material information regarding the Company that the
recipient requested. The shares were issued with a restrictive legend and the
transactions did not include a public distribution or offering.
During January 2002, the Company conducted a private placement offering
whereby it sold 875,000 shares of its no par value common stock to the
shareholders for $.04 per share pursuant to an exemption from registration
claimed under sections 3(b) and 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. The shares were sold
through the Company's officers and directors to a total of 33 investors. The
Company received proceeds in the amount of $33,000, a subscription receivable in
the amount of $2,000 and paid $7,500 in related offering expenses as of February
15, 2002. The transaction was completed on February 12, 2002 and did not include
a public distribution or offering.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We have adopted provisions, and will maintain provisions, to our articles
of incorporation and by-laws that limit the liability of officers, directors,
and employees, and provide for indemnification by the Company of officers,
directors, and employees to the full extent permitted by Colorado law. Colorado
law provides that officers and directors have no personal liability to a Company
or its shareholders for monetary damages for breach of fiduciary duties as
officers or directors, except for a breach of their duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director or officer derives an
improper personal benefit. Such provisions substantially limit the shareholders'
ability to hold officers and directors liable for breaches of fiduciary duty,
and may require us to indemnify our officers and directors.
The Colorado Business Corporation Act provides at Article 109 for
indemnification by a corporation of officers and directors in connection with
proceedings brought against them by reason of their position with the
corporation the person being indemnified must, in civil matters, have acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation. In criminal matters, indemnification
is permitted where the person had no reasonable cause to believe that his or her
conduct was unlawful. Indemnification is required (unless limited by a
corporation's Articles of Incorporation) where the officer or director is wholly
successful, on the merits or otherwise, in the defense of any proceeding. The
Act also establishes procedures by which persons seeking indemnification can
obtain cost advances from the corporation and procedures by which
indemnification determinations can be made.
ITEM 5. OTHER EVENTS
The Company's mailing address and business address have been changed to
1107 Biscayne Blvd., Suite 101, Miami, Florida 33161, phone number:
305-899-6100.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the SEC,
AGU Entertainment Corp. is the successor issuer of Lexington Barron
Technologies, Inc. for reporting purposes under the Exchange Act and AGU
Entertainment Corp. intends to file an annual report as required under Rule
12g-3(g).
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
On April 1, 2004, the Company accepted the resignations of all of its
executive officers and directors. Pursuant to their rights granted by the
Exchange Agreement, PMC's shareholders designated Michael Jay Solomon, Les
Garland, John Poling, David Levy and Gregory R. Catinella as the new directors
of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBIT INDEX
(a) Financial Statements filed as part of this report:
The financial statements will be filed as an amendment to this Report on
Form 8-K/A.
(b) List of Exhibits filed as part of this report. The following exhibits
are incorporated by reference herein or filed herewith.
NUMBER TITLE
- ------ -----
2.1* Share Exchange Agreement, dated March 15, 2004, between the
shareholders of Pyramid Music Corp., Pyramid Music Corp. and Lexington
Barron Technologies, Inc.
3.1 Articles of Incorporation of Lexington Barron Technologies, Inc.
(incorporated herein by reference to the Registrant's Registration
Statement on Form SB-2 (File No. 333-86244)).
3.2* Article of Amendment to Articles of Incorporation of Lexington Barron
Technologies, Inc.
3.3* Articles of Amendment to Articles of Incorporation of AGU Entertainment
Corp.
3.4 Bylaws of Lexington Barron Technologies, Inc. (incorporated herein by
reference to the Registrant's Registration Statement on Form SB-2 (File
No. 333-86244)).
3.5 Specimen certificate of the common stock of Lexington Barron
Technologies, Inc. (incorporated herein by reference to the
Registrant's Registration Statement on Form SB-2 (File No. 333-86244)).
10.1* Employment agreement of David Levy, dated as of April 1, 2004.
10.2* Employment agreement of Michael Jay Solomon, dated as of October 1,
2003.
10.3* Amendment to Employment Agreement of Michael Jay Solomon, dated as of
December 1, 2003.
10.4* Employment agreement of Allen Jacobi, dated as of April 1, 2004.
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NUMBER TITLE
- ------ -----
10.5* Assignment and Assumption Agreement, dated as of March 3, 2004, among
Pyramid Media Group, Inc., Allen Jacobi and Pyramid Records
International , Inc.
10.6* Amendment to Assignment and Assumption Agreement, dated March 8, 2004,
by and among Pyramid Media Group, Inc., Allen Jacobi and Pyramid
Records International , Inc.
10.7* Corporate Guaranty, dated March 5, 2004.
10.8* Employment Agreement of Les Garland, dated July 2003..
21.1* List of Subsidiaries.
- ----------
* Previously filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned hereunto duly authorized.
AGU ENTERTAINMENT CORP.
Date: April 21, 2004 By: /s/ David Levy
-------------------------------------
Name: David Levy
Title: President
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