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EX-3.2 - LEXICON UNITED INC | v200502_ex3-2.htm |
EX-99.1 - LEXICON UNITED INC | v200502_ex99-1.htm |
EX-10.2 - LEXICON UNITED INC | v200502_ex10-2.htm |
UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
FORM 8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF
1934
Date
of Report (Date of earliest event reported): October 21, 2010
Lexicon
United Incorporated
(Exact
Name of Registrant as Specified in its Charter)
Delaware
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0-33131
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06-1625312
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(State
or Other Jurisdiction of Incorporation)
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(Commission
File No.)
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(I.R.S.
Employer
Identification
No.)
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4500 Steiner Ranch Blvd., Suite 1708, Austin,
TX
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78732
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (512) 266-3507
n/a
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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TABLE OF
CONTENTS
Item 1.01
Entry into a Material Definitive Agreement
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3
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Item 2.01
Completion of Acquisition or Disposition of Assets
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5
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PART
I
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Item 1.
Description of Business
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5
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Item 2.
Management’s Discussion and Analysis or Plan of Operation
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17
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Item 3.
Description of Property
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19
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Item 4.
Security Ownership of Certain Beneficial Owners and
Management
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19
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Item 5.
Directors, Executive Officers, Promoters and Control
Persons
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20
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Item 6.
Executive Compensation
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21
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Item 7.
Certain Relationships and Related Transactions, and Director
Independence
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22
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Item 8.
Description of Securities.
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23
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PART
II
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Item 1.
Market Price of and Dividends on the Registrant’s Common Equity and Other
Shareholder Matters
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23
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Item 2.
Legal Proceedings
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23
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Item 4.
Recent Sales of Unregistered Securities
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24
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Item 5.
Indemnification of Directors and Officers
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24
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PART
F/S
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Item 3.02
Unregistered Sales of Equity Securities
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25
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Item 5.02
Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
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25
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Item 9.01
Financial Statements And Exhibits
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25
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SIGNATURES
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26
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EXHIBIT
INDEX
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27
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2
Item 1.01 Entry into a Material
Definitive Agreement.
(1) On
October 21, 2010, Lexicon United Incorporated (the “Company”) completed its
previously announced merger (“Merger”) with Pathworks PCO of Florida, Inc.
(“Pathworks-Florida”), pursuant to which Pathworks-Florida became a wholly-owned
subsidiary of the Company.
Pathworks-Florida
is engaged in the business of development, installation and operation of fiber
optic telecommunications delivery systems for multi-family residential units.
One of the Company’s shareholders, Pathworks, Inc. (“Pathworks”), is a party to
a Master Agreement (the “Master Agreement”) with CenturyTel Services Group, LLC
(“CenturyLink”), pursuant to which, Pathworks, has rights with respect to bulk
content pricing and tariffs applicable to services to be provided in certain
identified markets. In furtherance of its performance under the
Master Agreement, Pathworks has assigned certain of its rights and
responsibilities under the Master Agreement to Pathworks-Florida. In
exchange, Pathworks-Florida has entered into a royalty agreement with Pathworks
whereby Pathworks-Florida would pay Pathworks a royalty for the first five years
of service provided to Pathworks-Florida customers and thereafter such service
would continue to be provided by Pathworks-Florida on a royalty-free
basis
Pursuant
to the terms of the Merger, at the Closing, Pathworks-Florida shareholders
exchanged all of their issued and outstanding Pathworks-Florida stock for an
aggregate of 8,715,000 shares of the Company’s common stock, which equaled
forty-seven percent (47%) of the pro-forma, fully-diluted shares of the
Company’s common stock immediately following the
Closing.
At the
Closing, James A. Grimwade, a shareholder of Pathworks-Florida, was appointed to
the board of directors of the Company.
(2) On
September 20, 2010, a wholly-owned subsidiary of the Company, Chesscom
Management Advisors, Inc. (“Advisor”) entered into a Management Advisory
Agreement (“Advisory Agreement”) with Chesscom Technologies, Inc.
(“Chesscom”). Pursuant to the terms of the Advisory Agreement, the
Company agreed to do the following:
(a) serve as Chesscom’s
sole and exclusive operations and financial advisor and, as requested by the
Board, provide such information and data as may be requested from time to time
with respect to the Chesscom’s operations and financial results;
(b) provide the daily
management of Chesscom and perform and supervise the various administrative
functions reasonably necessary for the management of
Chesscom;
(c) maintain and preserve
the books and records of Chesscom, including maintaining the accounting and
other record-keeping functions with respect to Chesscom;
(d) investigate, select,
and, on behalf of Chesscom, engage and conduct business with such Persons as the
Advisor deems necessary to the proper performance of its obligations hereunder,
including but not limited to consultants, accountants, correspondents, lenders,
technical advisors, attorneys, corporate fiduciaries, depositaries, custodians,
agents for collection, insurers, insurance agents, banks, construction
contractors, developers, property owners, property management companies, real
estate operating companies, securities investment advisors, mortgagors, and any
and all agents for any of the foregoing, including Affiliates of the Advisor,
and Persons acting in any other capacity deemed by the Advisor necessary or
desirable for the performance of any of the foregoing services, including but
not limited to entering into contracts in the name of Chesscom with any of the
foregoing;
(e) make capital
investments in and dispositions within the discretionary limits and authority as
granted by the Board and in accordance with the Articles of
Incorporation;
(f) consult with the
Board and assist the Board in the formulation and implementation of Chesscom’s
financial policies, and, as necessary, furnish the Board with advice and
recommendations with respect to the financial and operational objectives and
policies of the Company and in connection with any borrowings proposed to be
undertaken by Chesscom;
3
(g) select joint venture
partners, structure corresponding agreements and oversee and monitor these
relationships;
(h) recommend to the
Board of Directors appropriate transactions which would provide liquidity to the
Company;
(i) oversee the
performance by a third party or Affiliates, including collection of payments due
from third parties the payment of expenses related to Chesscom’s business and
operations;
(j) review, analyze and
comment upon the operating budgets, capital budgets and the like and aggregate
these budgets into Chesscom’s overall budget;
(k) review and analyze
on-going financial information pertaining to Chesscom’s operations;
(l) if an action or
transaction requires approval by the Board of Directors, deliver to the Board of
Directors all documents requested by them in their evaluation of the proposed
action or transaction;
(m) formulate and oversee
the implementation of strategies for the administration, promotion, management,
operation, maintenance, financing and marketing of Chesscom;
(n) (i) locate, analyze
and select potential business opportunities; (ii) structure and negotiate the
terms and conditions of transactions for new business opportunities;
(iii) make investments on behalf of Chesscom in compliance with the
investment objectives and policies of Chesscom; (iv) on a best efforts
basis, arrange for financing and otherwise deal with Chesscom’s assets and
investments; (v) enter into supply agreements, leases and acquire property
interests related to Chesscom’s operations; (vi) enter into service
contracts; (vii) oversee the performance of all third-party contractors;
and (viii) to the extent necessary, perform all other operational functions
for the operation and maintenance of Chesscom and its assets;
(o) obtain the prior
approval of the Board, any particular Directors specified by the Board or any
committee of the Board, as the case may be, for any and all investments outside
of the ordinary course of Chesscom’s business;
(p) negotiate on behalf
of Chesscom with banks or lenders for loans to be made to Chesscom; provided,
further, that any fees and costs payable to third parties incurred by the
Advisor in connection with the foregoing shall be the responsibility of
Chesscom;
(q) on behalf of
Chesscom, maintain, customary insurance, including but not limited to customary
fire, casualty and public liability insurance;
(r) from time to time,
or at any time reasonably requested by the Board, provide information or make
reports to the Board related to its performance of services to Chesscom under
this Agreement;
(s) provide Chesscom
with all necessary cash management services;
(t) notify the Board of
all proposed material transactions before they are completed;
(u) supervise the
preparation and filing and distribution of returns and reports to governmental
agencies;
(v) establish and
maintain bank accounts on behalf of Chesscom pursuant to the terms of the
Advisory Agreement;
4
(w) at the expense of
Chesscom, provide
office space, equipment and personnel as required for the performance of the
foregoing services as the Advisor; and
(x) do all things it
reasonably deems necessary to assure its ability to render the services
described in the Advisory Agreement.
The terms
of the Advisory Agreement is one year, subject to renewal at the end of the
initial term. Chesscom agreed to pay the Company an annual management
fee of $52,000, payable bi-monthly. The Company is also entitled to
reimbursement of all expenses incurred in connecti0n with the Advisory
Agreement.
A copy of
the Advisory Agreement is attached as Exhibit 10.2.
Item 2.01
Completion of Acquisition or Disposition of Assets.
See Item
1.01, Entry into a Material Definitive Agreement.
Part I
FORWARD-LOOKING
STATEMENTS
Statements
in this current report on Form 8-K may be “forward-looking statements.”
Forward-looking statements include, but are not limited to, statements that
express our intentions, beliefs, expectations, strategies, predictions or any
other statements relating to our future activities or other future events or
conditions. These statements are based on current expectations, estimates and
projections about our business based, in part, on assumptions made by
management. These forward looking statements include, without limitation, those
statements contained in this current report regarding our ability to
successfully complete development of our product, the capabilities, performance
and competitive advantages of our products following completion of development,
our ability to compete and successfully sell our product in our target markets,
our future hiring of sufficient numbers and types of qualified employees, any
competitive advantage or protection that our intellectual property rights will
provide to us and the occurrence and timing of the availability of our product,
the establishment of reference sites and initial commercial sales of our
product. These statements are not guarantees of future performance and involve
risks, uncertainties and assumptions that are difficult to predict. Therefore,
actual outcomes and results may, and are likely to, differ materially from what
is expressed or forecasted in the forward-looking statements due to numerous
factors, including those described above and those risks discussed from time to
time in this prospectus, including the risks described under “Risk Factors,” and
“Management’s Discussion and Analysis or Plan of Operation” in this current
report and in other documents which we file with the Securities and Exchange
Commission. In addition, such statements could be affected by risks and
uncertainties related to our ability to raise any financing which we may require
for our operations, competition, government regulations and requirements,
pricing and development difficulties, our ability to make acquisitions and
successfully integrate those acquisitions with our business, as well as general
industry and market conditions and growth rates, and general economic
conditions. Any forward-looking statements speak only as of the date on which
they are made, and we do not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this current report.
Item 1. Description of
Business.
Description of the
Transaction.
On
July 20, 2010, all of the members of Ethos Media, LLC (“Ethos”) exchanged
their membership interests for shares in Pathworks Corporation, Inc.,
(“Pathworks”) a Florida corporation; as a result of this transaction, the
members of Ethos became the 100% shareholders of Pathworks and Ethos became the
wholly owned subsidiary of Pathworks.
Subsequently,
on July 20, 2010, Pathworks exchanged its 100% ownership of Ethos pursuant
to a joint venture agreement with Chesscom Technologies, Inc., A Nevada
Corporation and James G. Grimwade, (“Grimwade”) an individual. Under
the agreement, Pathworks obtained a 51% interest in the joint venture entity,
Pathworks-Florida; Chesscom Technologies received a 39% interest in
Pathworks-Florida and Grimwade received a 10% interest in
Pathworks-Florida.
On
October 21, 2010, Lexicon United Incorporated (the “Company”) completed its
previously announced merger (“Merger”) with Pathworks PCO of Florida, Inc.
(“Pathworks-Florida”), pursuant to which Pathworks-Florida became a wholly-owned
subsidiary of the Company.
Pathworks-Florida
is engaged in the business of development, installation and operation of fiber
optic telecommunications delivery systems for multi-family residential units.
One of the Company’s shareholders, Pathworks, Inc. (“Pathworks”), is a party to
a Master Agreement (the “Master Agreement”) with CenturyTel Services Group, LLC
(“CenturyLink”), pursuant to which, Pathworks, has rights with respect to bulk
content pricing and tariffs applicable to services to be provided in certain
identified markets. In furtherance of its performance under the
Master Agreement, Pathworks has assigned certain of its rights and
responsibilities under the Master Agreement to Pathworks-Florida. In
exchange, Pathworks-Florida has entered into a royalty agreement with Pathworks
whereby Pathworks-Florida would pay Pathworks a royalty for the first five years
of service provided to Pathworks-Florida customers and thereafter such service
would continue to be provided by Pathworks-Florida on a royalty-free
basis
Pursuant
to the terms of the Merger, at the Closing, Pathworks-Florida shareholders
exchanged all of their issued and outstanding Pathworks-Florida stock for an
aggregate of 8,715,000 shares of the Company’s common stock, which equaled
forty-seven percent (47%) of the pro-forma, fully-diluted shares of the
Company’s common stock immediately following the
Closing.
At the
Closing, James A. Grimwade, a shareholder of Pathworks-Florida, was appointed to
the board of directors of the Company.
Business of
Pathworks-Florida.
Pathworks-Florida
is a Florida-based provider of High Definition television, next generation
Internet access, and carrier-class telephone services delivered via
state-of-the-art fiber to the home networks. With a focus on
condominium properties and planned communities, Pathworks-Florida leverages
strategic relationships with CenturyLink (NYSE: CTL), Dish Network (NASDAQ:
DISH) and DirecTV (NASDAQ: DTV) to provide subscribers with access to over 265
digital channels with more than 130 available to be delivered in high
definition. On August 2, 2010, Pathworks-Florida entered into a
definitive agreement for merger with and acquisition by Lexicon
United. This transaction closed on October 21, 2010.
5
Pathworks-Florida
has a special focus on building fiber optic infrastructure and marketing its
services to community associations in the regulated carrier territory serviced
by CenturyLink. This territory includes several metropolitan areas in
central and southwest Florida including but not limited to Naples, Ft. Myers,
Tampa and Orlando. Pursuant to an agreement with CenturyLink, the
company has the ability to purchase television, Internet and telephone content
and bandwidth at a wholesale rate and deliver these services at a significant
mark-up over company deployed, controlled and serviced fiber optic networks.
Pathworks-Florida enters into long term (ten years or greater) agreements to be
the exclusive provider of these multimedia and telecom services to its client
community associations. Outside of CenturyLink territory, the company
leverages the local carrier for Internet and its agreements with DirecTV and
Dish Network for television content. As a part of the company’s
growth strategy, it is expected that Pathworks-Florida will establish its own
satellite head-end and based of content reception for franchise delivery over
leased fiber to Pathworks-Florida client networks.
In order
to evolve from a development stage to a growth business, the Company will seek
to raise an additional approximately $2,000,000 in operating capital and an
additional $20,000,000 of collateralizable investment to support the Company’s
growth. This investment would finance the deployment of fiber optic
infrastructure on client properties in exchange for ten to fifteen year
contracts for Pathworks-Florida to be the exclusive provider to the homeowners
association of television, Internet and voice. Assuming that the
Company can raise the required investment, the Company has a goal of achieving
annual revenues of $100 Million within five years.
The
Company currently has a sales pipeline of many interested condominium units (and
homes in gated communities) that are struggling to receive current generation
High Definition television and high-speed Internet services. These
struggles result from the fact that (a) in many cases, the existing coaxial
cable is physically unable to service the growing demands for high definition
television content, (b) the franchise cable provider is trying to offer services
to too many customers using a single fiber node, (c) higher speed Internet
connections cannot be achieved due to the bandwidth limitations of the
properties coaxial cable infrastructure, (d) the franchise cable companies have
alienated a number of consumers and home owner and condominium groups with its
poor customer service and somewhat heavy handed business practices and
accordingly, have evoked extreme animosity, and (e) the franchise cable provider
is taking no responsibility for the need to upgrade their clients’
infrastructure.
The
existing aging coaxial networks are able to deliver some of the High Definition,
high speed Internet and Video on Demand features that are being demanded by
homeowners. The inherent disconnect between utilizing such services
and receiving actual value is that franchise cable operators are dramatically
encumbered by the physical limitations of the coaxial cable plant on the
properties and as such cannot deliver these services without a capital
investment that neither the franchise cable operators nor the home owners
associations would prefer to make.
The
installation of a new fiber optic backbone on the client property (at the
Company’s expense) provides the ability to deliver what the franchise cable
companies cannot: (1) nearly unlimited capacity to delivery High
Definition television content, (2) gigabit Internet delivery capacity over the
backbone, (3) exponentially greater capacity to deliver Video-on-Demand and (4)
multiple choices to receive television programming that is tailored to the
needs, desires and wishes of the property (i.e. from CenturyLink, Dish Network,
DirecTV or a Pathworks-Florida head-end).
Pathworks-Florida
services provide the following value proposition for the
consumer: (1) The client gets an immediate upgrade to the physical
plant of their property. The new fiber optic network allows for the
delivery of ALL current and future generation services for television, Internet,
phone, and multimedia with virtually no investment from the association, (2) the
Internet speeds that will be offered as demand scales up will no longer be
limited by the physical cable in the walls, but rather by the price of
bandwidth. As demand increases, only fiber networks will have the
ability to increase supply without having dramatic cost increases, (3) only
television programming delivery over Fiber has the ability to deliver multiple
HD streams of television to multiple homes while simultaneously delivering
Video-on-Demand services and Internet speeds over 50 Mbps, (4) only the
ultra-high bandwidth provided for by fiber will allow for Video-on-Demand
services to be truly ON DEMAND, (5) we have a special agreement with CenturyLink
to deliver, in their territory, a land line telephone service with unlimited
long distance that is powered by the Central Office, (6) we make a long-term
commitment to a basic bulk service delivered to the property that does not
require the use of a set-top box or receiver, (7) we offer 118 channels in our
basic line-up in contrast to the 72 channels offered by the franchise operator,
(8) we will be able to offer more competitive triple play services in terms of
pricing than any other provider because of our competitive advantage,
organizational structure and cost control, (9) the client is released from the
monopoly of the franchise cable provider, and (10) we offer maximum annual
increases for service cost at 3.9% versus the franchise provider who typically
increases their service costs by as much as 5% - 8% per year.
6
The
Company is targeting just over one percent of the more than 8 Million individual
condominium units and homes in gated communities in Florida and has made
significant introductions into as many as 50 to 60 properties or groups
controlling perhaps as many as 150,000 to 165,000 subscription
units.
Pathworks-Florida
has created several strategic relationships to develop operational and fiber
network deployment facilities and to leverage the capacity of each to engineer,
install and maintain the infrastructure contracted by the
Company. Pathworks-Florida has a sales pipeline established that it
expects will support the growth of the business to 60,000 units receiving
services by the end of 2013. Utilizing the Company’s internal
assumptions, these units would support nearly $54 Million in annual revenue. The
company has presently 180 units that represented its pilot services, 1930 units
under contract, an additional 3,500 units with contracts pending financing, and
15,000 units in negotiations, half of which the Company hopes to bring under
contract by February 2011. Further, management believes that it has a
pipeline of nearly 150,000 units with whom they are in active contact and
pursing sales opportunities through direct contact, management companies and
developers.
Management
estimates that it can grow the Company from its pilot customer base of 184
subscribers or end users to 115,000 by December 31, 2115. Management
also believes that by December 31, 2115 it will have its contracts with
homeowners association and condominium groups extending or extended for at least
10 years forward.
Pathworks-Florida
is essentially a cash business, collecting receivables from the client on a
monthly basis. A high percentage of the Company’s billing will be
direct with home and condo owners associations that are in many instances
required to provide media content (cable, etc) under the terms of their
association bylaws. The Company believes that these high-end
condominium associations are orders of magnitude less likely to default than any
individual subscriber.
RISK
FACTORS
An
investment in our common stock involves a number of risks. You should carefully
read and consider the following risks as well as the other information contained
in this prospectus, including the financial statements and the notes to those
financial statements, before making an investment decision. The realization of
any of the risks described below could have a material adverse affect on our
business, financial condition, results of operations, cash flows and/or future
prospects. The trading price of our common stock could decline due to any of
these risks, and you could lose part or all of your investment. The order of
these risk factors does not reflect their relative importance or likelihood of
occurrence.
Risks
Related to Our Business and Industry
The
Company must raise Additional Capital to Carry Out its Business
Plan
The
achievement of the Company’s business plan is highly dependent on our ability to
raise additional capital. Our business is highly capital intensive
and our ability to service new customers is dependent on our direct investment
in the customer’s infrastructure. There is no guarantee that the Company will be
able to access additional capital at rates and on terms which are attractive to
the Company, if at all.
7
Our
business and operations are experiencing rapid growth. If we fail to effectively
manage our growth, our business and operating results could be
harmed.
We have
experienced and expect to continue to experience rapid growth in our operations,
which has placed, and will continue to place, significant demands on our
management, operational and financial infrastructure. If we do not effectively
manage our growth, the quality of our products and services could suffer, which
could negatively affect our operating results. This growth will require
significant capital expenditures and management resources. Failure to implement
these improvements could hurt our ability to manage our growth and our financial
position.
If
we were to lose the services of key members of our management team, we may not
be able to execute our business strategy.
Our
future success depends in a large part upon the continued service of key members
of our senior management team, who are critical to the overall management of the
company as well as the development of our technology, our culture and our
strategic direction. The loss of any of our management or key personnel could
seriously harm our business.
We
rely on highly skilled personnel and, if we are unable to retain or motivate key
personnel, hire qualified personnel, we may not be able to grow
effectively.
Our
performance largely depends on the talents and efforts of highly skilled
individuals. Our future success depends on our continuing ability to identify,
hire, develop, motivate and retain highly skilled personnel for all areas of our
organization. Competition in our industry for qualified employees is intense,
and certain of our competitors have directly targeted our employees. In
addition, our compensation arrangements, such as our equity award programs, may
not always be successful in attracting new employees and retaining and
motivating our existing employees. Our continued ability to compete effectively
depends on our ability to attract new employees and to retain and motivate our
existing employees.
We
have a short operating history and a relatively new business model in an
emerging and rapidly evolving market. This makes it difficult to evaluate our
future prospects and may increase the risk that we will not continue to be
successful.
We only
commenced business in 2009 and we have only a short operating history with our
business model. As a result, we have only a short operating history to aid in
assessing our future prospects. We will encounter risks and difficulties as a
company operating in a new and rapidly evolving market. We may not be able to
successfully address these risks and difficulties, which could materially harm
our business and operating results.
We
operate in a very competitive business environment, which affects our ability to
attract and retain customers and can adversely affect our business and
operations.
The
industry in which we operate is highly competitive and has become more so in
recent years. In some instances, we compete against companies with
fewer regulatory burdens, better access to financing, greater personnel
resources, greater resources for marketing, greater and more favorable brand
name recognition, and long-established relationships with regulatory authorities
and customers. Increasing consolidation in the cable industry and the
repeal of certain ownership rules have provided additional benefits to certain
of our competitors, either through access to financing, resources, or
efficiencies of scale.
Our
principal competitors for video services throughout our territory are DBS
providers. The two largest DBS providers are DirecTV and DISH
Network. Competition from DBS, including intensive marketing efforts
with aggressive pricing, exclusive programming and increased high definition
broadcasting has had an adverse impact on our ability to retain customers. DBS
has grown rapidly over the last several years. DBS companies have
also expanded their activities in the MDU market. The cable industry,
including us, has lost a significant number of video customers to DBS
competition, and we face serious challenges in this area in the
future.
8
Telephone
companies, including two major telephone companies, AT&T and Verizon, offer
video and other services in competition with us, and we expect they will
increasingly do so in the future. Upgraded portions of these networks
carry two-way video, data services and provide digital voice services similar to
ours. In the case of Verizon, high-speed data services operate at
speeds as high as or higher than ours. In addition, these companies
continue to offer their traditional telephone services, as well as service
bundles that include wireless voice services provided by affiliated
companies. AT&T and Verizon have also launched campaigns to
capture more of the MDU market. Additional upgrades and product
launches are expected in markets in which we operate. With respect to our
Internet access services, we face competition, including intensive marketing
efforts and aggressive pricing, from telephone companies and other providers of
DSL. DSL service competes with our high-speed Internet service and is
often offered at prices lower than our Internet services, although often at
speeds lower than the speeds we offer. In addition, in many of our
markets, these companies have entered into co-marketing arrangements with DBS
providers to offer service bundles combining video services provided by a DBS
provider with DSL and traditional telephone and wireless services offered by the
telephone companies and their affiliates. These service bundles offer
customers similar pricing and convenience advantages as our
bundles. Moreover, as we continue to market our telephone offerings,
we will face considerable competition from established telephone companies and
other carriers.
Mergers,
joint ventures, and alliances among franchised, wireless, or private cable
operators, DBS providers, local exchange carriers, and others, may provide
additional benefits to some of our competitors, either through access to
financing, resources, or efficiencies of scale, or the ability to provide
multiple services in direct competition with us.
In
addition to the various competitive factors discussed above, our business is
subject to risks relating to increasing competition for the leisure and
entertainment time of consumers. Our business competes with all other sources of
entertainment and information delivery, including broadcast television, movies,
live events, radio broadcasts, home video products, console games, print media,
and the Internet. Technological advancements, such as
video-on-demand, new video formats, and Internet streaming and downloading, have
increased the number of entertainment and information delivery choices available
to consumers, and intensified the challenges posed by audience fragmentation.
The increasing number of choices available to audiences could also negatively
impact advertisers’ willingness to purchase advertising from us, as well as the
price they are willing to pay for advertising. If we do not respond
appropriately to further increases in the leisure and entertainment choices
available to consumers, our competitive position could deteriorate, and our
financial results could suffer.
Our
services may not allow us to compete effectively. Additionally, as we
expand our offerings to include other telecommunications services, and to
introduce new and enhanced services, we will be subject to competition from
other providers of the services we offer. Competition may reduce our
expected growth of future cash flows which may contribute to future impairments
of our franchises and goodwill.
Economic
conditions in the United States may adversely impact the growth of our
business.
We
believe that the weakened economic conditions in the United States, including a
continued downturn in the housing market over the past year and increases in
unemployment, have adversely affected consumer demand for our services,
especially premium services. If these conditions do not improve, we believe the
growth of our business and results of operations will be further adversely
affected which may contribute to future impairments of our
franchises.
We face risks
inherent in our telephone services.
Continued
growth in our residential telephone business faces risks. The
competitive landscape for residential and commercial telephone services is
intense; we face competition from providers of Internet telephone services, as
well as incumbent telephone companies. Further, we face increasing
competition for residential telephone services as more consumers in the United
States are replacing traditional telephone service with wireless
service. We depend on interconnection and related services provided
by certain third parties for the growth of our commercial
business. As a result, our ability to implement changes as the
services grow may be limited. If we are unable to meet these service
level requirements or expectations, our commercial business could be adversely
affected. Finally, we expect advances in communications technology,
as well as changes in the marketplace and the regulatory and legislative
environment. Consequently, we are unable to predict the effect that ongoing or
future developments in these areas might have on our telephone and commercial
businesses and operations.
9
Our
exposure to the credit risks of our customers, vendors and third parties could
adversely affect our cash flow, results of operations and financial
condition.
We are
exposed to risks associated with the potential financial instability of our
customers, many of whom have been adversely affected by the general economic
downturn. Dramatic declines in the housing market over the past year,
including falling home prices and increasing foreclosures, together with
significant increases in unemployment, have severely affected consumer
confidence and caused increased delinquencies or cancellations by our customers
or lead to unfavorable changes in the mix of products purchased. The
general economic downturn has also affected advertising sales, as companies seek
to reduce expenditures and conserve cash. These events have adversely
affected, and may continue to adversely affect our cash flow, results of
operations and financial condition.
In
addition, we are susceptible to risks associated with the potential financial
instability of the vendors and third parties on which we rely to provide
products and services or to which we outsource certain functions. The
same economic conditions that may affect our customers, as well as volatility
and disruption in the capital and credit markets, also could adversely affect
vendors and third parties and lead to significant increases in prices, reduction
in output or the bankruptcy of our vendors or third parties upon which we
rely. Any interruption in the services provided by our vendors or by
third parties could adversely affect our cash flow, results of operation and
financial condition.
We
may not have the ability to reduce the high growth rates of, or pass on to our
customers, our increasing programming costs, which would adversely affect our
cash flow and operating margins.
In recent
years, the cable TV industry has experienced a rapid escalation in the cost of
programming. We expect programming costs to continue to increase,
because of a variety of factors including amounts paid for retransmission
consent, annual increases imposed by programmers and additional programming,
including high definition and OnDemand programming, being provided to
customers. The inability to fully pass these programming cost
increases on to our customers could have an adverse impact on our cash flow and
operating margins associated with the video product.
Increased
demands by owners of some broadcast stations for carriage of other services or
payments to those broadcasters for retransmission consent are likely to further
increase our programming costs. Federal law allows commercial
television broadcast stations to make an election between “must-carry” rights
and an alternative “retransmission-consent” regime. Carriage of these
other services, as well as increased fees for retransmission rights, may
increase our programming expenses and diminish the amount of capacity we have
available to introduce new services, which could have an adverse effect on our
business and financial results.
Our
inability to respond to technological developments and meet customer demand for
new products and services could limit our ability to compete
effectively.
Our
business is characterized by rapid technological change and the introduction of
new products and services, some of which are bandwidth-intensive. We
may not be able to fund the capital expenditures necessary to keep pace with
technological developments, or anticipate the demand of our customers for
products and services requiring new technology or bandwidth. Our
inability to maintain and expand our upgraded systems and provide advanced
services in a timely manner, or to anticipate the demands of the marketplace,
could materially adversely affect our ability to attract and retain
customers. Consequently, our growth, financial condition and results
of operations could suffer materially.
10
We
depend on third party service providers, suppliers and licensors; thus, if we
are unable to procure the necessary services, equipment, software or licenses on
reasonable terms and on a timely basis, our ability to offer services could be
impaired, and our growth, operations, business, financial results and financial
condition could be materially adversely affected.
We depend
on third party service providers, suppliers and licensors to supply some of the
services, hardware, software and operational support necessary to provide some
of our services. We obtain these materials from a limited number of
vendors, some of which do not have a long operating history or which may not be
able to continue to supply the equipment and services we desire. Some
of our hardware, software and operational support vendors, and service providers
represent our sole source of supply or have, either through contract or as a
result of intellectual property rights, a position of some
exclusivity. If demand exceeds these vendors’ capacity or if these
vendors experience operating or financial difficulties, or are otherwise unable
to provide the equipment or services we need in a timely manner and at
reasonable prices, our ability to provide some services might be materially
adversely affected, or the need to procure or develop alternative sources of the
affected materials or services might delay our ability to serve our
customers. These events could materially and adversely affect our
ability to retain and attract customers, and have a material negative impact on
our operations, business, financial results and financial
condition. A limited number of vendors of key technologies can lead
to less product innovation and higher costs. For these reasons, we
generally endeavor to establish alternative vendors for materials we consider
critical, but may not be able to establish these relationships or be able to
obtain required materials on favorable terms.
Malicious
and abusive Internet practices could impair our high-speed Internet
services.
Our
high-speed Internet customers utilize our network to access the Internet and, as
a consequence, we or they may become victim to common malicious and abusive
Internet activities, such as peer-to-peer file sharing, unsolicited mass
advertising (i.e., “spam”) and dissemination of viruses, worms, and other
destructive or disruptive software. These activities could have
adverse consequences on our network and our customers, including degradation of
service, excessive call volume to call centers, and damage to our or our
customers' equipment and data. Significant incidents could lead to
customer dissatisfaction and, ultimately, loss of customers or revenue, in
addition to increased costs to service our customers and protect our
network. Any significant loss of high-speed Internet customers or
revenue, or significant increase in costs of serving those customers, could
adversely affect our growth, financial condition and results of
operations.
If
we are unable to attract new key employees, our ability to manage our business
could be adversely affected.
Our
ability to hire new key employees for management positions could be impacted
adversely by the competitive environment for management talent in the
telecommunications industry. The loss of the services of key members
of management and the inability to hire new key employees could adversely affect
our ability to manage our business and our future operational and financial
results.
Risks
Related to Regulatory and Legislative Matters
Our
business is subject to extensive governmental legislation and regulation, which
could adversely affect our business.
Regulation
of the telecommunications industry has increased cable operators' operational
and administrative expenses and limited their
revenues. Telecommunications operators are subject to, among other
things:
·
|
rules
governing the provision of telecommunications equipment and compatibility
with new digital technologies;
|
·
|
rules
and regulations relating to subscriber and employee
privacy;
|
·
|
limited
rate regulation;
|
11
·
|
rules
governing the copyright royalties that must be paid for retransmitting
broadcast signals;
|
·
|
requirements
governing when a telecommunications system must carry a particular
broadcast station and when it must first obtain consent to carry a
broadcast station;
|
·
|
requirements
governing the provision of channel capacity to unaffiliated commercial
leased access programmers;
|
·
|
rules
limiting our ability to enter into exclusive agreements with multiple
dwelling unit complexes and control our inside
wiring;
|
·
|
rules,
regulations, and regulatory policies relating to provision of voice
communications and high-speed Internet
service;
|
·
|
rules
for franchise renewals and transfers;
and
|
·
|
other
requirements covering a variety of operational areas such as equal
employment opportunity, technical standards, and customer service
requirements.
|
Additionally,
many aspects of these regulations are currently the subject of judicial
proceedings and administrative or legislative proposals. There are
also ongoing efforts to amend or expand the federal, state, and local regulation
of some of our cable systems, which may compound the regulatory risks we already
face, and proposals that might make it easier for our employees to
unionize. Certain states and localities are considering new cable and
telecommunications taxes that could increase operating expenses.
Our
franchises are subject to non-renewal or termination. The failure to renew a
franchise in one or more key communities could adversely affect our
business.
Our cable
systems generally operate pursuant to franchises, permits, and similar
authorizations issued by a state or local governmental authorities and
residential communities. Many franchises establish comprehensive
facilities and service requirements, as well as specific customer service
standards and monetary penalties for non-compliance. In many cases,
franchises are terminable if the franchisee fails to comply with significant
provisions set forth in the franchise agreement governing system
operations. Franchises are generally granted for fixed terms and must
be periodically renewed. Franchising authorities may resist granting
a renewal if either past performance or the prospective operating proposal is
considered inadequate. Franchise authorities often demand concessions
or other commitments as a condition to renewal. In some instances,
local franchises have not been renewed at expiration, and we have operated and
are operating under either temporary operating agreements or without a franchise
while negotiating renewal terms with the local franchising
authorities.
We cannot
assure you that we will be able to comply with all significant provisions of our
franchise agreements and certain of our franchisors have from time to time
alleged that we have not complied with these agreements. A
termination of or a sustained failure to renew a franchise in one or more key
communities could adversely affect our business in the affected geographic
area.
Further
regulation of the cable industry could cause us to delay or cancel service or
programming enhancements, or impair our ability to raise rates to cover our
increasing costs, resulting in increased losses.
Currently,
rate regulation is strictly limited to the basic service tier and associated
equipment and installation activities. However, the FCC and Congress
continue to be concerned that cable rate increases are exceeding
inflation. It is possible that either the FCC or Congress will
further restrict the ability of cable system operators to implement rate
increases. Should this occur, it would impede our ability to raise
our rates. If we are unable to raise our rates in response to
increasing costs, our losses would increase.
12
There has
been legislative and regulatory interest in requiring cable operators to offer
historically combined programming services on an á la carte basis. It
is possible that new marketing restrictions could be adopted in the future. Such
restrictions could adversely affect our operations.
Actions
by pole owners might subject us to significantly increased pole attachment
costs.
Pole
attachments are cable wires that are attached to utility poles. Cable
system attachments to public utility poles historically have been regulated at
the federal or state level, generally resulting in favorable pole attachment
rates for attachments used to provide cable service. The FCC
previously determined that the lower cable rate was applicable to the mixed use
of a pole attachment for the provision of both cable and Internet access
services. However, in late 2007, the FCC issued a NPRM, in which it
“tentatively concludes” that this approach should be modified. The
change could affect the pole attachment rates we pay when we offer either data
or voice services over our broadband facility. Any changes in the FCC
approach could result in a substantial increase in our pole attachment
costs.
Increasing
regulation of our Internet service product adversely affect our ability to
provide new products and services.
There has
been continued advocacy by certain Internet content providers and consumer
groups for new federal laws or regulations to adopt so-called “net neutrality”
principles limiting the ability of broadband network owners (like us) to manage
and control their own networks. In August 2005, the FCC issued a
nonbinding policy statement identifying four principles to guide its
policymaking regarding high-speed Internet and related
services. These principles provide that consumers are entitled
to: (i) access lawful Internet content of their choice; (ii) run
applications and services of their choice, subject to the needs of law
enforcement; (iii) connect their choice of legal devices that do not harm the
network; and (iv) enjoy competition among network providers, application and
service providers, and content providers. In August 2008, the FCC
issued an order concerning one Internet network management practice in use by
another cable operator, effectively treating the four principles as rules and
ordering a change in network management practices. This decision is
on appeal. In October 2009, the FCC released a NPRM seeking additional
comment on draft rules to codify these principles and to consider further
network neutrality requirements. This Rulemaking and additional proposals
for new legislation could impose additional obligations on high-speed Internet
providers. Any such rules or statutes could limit our ability to
manage our cable systems (including use for other services), to obtain value for
use of our cable systems and respond to competitive
competitions.
Changes
in channel carriage regulations could impose significant additional costs on
us.
Cable
operators also face significant regulation of their channel
carriage. We can be required to devote substantial capacity to the
carriage of programming that we might not carry voluntarily, including certain
local broadcast signals; local public, educational and government access (“PEG”)
programming; and unaffiliated, commercial leased access programming (required
channel capacity for use by persons unaffiliated with the cable operator who
desire to distribute programming over a cable system). The FCC
adopted a plan in 2007 addressing the cable industry’s broadcast carriage
obligations once the broadcast industry migration from analog to digital
transmission is completed, which occurred in June 2009. Under the
FCC’s plan, most cable systems are required to offer both an analog and digital
version of local broadcast signals for three years after the June 12, 2009
digital transition date. This burden could increase further if we are
required to carry multiple programming streams included within a single digital
broadcast transmission (multicast carriage) or if our broadcast carriage
obligations are otherwise expanded. The FCC also adopted new
commercial leased access rules which dramatically reduce the rate we can charge
for leasing this capacity and dramatically increase our associated
administrative burdens. These regulatory changes could disrupt
existing programming commitments, interfere with our preferred use of limited
channel capacity, and limit our ability to offer services that would maximize
our revenue potential. It is possible that other legal restraints
will be adopted limiting our discretion over programming decisions.
13
Offering
voice communications service may subject us to additional regulatory burdens,
causing us to incur additional costs.
We offer
voice communications services over our broadband network and continue to develop
and deploy VoIP services. The FCC has declared that certain VoIP
services are not subject to traditional state public utility
regulation. The full extent of the FCC preemption of state and local
regulation of VoIP services is not yet clear. Expanding our offering of these
services may require us to obtain certain authorizations, including federal and
state licenses. We may not be able to obtain such authorizations in a
timely manner, or conditions could be imposed upon such licenses or
authorizations that may not be favorable to us. The FCC has extended
certain traditional telecommunications requirements, such as E911, Universal
Service fund collection, CALEA, Customer Proprietary Network Information and
telephone relay requirements to many VoIP providers such as
us. Telecommunications companies generally are subject to other
significant regulation which could also be extended to VoIP
providers. If additional telecommunications regulations are applied
to our VoIP service, it could cause us to incur additional costs.
We
rely on bandwidth providers, data centers and others in providing products and
services to our users, and any failure or interruption in the services and
products provided by these third parties could damage our reputation and harm
our ability to operate our business.
We rely
on vendors, including bandwidth providers in providing products and services to
our users. Any disruption in the network access provided by these providers or
any failure of these providers to handle current or higher volumes of use could
significantly harm our business. Any financial or other difficulties our
providers face may have negative effects on our business. We exercise little
control over these vendors, which increases our vulnerability to problems with
the services they provide. We license technology and related databases to
facilitate aspects of our data center and connectivity operations including
Internet traffic management services. We expect to experience interruptions and
delays in service and availability for such elements. Any errors, failures,
interruptions or delays in connection with these technologies and information
services could harm our relationship with users, adversely affect our business
and expose us to liabilities.
Interruption
or failure of our information technology and communications systems could hurt
our ability to effectively provide our products and services, which could damage
our reputation and harm our operating results.
The
availability of our products and services depends on the continuing operation of
our information technology and communications systems. Any damage to or failure
of our systems could result in interruptions in our service, which could reduce
our revenues and profits, and damage our brand. Our systems are vulnerable to
damage or interruption from earthquakes, terrorist attacks, floods, fires, power
loss, telecommunications failures, computer viruses, computer denial of service
attacks or other attempts to harm our systems. Some of our data centers are
located in areas with a high risk of major earthquakes. Our data centers are
also subject to break-ins, sabotage and intentional acts of vandalism, and
potential disruptions if the operators of these facilities have financial
difficulties. Some of our systems are not fully redundant, and our disaster
recovery planning cannot account for all eventualities. The occurrence of a
natural disaster, a decision to close a facility we are using without adequate
notice for financial reasons or other unanticipated problems at our data centers
could result in lengthy interruptions in our service.
Risks
Related to Ownership of Our Common Stock
The
price of our common stock may be extremely volatile.
In
some future periods, our results of operations may be below the expectations of
public market investors, which could negatively affect the market price of our
common stock. Furthermore, the stock market in general has experienced extreme
price and volume fluctuations in recent years. We believe that, in the future,
the market price of our common stock could fluctuate widely due to variations in
our performance and operating results or because of any of the following
factors:
•
announcements of new services, products, technological innovations, acquisitions
or strategic relationships by us or our competitors;
• trends
or conditions in the software, business process outsourcing and Internet
markets;
14
• changes
in market valuations of our competitors; and
• general
political, economic and market conditions.
In
addition, the market prices of securities of telecommunications companies,
including our own, have been volatile and have experienced fluctuations that
have often been unrelated or disproportionate to a specific company's operating
performance. As a result, investors may not be able to sell shares of our common
stock at or above the price at which an investor purchase paid. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against that
company. If any securities litigation is initiated against us, we could incur
substantial costs and our management's attention could be diverted from our
business.
Quarterly
and annual operating results may fluctuate, which could cause our stock price to
be volatile.
Our
quarterly and annual operating results may fluctuate significantly in the future
due to a variety of factors that could affect our revenues or our expenses in
any particular period. You should not rely on our results of operations during
any particular period as an indication of our results for any other period.
Factors that may adversely affect our periodic results may include the loss of a
significant account or accounts.
Our
operating expenses are based in part on our expectations of our future revenues
and are partially fixed in the short term. We may be unable to adjust spending
quickly enough to offset any unexpected revenue shortfall.
The
significant concentration of ownership of our common stock will limit an
investor's ability to influence corporate actions.
The
concentration of ownership of our common stock may limit an investor's ability
to influence our corporate actions and have the effect of delaying or deterring
a change in control of our company, could deprive our stockholders of an
opportunity to receive a premium for their common stock as part of a sale of our
company, and may affect the market price of our common stock. Certain major
stockholders, if they act together, are able to substantially influence all
matters requiring stockholder approval, including the election of all directors
and approval of significant corporate transactions and amendments to our
certificate of incorporation. These stockholders may use their ownership
position to approve or take actions that are adverse to interests of other
investors or prevent the taking of actions that are inconsistent with their
respective interests.
We
are subject to compliance with securities law, which exposes us to potential
liabilities, including potential rescission rights.
We have
offered and sold our common stock to investors pursuant to certain exemptions
from the registration requirements of the Securities Act of 1933, as well as
those of various state securities laws. The basis for relying on such exemptions
is factual; that is, the applicability of such exemptions depends upon our
conduct and that of those persons contacting prospective investors and making
the offering. We have not received a legal opinion to the effect that any of our
prior offerings were exempt from registration under any federal or state law.
Instead, we have relied upon the operative facts as the basis for such
exemptions, including information provided by investors themselves.
If any
prior offering did not qualify for such exemption, an investor would have the
right to rescind its purchase of the securities if it so desired. It is possible
that if an investor should seek rescission, such investor would succeed. A
similar situation prevails under state law in those states where the securities
may be offered without registration in reliance on the partial preemption from
the registration or qualification provisions of such state statutes under the
National Securities Markets Improvement Act of 1996. If investors were
successful in seeking rescission, we would face severe financial demands that
could adversely affect our business and operations. Additionally, if we did not
in fact qualify for the exemptions upon which it has relied, we may become
subject to significant fines and penalties imposed by the SEC and state
securities agencies.
15
The
availability of a large number of authorized but unissued shares of common stock
may, upon their issuance, lead to dilution of existing
stockholders.
We are
authorized to issue 40,000,000 shares of common stock, $0.001 par value per
share, of which, as of October 26, 2010 18,543,134 shares of common stock were
issued and outstanding and 21,456,866 remain unissued. These shares may be
issued by our board of directors without further stockholder approval. The
issuance of large numbers of shares, possibly at below market prices, is likely
to result in substantial dilution to the interests of other stockholders. In
addition, issuances of large numbers of shares may adversely affect the market
price of our common stock.
Further,
our Certificate of Incorporation authorizes 10,000,000 shares of preferred
stock, $0.001 par value per share. The board of directors is authorized to
provide for the issuance of these unissued shares of preferred stock in one or
more series, and to fix the number of shares and to determine the rights,
preferences and privileges thereof. Accordingly, the board of directors may
issue preferred stock which convert into large numbers of shares of common stock
and consequently lead to further dilution of other shareholders.
We
do not intend to pay cash dividends in the foreseeable future
We
currently intend to retain all future earnings for use in the operation and
expansion of our business. We do not intend to pay any cash dividends in the
foreseeable future but will review this policy as circumstances
dictate.
There
is currently a very limited market for our securities and there can be no
assurance that anymore liquid market will ever develop.
There is
currently only a very limited trading market for our common stock and there are
currently only a few market-makers quoting our stock. There can be no assurance
as to whether additional market makers will quote our stock or that an orderly
market will develop, (if ever) in our common stock. As a result, we
expect that the price at which our stock trades is likely to fluctuate
significantly. Prices for our common stock will be determined in the marketplace
and may be influenced by many factors, including the depth and liquidity of the
market for shares of our common stock, developments affecting our business,
including the impact of the factors referred to elsewhere in these Risk Factors,
investor perception of us and general economic and market conditions. No
assurances can be given that an orderly or liquid market will ever develop for
the shares of our common stock. Owing to the anticipated low price of the
securities, many brokerage firms may not be willing to effect transactions in
the securities. See “Broker-dealers may be discouraged from effecting
transactions in our common stock because they are considered a penny stock and
are subject to the penny stock rules.”
Our
common stock is subject to the Penny Stock Regulations
Our
common stock and will likely be subject to the SEC's “penny stock” rules to the
extent that the price remains less than $5.00. Those rules, which require
delivery of a schedule explaining the penny stock market and the associated
risks before any sale, may further limit your ability to sell your
shares.
The SEC
has adopted regulations which generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share. Our common stock,
when and if a trading market develops, may fall within the definition of penny
stock and subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000, or annual incomes exceeding $200,000 or $300,000, together with
their spouse).
For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser's prior written consent to the transaction. Additionally, for any
transaction, other than exempt transactions, involving a penny stock, the rules
require the delivery, prior to the transaction, of a risk disclosure document
mandated by the Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Consequently, the `penny stock` rules may restrict the ability of broker-dealers
to sell our common stock and may affect the ability of investors to sell their
common stock in the secondary market.
16
Our
common stock is illiquid and subject to price volatility unrelated to our
operations
The
market price of our common stock could fluctuate substantially due to a variety
of factors, including market perception of our ability to achieve our planned
growth, quarterly operating results of other companies in the same industry,
trading volume in our common stock, changes in general conditions in the economy
and the financial markets or other developments affecting our competitors or us.
In addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has had a significant effect on the market price
of securities issued by many companies for reasons unrelated to their operating
performance and could have the same effect on our common stock.
Sales of
substantial amounts of common stock, or the perception that such sales could
occur, and the existence of convertible securities to purchase shares of common
stock at prices that may be below the then current market price of the common
stock, could adversely affect the market price of our common stock and could
impair our ability to raise capital through the sale of our equity
securities.
Item 2. Management’s Discussion
and Analysis or Plan of Operation.
The following discussion and
analysis should be read in conjunction with the financial statements and the
notes to those statements included in this 8-K other previous SEC filings. This
discussion contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially. Factors that could cause or contribute to such differences include,
but are not limited to those discussed below, as well as those discussed
elsewhere in this 8-K, including those factors discussed under the heading “Risk
Factors.” See “Forward Looking Statements”.
Business
Pathworks-Florida
is engaged in the business of development, installation and operation of fiber
optic telecommunications delivery systems for multi-family residential units.
One of the Company’s shareholders, Pathworks, Inc. (“Pathworks”), is a party to
a Master Agreement (the “Master Agreement”) with CenturyTel Services Group, LLC
(“CenturyLink”), pursuant to which, Pathworks, has rights with respect to bulk
content pricing and tariffs applicable to services to be provided in certain
identified markets. In furtherance of its performance under the
Master Agreement, Pathworks has assigned certain of its rights and
responsibilities under the Master Agreement to Pathworks-Florida. In
exchange, Pathworks-Florida has entered into a royalty agreement with Pathworks
whereby Pathworks-Florida would pay Pathworks a royalty for the first five years
of service provided to Pathworks-Florida customers and thereafter such service
would continue to be provided by Pathworks-Florida on a royalty-free
basis. See also “Business of Pathworks-Florida”,
above)
17
Critical Accounting Policies and
Estimates
The
discussion and analysis of our financial condition and results of operations is
based upon our financial statements which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets and liabilities. Currently, our only
estimate is that of depreciation expense. We base our estimates on historical
experience and on other assumptions that we believes to be reasonable under the
circumstances, the results of which form our basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Fair
Values of Financial Instruments
At June
30, 2010, fair values of cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses and notes payable approximate their carrying
amount due to the short period of time to maturity.
Property and
equipment
We record
property and equipment at cost and calculate depreciation using the
straight-line method over the estimated useful life of the assets, which is
estimated to be three years. Expenditures for maintenance and repairs, which do
not improve or extend the expected useful life of the assets, are expensed to
operations while major repairs are capitalized. The gain or loss on disposal of
property, plant and equipment is the difference between the net sales proceeds
and the carrying amount of the relevant assets, and, if any, is recognized in
the statements of operations.
Stock-based
compensation
As of
January 1, 2006, SFAS No. 123R, Share-Based Payment, became
effective for all companies and addresses the accounting for share-based payment
transactions. SFAS No. 123R eliminates the ability to account for
share-based compensation transactions using APB No. 25, and generally
requires instead that such transactions be accounted and recognized in the
statement of operations based on their fair value. We have never implemented a
stock option plan nor have we ever issued stock in lieu of compensation to
anyone. As such, this pronouncement has no impact on these financial statements
but its provisions will apply to the extent we engage in such activities in the
future.
Results of Operations
Six Months Ended March 31,
2009
Revenues
for the six months ended June 30, 2010 were $53,092. There are no
comparable amounts for any prior periods. Our cost of revenues was
$49,569, netting a gross margin of $6,523. Operating expenses were
$371,990 (comprising consulting fees and sales, general and administrative
expense) and our operating loss before taxes for the period was $365,467.
Interest expense for the six months ended June 30, 2010 was approximately
$16,796.
Year
Ended December 31, 2009
Revenues for the period from inception
(March 5, 2009) to December 31, 2009 were $25,889. There are no
comparable amounts for any prior periods. Our cost of revenues was
$31,624, netting a gross margin deficiency of $5,735. Operating
expenses were $391,586 (comprising consulting fees and sales, general and
administrative expense) and our operating loss before taxes for the period was
$397,321. Interest expense for the six months ended June 30, 2010 was
approximately $1,907.
18
Liquidity
and Capital Resources
Our need for funds will increase from
period to period as we increase the scope of our development, marketing, and
operating activities. From inception through June 30, 2010, we have funded this
need through member capital contributions, loan proceeds and proceeds from
equipment financing. The company intends to seek to raise an
additional $10-20 million investment to provide capital for physical
improvements on customer projects and fund required working capital for
operations.
There is
no guarantee that the company will be able to raise such additional capital or
any portion thereof or whether the terms and conditions of raising such capital
will be favorable to the company. It is likely that the raising of
any additional capital will result in significant and substantial dilution to
current shareholders.
Item 3. Description of
Property.
Pathworks-Florida
leases approximately 1,400 sq. ft. as its principal offices at 830 Cottage View Drive Traverse City, MI 49684 for a monthly rental of $1,400 per
month pursuant to a written lease with Pavilion Title Agency, Inc. dated as of
July 8, 2010. The lease provides for a month-to-month term which
automatically renews each month until terminated by one of the parties by
providing 30-days written notice to the other party.
Item 4. Security Ownership of
Certain Beneficial Owners and Management.
The
following table sets forth certain information with respect to beneficial
ownership of our common stock, as of October 26, 2010 and after giving effect to
the Merger by:
•
|
each
beneficial owner of 5% or more of the currently outstanding shares of our
common stock;
|
•
|
each
of our directors;
|
•
|
each
of our executive officers;
and
|
•
|
all
of our directors and executive officers as a
group.
|
In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of our common stock subject to options or
warrants held by that person that are currently exercisable or exercisable
within 60 days of October 26, 2010 are deemed outstanding, but are not
deemed outstanding for computing the percentage ownership of any other person.
To our knowledge, except as set forth in the footnotes to this table and subject
to applicable community property laws, each person named in the table has sole
voting and investment power with respect to the shares set forth opposite such
person’s name.
Each
stockholder’s percentage ownership is based on 18,543,134 shares of our common
stock outstanding as of October 26, 2010.
19
Name & Address of
Beneficial Owner1
|
Office, If Any
|
Shares
|
Notes
Convertible
And Options
and
Warrants
Exercisable
within 60
days
|
Percent of
Class2
|
||||||||||
Holders
of more than 5%:
|
||||||||||||||
Pathworks
Corporation
830
Cottage View Drive
Traverse
City, MI 49684
|
4,444,650 | - | 23.97 | % | ||||||||||
Chesscom
Technologies, Inc.
2610
Tampa East Blvd.
Tampa,
FL 33619
|
3,398,850 | - | 18.33 | % | ||||||||||
Keyano
Invest Inc.
C/o
VP Bank attention Mr. Diego Piccoli
Bleicherweg
50 CH 8039
Zurich
Switzerland
|
6,282,0343 | - | 33.88 | % | ||||||||||
Officers
and Directors:
|
||||||||||||||
Elie
Saltoun
4500
Steiner Ranch Blvd.
Suite
1708
Austin,
Texas 78732
|
President,
CEO, Treasurer and Director
|
6,282,0343 | - | 67.55 | % | |||||||||
Jeffrey
Nunez
4500
Steiner Ranch Blvd.
Suite
1708
Austin,
Texas 78732
|
Vice
President, Secretary and Director
|
1,012,047 | - | 5.46 | % | |||||||||
James
Grimwade
C/O
Pathworks Corporation
830
Cottage View Drive
Traverse
City, MI 49684
|
Director
|
871,500 | - | 4.70 | % | |||||||||
All
officers and directors as a group (3 persons named above)
|
6,294,081 | - | 44.04 | % |
(1)
|
Beneficial
Ownership is determined in accordance with Rule 13d-3 of the Securities
and Exchange Commission and generally includes voting or investment power
with respect to securities. Each of the beneficial owners listed above has
direct ownership of and sole voting power and investment power with
respect to the shares of our common stock. For each Beneficial Owner
above, any options exercisable within 60 days have been included in the
denominator.
|
(2)
|
Based
on 18,543,134 shares of our Common Stock outstanding as of October 26,
2010.
|
(3)
|
Our
president, CEO, Treasurer and director, Elie Saltoun, owns fifty percent
of Keyano Invest Inc. Accordingly, Mr. Saltoun and Keyano are deemed to be
affiliates. Mr. Saltoun is deemed to be the beneficial owner of any
securities owned by Keyano, and vice versa. Therefore, the 6,282,034
shares of our common stock owned by Keyano include the 900,000 shares of
common stock held by Mr. Saltoun. Conversely, the 6,282,034 shares of our
common stock owned by Mr. Saltoun include the 5,382,034 shares held by
Keyano.
|
Item 5. Directors, Executive
Officers, Promoters and Control Persons.
Set forth
below are the names of our directors, officers and significant employees, their
ages, all positions and offices that they hold with us, the period during which
they have served as such, and their business experience during at least the last
five years.
20
Name
|
Age
|
Positions
Held
|
Experience
|
|||
Elie
Saltoun
|
70
|
Chief
Executive Officer, President and Treasurer since November
2004
|
Elie
Saltoun has served as our Chief Executive Officer, President and
Treasurer, and as the Chairman of our board of directors since November
2004. Mr. Saltoun also served as our Secretary from July 2001 until he
resigned to assume his current role with our Company. Since May 2005, Mr.
Saltoun has also acted as a principal of Keyano Invest Inc., a corporate
consulting firm based in Brazil. Mr. Saltoun is an expert at structuring
complex foreign debt recoveries and debt to equity transactions. He has
successfully coordinated the use and conversion of past due unpaid
sovereign debt into equity in privatized Brazilian State-owned companies,
and has supervised the purchase and swap of unpaid obligations from a
State-owned reinsurance organization.
|
|||
Jeffrey
Nunez
|
50
|
Vice
President and Secretary since November 2004
|
During
the period from our inception until November 4, 2004, Mr. Nunez was our
director, Chief Executive Officer, President and Treasurer. He resigned
from all of those positions (except he remained a director) on November 4,
2004 and on such date he was appointed as our Secretary. From October 2003
to present Mr. Nunez has been self employed acting as a consultant to
public companies under the name Broad Street Capital.
|
|||
Omar
Malheiro Silva Araújo
|
55
|
President,
Chief Executive Officer and director of ATN since April
1997
|
Mr.
Araújo has been the President, Chief Executive Officer and director of our
subsidiary ATN since April 1997. Mr. Araújo is the co-founder of ATN. From
1991 to 1997, Mr. Araújo served as the Chief Financial Officer and
director of Cartao Unibanco Visa where he supervised the cash flow of the
credit card division. Mr. Araújo has a MBA in Finance.
|
|||
Manuel
da Costa Fraguas
|
62
|
General
Manager and director of ATN since April 1997
|
Mr.
Fraguas has been the General Manager and director of our subsidiary ATN
since its inception on April 1997. Mr. Fraguas is the co-founder of ATN.
Mr. Fraguas has a master in Production Engineering.
|
|||
James
Grimwade
|
51
|
Director
since October 2010
|
Mr.
Grimwade has been the principal owner and President of JG Resources, Inc.
since January 2007. JG Resources manages the liquidation of
retail equipment from “big box” retail stores, Fortune 500 companies,
regional chains, distribution centers and manufacturing
facilities. Previously, he had been the principal and President
of National Retail Equipment Liquidators, Inc. since March
1985.
|
Item 6. Executive
Compensation
The
following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to our Chief Executive Officer, for
services during the last three fiscal years in all capacities to us, our
subsidiaries and predecessors. No executive officer received compensation of
$100,000 or more in any of the last three fiscal years.
21
Summary
Compensation Table
Name and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive Plan
Compensation
Earnings ($)
|
Non-
qualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||||||
Elie
Saltoun
|
2008
|
0 | 0 | 0 | 0 | 0 | 0 | 75,097 | 75,097 | |||||||||||||||||||||||||
CEO
|
2009
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Jeffrey
Nunez
|
2008
|
0 | 0 | 0 | 0 | 0 | 0 | 26,693 | 26,693 | |||||||||||||||||||||||||
Secretary
|
2009
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Outstanding
Equity Awards at Fiscal Year End
None of
our executive officers received any equity awards, including, options,
restricted stock or other equity incentives, during the fiscal year ended
December 31, 2009.
Employment
Agreements.
None.
DIRECTOR
COMPENSATION
The
following table sets forth Director compensation for the fiscal year ending
December 31, 2009.
None.
Item 7. Certain Relationships
and Related Transactions, and Director Independence.
On
November 22, 2005, we entered into a Debt Conversion Agreement with Keyano, the
holder of our convertible promissory note having a principal amount plus accrued
interest of $1,063,750. Under the Debt Conversion Agreement, we converted
Keyano’s note and any accrued interest into our common stock at a rate of $0.20
per share. 5,318,750 shares of our common stock were delivered to Keyano and the
note was cancelled. Keyano is an affiliate of our director and current Chief
Executive Officer, President and Treasurer, Elie Saltoun, who is the owner of a
50% interest in Keyano.
On
February 27, 2006, we consummated the transactions contemplated by a share
exchange agreement among us, ATN, Omar Malheiro Silva Araújo and Manuel da Costa
Fraguas, both directors and officers of ATN. Pursuant to the share exchange
agreement, we acquired 80% of the outstanding capital stock of ATN in exchange
for 2,000,000 shares of our common stock, in the aggregate. The purchase price
was subsequently adjusted to an aggregate of 1,200,000 shares of our common
stock. As a result of this transaction, Messrs. Araújo and Fraguas
became the owners of 13.8% of our outstanding capital stock.
During
the quarter ended March 31, 2008, Keyano Invest Inc., a related party, loaned
the Company $1,000,000 for working capital purposes. During the quarter ended
June 30, 2008, the Company repaid Keyano Invest Inc $200,000 and converted the
remaining balance of $800,000 to a 2.5% convertible debenture. On June 5, 2008,
the Company issued 231,884 shares of its commons shares in conversion of an
$800,000 debenture from Keyano Invest, Inc, a related party. The shares were
converted at $3.45 per share.
22
Director
Independence
The Board
of Directors is currently composed of 3 members, Messrs. Saltoun, Nunez and
Grimwade. Only Mr. Grimwade is an “independent” director, as that term is
defined under the Nasdaq listing standards.
Item 8. Description of
Securities.
We
currently have authorized capital of 50,000,000 shares, of which 40,000,000 are
designated as common stock, par value $0.001 per share (the “Common Stock”), and
10,000,000 shares are preferred stock, par value $0.001 per share (the
“Preferred Stock”), none of which is currently designated. Following completion
of the Merger, the Company has outstanding 18,543,134 shares of Common Stock and
no shares of Preferred Stock.
Common
Stock
Holders
of shares of our Common Stock shall be entitled to cast one vote for each share
held at all stockholders’ meetings for all purposes, including the election of
directors. Our Common Stock does not have cumulative voting rights. No holder of
shares of stock of any class shall be entitled as a matter of right to subscribe
for or purchase or receive any part of any new or additional issue of shares of
stock of any class, or of securities convertible into shares of stock of any
class, whether now hereafter authorized or whether issued for money, for
consideration other than money, or by way of dividend.
Preferred
Stock
None
designated or issued.
PART
II
Item 1. Market Price of and
Dividends on the Registrant’s Common Equity and Other Shareholder
Matters
Holders
As of
October 21, 2010, there were approximately 100 record holders of our common
stock and there were 18,543,134 shares of our common stock outstanding,
including 871,500 shares of Common Stock which were escrowed by the
Company.
Market
Information
Our
shares of common stock are quoted on the Pink Sheets under the trading symbol
LXUN.
Dividends
We have never declared or paid any
dividends nor do we have any intent to do so in the foreseeable
future.
Item 2. Legal
Proceedings.
We are
not currently a party to any legal proceedings. From time to time, we may be
involved in legal proceedings and claims arising out of the ordinary course of
business.
23
Item 4. Recent Sales of
Unregistered Securities.
In
connection with the Merger transaction between the Company and Pathworks-Florida
on October 21, 2010, the Company issued the following shares of its common stock
to the former shareholders of Pathworks-Florida:
James
A. Grimwade
|
871,500 | |||
Pathworks
Corporation
|
4,444,650 | |||
Chesscom
Technologies, Inc,
|
3,398,850 | |||
Total
|
8,715,000 |
871,500
of the above-indicated shares are being held in escrow by the Company and are
subject to release based on certain mutually-agreed terms and
conditions.
On
October 21, 2010, the Company issued 400,000 shares of common stock to Elie
Saltoun, the Company’s President and 600,000 shares of common stock to Jeffrey
Nunez, the Company’s Vice President and Secretary.
Item 5. Indemnification of
Directors and Officers.
Our
Certificate of Incorporation, as amended, and by-laws provide that we shall, to
the fullest extent permitted by applicable Delaware law, as amended from time to
time, indemnify all persons whom it may indemnify pursuant thereto.
Delaware
law authorizes a corporation to provide indemnification to a director, officer,
employee or agent of the corporation, including attorneys’ fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him in
connection with such action, suit or proceeding, if such party acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful as
determined in accordance with the statute, and except that with respect to any
action which results in a judgment against the person and in favor of the
corporation the corporation may not indemnify unless a court determines that the
person is fairly and reasonably entitled to the indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended (the “Securities Act”) may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provision, or otherwise, we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. If a claim for indemnification against such liabilities (other
than the payment by us of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered) we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
us is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
PART F/S
Reference
is made to the filings by Lexicon United Incorporated for its financial
statements.
The
financial statements of Pathworks-Florida’s predecessor in interest, Ethos
Media, LLC (“Ethos”), are in Exhibit 99.1. On July 20, 2010, all
of the members of Ethos exchanged their membership interests for shares in
Pathworks Corporation, Inc., (“Pathworks”) a Florida corporation; as a result of
this transaction, the members of Ethos became the 100% shareholders of Pathworks
and Ethos became the wholly owned subsidiary of Pathworks.
24
Subsequently,
on July 20, 2010, Pathworks exchanged its 100% ownership of Ethos pursuant
to a joint venture agreement with Chesscom Technologies, Inc., A Nevada
Corporation and James G. Grimwade, (“Grimwade”) an individual. Under
the agreement, Pathworks obtained a 51% interest in the joint venture entity,
Pathworks-Florida; Chesscom Technologies received a 39% interest in
Pathworks-Florida and Grimwade received a 10% interest in
Pathworks-Florida.
On
October 21, 2010, Lexicon United Incorporated (the “Company”) completed its
previously announced merger (“Merger”) with Pathworks PCO of Florida, Inc.
(“Pathworks-Florida”), pursuant to which Pathworks-Florida became a wholly-owned
subsidiary of the Company.
Item 3.02 Unregistered Sales of
Equity Securities
In
connection with the Merger transaction between the Company and Pathworks-Florida
on October 21, 2010, the Company issued the following shares of its common stock
to the former shareholders of Pathworks-Florida:
James
A. Grimwade
|
871,500 | |||
Pathworks
Corporation
|
4,444,650 | |||
Chesscom
Technologies, Inc,
|
3,398,850 | |||
Total
|
8,715,000 |
871,500
of the above-indicated shares are being held in escrow by the Company and are
subject to release based on certain mutually-agreed terms and
conditions.
On
October 21, 2010, the Company issued 400,000 shares of common stock to Elie
Saltoun, the Company’s President and 600,000 shares of common stock to Jeffrey
Nunez, the Company’s Vice President and Secretary.
Item 5.02 Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers
Pursuant
to the terms of the Merger Agreement, on October 21, 2010 the Company appointed
James Grimwade as a director of the Company with immediate effect.
See
Item 5 of Item 2.01 of this Form 8-K for information concerning the
background of the officers and directors.
Item 9.01 Financial Statements
and Exhibits.
(a) As
a result of the Merger described in Item 2.01, the registrant is filing
Pathworks-Florida’s audited financial information for the period ended December
31, 2009 and unaudited financial statements for the six-month period ended June
30, 2010 as Exhibit 99.1 to this current report.
(b) Pro
forma financial information has not been included, as it would not be materially
different from the financial information of Pathworks-Florida as referenced
above.
25
(d) Exhibits
EXHIBIT
|
||
NUMBER
|
DESCRIPTION
|
|
3.1
|
Lexicon
United Incorporated Corporation Certificate of Incorporation (filed with
the Registrant's Registration Statement on August 28, 2001, and
incorporated herein by reference).
|
|
3.2*
|
Certificate
of Merger filed with the Delaware Secretary of State.
|
|
3.3
|
Lexicon
United Incorporated Bylaws (filed with the Registrant's Registration
Statement on August 28, 2001, and incorporated herein by
reference).
|
|
10.1
|
Agreement
and Plan of Merger by and between the Company, Pathworks PCO of Florida,
Inc. and Lexicon Acquisition, Inc., (filed as Exhibit 10.1 to the
Company’s Form 8-K/A filed on August 5, 2010, and incorporated herein by
reference)
|
|
10.2*
|
Management
Advisory Agreement dated as of September 20, 2010 by and between Chesscom
Technologies, Incl. and Chesscom Management Advisors,
Inc.
|
|
99.1*
|
Financial
Statements for Pathworks PCO of Florida, Inc. for the period ended
December 31, 2009 (audited) and for the six-month period ended June 30,
2010 (unaudited).
|
* Filed
herewith
SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
LEXICON
UNITED INCORPORATED
|
|||
By:
|
|
/S/
Elie Saltoun
|
|
Name:
|
Elie
Saltoun
|
||
Title:
|
President
|
||
Dated: | October 29, 2010 |
26
EXHIBIT
LIST
EXHIBIT
|
||
NUMBER
|
DESCRIPTION
|
|
3.1
|
Lexicon
United Incorporated Corporation Certificate of Incorporation (filed with
the Registrant's Registration Statement on August 28, 2001, and
incorporated herein by reference).
|
|
3.2*
|
Certificate
of Merger filed with the Delaware Secretary of State.
|
|
3.3
|
Lexicon
United Incorporated Bylaws (filed with the Registrant's Registration
Statement on August 28, 2001, and incorporated herein by
reference).
|
|
10.1
|
Agreement
and Plan of Merger by and between the Company, Pathworks PCO of Florida,
Inc. and Lexicon Acquisition, Inc., (filed as Exhibit 10.1 to the
Company’s Form 8-K/A filed on August 5, 2010, and incorporated herein by
reference)
|
|
10.2*
|
Management
Advisory Agreement dated as of September 20, 2010 by and between Chesscom
Technologies, Incl. and Chesscom Management Advisors,
Inc.
|
|
99.1*
|
Financial
Statements for Pathworks PCO of Florida, Inc. for the period ended
December 31, 2009 (audited) and for the six-month period ended June 30,
2010 (unaudited).
|
* Filed
herewith
27