Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2/A First Amendment to Registration Statement 60 227K
2: EX-4 Instrument Defining the Rights of Security Holders 2 14K
-- warrant
3: EX-4 Warrant Agreement 8 33K
4: EX-5 Legal Opinion Revised 2± 9K
5: EX-10 Acquisition of Product Line 16 63K
6: EX-23 Consent of Auditor 1 6K
7: EX-23 Counsel's Consent 1 5K
Registration Number: 333-104368
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
FIRST AMENDMENT TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TEXXAR, INC.
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(Name of small business
issuer in its charter)
Delaware 1623 13-4049603
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(State of incorporation (Primary Standard Industrial (I.R.S. Employer
or jurisdiction Classification Code Number) Identification No.)
of organization)
19 Engineers Lane, Farmingdale, New York 11735 (631)756-9116
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(Address and telephone number of principal executive offices)
19 Engineers lane, Farmingdale, New York 11735 (631)756-9116
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(Address of principal place of business or intended principal place of business)
Aron Govil, 19 Engineers lane, Farmingdale, New York 11735 (631)756-9116
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(Name, address, and telephone number of agent for service)
Copies to:
Joel Pensley, Esq.
211 Schoolhouse Road
Norfolk, Connecticut 06058
Phone: (860) 542-1122
Fax: (626) 608-3076
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after
the effective date of the registration statement until such time that all of the
shares of common stock registered hereunder have been sold.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum
Each Class of Amount Offering Aggregate Amount of
Securities Being Being Price Per Offering Registration
Registered Registered Share (1) Price(1) Fee
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Shares of common stock 2,000,000 $ 0.75 $ 1,500,000 $138.00
owned by existing
stockholders
Resale of Shares of Common
Stock Underlying "A" Warrants 700,000 0.75 525,000 48.30
Resale of Shares of Common
Stock Underlying "B" Warrants 700,000 1.00 700,000 64.40
Resale of Shares of Common
Stock Underlying "C" Warrants 700,000 1.25 875,000 80.50
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TOTAL $ 3,600,000 $331.20
(1) Estimated solely for the purposes of computing the registration fee
pursuant to Rule 457.
(1) Pursuant to Rule 416 there are also registered hereby such additional
number of shares as may become issuable by reason of the anti-dilution
provisions of the Class A, Class B and Class C warrants. These additional
shares are not issuable by reason of the anti-dilution provisions of other
derivative securities we may issue in the future.
(2) Pursuant to Rule 457, the registrant, (file no. 333-104368), previously
paid a fee of $252.83 on April 8, 2003. The current fee of $331.20 was
offset against this previously paid fee and an additional fee of $78.37 is
due with this filing.
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that the registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The information in the prospectus is not complete and may be changed.
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these securities may not be sold until the registration statement filed with the
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Securities and Exchange Commission is effective. The prospectus is not an offer
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to sell, nor does it seek an offer to buy, these securities in any state where
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the offer or sale is not permitted.
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Subject to completion: Dated August 11, 2003
PROSPECTUS
TEXXAR, INC.
4,100,000 SHARES OF COMMON STOCK TO BE SOLD BY SELLING STOCKHOLDERS
This prospectus relates to the resale by the selling stockholders who
presently own our shares of common stock of 2,000,000 shares of our common stock
and the resale of 2,100,000 shares underlying our warrants owned by Colebook,
Inc. The offering will expire two years from the effective date of the
registration statement of which the prospectus is a part. None of our securities
trade on any securities market. Selling securityholders must sell their shares
at $.75 per share until the shares become listed or quoted on a securities
market. Thereafter, selling stockholders, who are not affiliates, may sell their
shares at market prices or at privately negotiated prices. Selling stockholders
who are affiliates must sell their shares at $.75 per share for the duration of
the offering. We will not receive any of the proceeds from the sale of the
shares by the selling stockholders. We have not retained any underwriter in
connection with the sale of our securities. We have paid, on behalf of the
selling stockholders, the expenses of the offering which we estimate at $27,500.
Of the shares registered:
o 2,000,000 are currently outstanding, and
o 2,100,000 shares are issuable upon the exercise of warrants.
The warrants are exercisable from the date our common stock commences to
trade publicly as follows:
o 700,000 Class "A" Warrants exercisable at $.75 per warrant or an
aggregate of $525,000, exercisable for a period of three months from the
date our common stock commences trading on a securities market;
o 700,000 Class "B" Warrants exercisable at $1.00 per warrant or an
aggregate of $700,000 exercisable for a period of six months from the date
our common stock commences trading on a securities market; and
o 700,000 Class "C" Warrants exercisable at $1.25 per warrant or an
aggregate of $875,000 exercisable for a period of nine months from the
date our common stock commences trading on a securities market;.
Nexgen Holdings may use this prospectus in connection with sales of up to
2,1000 shares of our common stock underlying the warrants.
As you review this prospectus, you should carefully consider the matters
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described in "Risk Factors" beginning on page 4.
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Neither the Securities and Exchange Commission nor any state securities
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commission has approved or disapproved of these securities or passed on the
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accuracy or adequacy of this prospectus. any representation to the contrary is a
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criminal offense.
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The date of the prospectus is August , 2003
TABLE OF CONTENTS
PAGE
----
Prospectus Summary..................................................... 3
The Offering........................................................... 4
Summary Financial Information.......................................... 4
Risk Factors........................................................... 5
Capitalization......................................................... 8
Dividend Policy........................................................ 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 9
Business............................................................... 13
Management............................................................. 20
Certain Related Party Transactions..................................... 23
Principal Stockholders................................................. 24
Description of Securities.............................................. 24
Selling Stockholders................................................... 27
Plan of Distribution of Shares of Existing Stockholders ............... 28
Nexgen Holdings' Plan of Distribution.................................. 30
Shares Eligible for Future Sale........................................ 32
Where You Can Find More Information.................................... 32
Legal Proceedings...................................................... 33
Legal Matters.......................................................... 33
Experts................................................................ 33
Financial Statements................................................... F-1
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2
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information in the prospectus including our financial statements and notes to
those statements appearing elsewhere in the prospectus.
On November 15, 2001, we, under the name World Wide Yacht Deliveries, Inc.,
merged with Texxar Inc. We were the surviving company. We then changed our name
to Texxar, Inc.
We supply advanced air pollution control systems and flue gas emissions
measurement instrumentation systems for power plants, refineries, cement plants
and a variety of other industrial and health care facilities in the United
States and abroad. We design, manufacture, assemble and market equipment,
integrated with instrumentation, which monitors, ameliorates or abates
industrial environmental emissions. Through use of our equipment and
instrumentation, our clients can both recover valuable products from their
exhaust gaseous streams and, at the same time, comply with United States
Environmental Protection Agency and state and local emission regulations on
dust, particulate, fumes, acid gases and other toxic pollutants into the
atmosphere. Since the inception of our business over fifty years ago, we have
supplied equipment to thousands installations worldwide.
o On November 29, 2002, we, entered into a securities purchase agreement with
Nexgen Holdings. The agreement was rescinded on June 2, 2003.
o On June 11, 2003, we sold 2,100,000 warrants to Nexgen Holdings for $1,000.
We are registering the resale of common stock owned by present
stockholders. Selling stockholders may sell their shares at $.75 per share
until a securities market quotes the shares. Thereafter, selling
stockholders, who are not affiliates, must sell their shares at market prices
or at privately negotiated prices. Selling stockholders who are affiliates must
sell their shares at $.75 per share for the duration of the offering.
We are also registering resale of the shares underlying the warrants
purchased by Nexgen Holdings. On June 11, 2003, Nexgen Holdings purchased
700,000 Class "A", 700,000 Class "B" and 700,000 Class "C" warrants for an
aggregate purchase price of $1,000. The Class "A" Warrants are exercisable at
$.75 per warrant for three months from the date our common stock commences
trading on a securities market; the Class "B" Warrants are exercisable at $1.00
per warrant or an for six months from the date our common stock commences
trading on a securities market; and the Class "C" Warrants are exercisable at
$1.25 for nine months from the date our common stock commences trading on a
securities market.
3
THE OFFERING
Shares offered by the selling
stockholders who are holders
of their shares as of the date
of the prospectus.............. 2,000,000 shares of common stock
Shares to be offered by Nexgen
Holdings upon exercise of
warrants....................... 2,100,000 shares of common stock
Common stock outstanding.......... 25,591,400 shares
Warrants outstanding.............. 2,100,000 warrants
Common stock outstanding after
exercise of outstanding warrants. 27,691,400 shares
SUMMARY FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
[Enlarge/Download Table]
Six Months Ended Year Ended
March 31, September 30,
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2003 2002 2002 2001
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Sales 1,983,761 1,816,655 $3,790,496 $4,270,282
Cost of Sales 1,134,116 1,197,370 2,379,733 3,111,744
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Gross Profit 849,645 619,285 1,410,763 1,158,538
Operating Expenses 802,819 551,560 1,249,110 1,151,484
Interest Expense (16,368) (12,481) 23,376 60,075
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Income (loss) Before
Income Taxes 30,458 55,244 138,277 (53,021)
Income Tax Provision 0 0 0 0
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Net income (loss) 30,458 55,244 $138,277 $ (53,021)
========== ========== ========== ===========
Net Income (loss) Per Share $0.00 $0.00 $0.01 ($0.05)
========== ========== ========== ===========
Weighted Average Common
Shares Outstanding* 23,591,400 15,991,400 18,134,257 991,400
========== ============ ========== =======
4
Balance Sheet Data March 31, September 30,
2003 2002
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Total Assets $1,226,460 $1,288,625
Total Liabilities 1,112,823 1,219,446
Stockholders' Equity $ 114,637 $ 69,179
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(1) Pro-forma diluted loss per share excludes the 2,100,000 shares of common
stock underlying the warrants since the issuance of shares pursuant to
warrant exercise would be antidilutive.
RISK FACTORS
You should carefully consider the following factors in addition to the
other information in this prospectus, including the financial statements and
related notes, before investing in our common stock. These risk factors are all
those which we believe are material to our business. Risks and uncertainties
that we do not presently know about or that we currently believe are immaterial
may also impair our business. If any of the following risks actually occurs, our
business, financial condition or results of operations will likely suffer.
Our business is dependent on environmental regulation and the elimination or
lack of enforcement of regulations limiting pollution would have a severe
negative effect on our revenues and profitability.
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The market for air pollution control products and systems is directly
dependent upon the existence and enforcement of laws, particularly the Federal
1990 Clean Air Act and regulations of various states, which limit or prohibit
the release of pollutants into the atmosphere and impose penalties for
non-compliance. The 1990 Clean Air Act allows individual states to enact
stronger pollution controls, but not to have weaker pollution controls than
those set for the whole country. The potential enactment of legislative
proposals which seek to abolish or reduce enforcement of environmental laws
and regulations could reduce the corporate funding for environmental control
systems. Such reductions in funding would reduce our our future revenues and,
thus, our profitability.
We cannot not protect our technologies; thus, our competitors can produce
similar pollution abatement equipment using the same technology and we may not
be able successfully to compete with them. In that event, our revenues and
profits would suffer.
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The technologies we use in our products are not patented. Thus, we rely on
a combination of trade secrets and know-how based on decades of confidential
data of the design and performance of our products, including but not limited to
efficiency of pollutant removal, and the cost and maintenance in similar
installations, to sell our products and gain a competitive edge. Our trade
secrets and know-how may become known to or independently developed by our
competitors. If competitors offer products using our technology, it could place
us at competitive disadvanage. We may thus fail to a win many of the contracts
on which we bid. In that event, our revenues and profits would decline.
5
?We may be unable to bid on major contracts because we lack capital to fund
construction and installation prior to receiving payment and to procure bonds
with a consequential decrease in revenues and profits.
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Although many projects on which we bid involve our receiving progress
payments as the work is completed, for other projects, the customer does not pay
until after completion. Thus, for those projects, we must pay for engineering,
fabrication and installation prior to the receipt of any payments from the
client. Large projects, such as power plant flue gas desulfurization or waste
incineration, require bid and performance bonds. Presently, we are unable to
obtain bonding for large-scale projects and are thus prevented from bidding and
obtaining such projects.
As a result, we are limited to bid on smaller contracts where our capital
is sufficient to pay the costs of contract performance before receiving payment,
if necessary, and where there are no bonding requirements. Thus, in the absence
of additional funding, we find it difficult to expand because we are unable to
bid on larger projects which require performance bonds or which do not provide
for sufficient progress payments.
Permitting delays cause curtailment or elimination of projects and have a
negative impact on our revenues and cash flow.
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Generally, before we can commence construction of domestic projects which
we have been awarded, our customers must obtain permits from one or more state
governmental agencies following guidelines of the Environmental Protection
Agency. Political and other considerations often delay or curtail the issuance
of permits. Permitting, at best, delays many projects or, at worst, causes their
cancellation. The permitting process delays or reduces our revenues, cash flow
and profits.
We are dependent on subcontractors for the manufacture, fabrication and
installation of our products; if their performance is inadequate, we may default
or lose money on contracts, lose credibility in the marketplace with a result
that our revenues and profits would decline.
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Generally, we do not manufacture or fabricate our own products, relying
instead upon the services of third party manufacturers and fabricators. We also
do not engage in the field construction of our systems but rely on field
construction subcontractors operating under the supervision of our employees. If
the manufacturers or subcontractors we rely upon are not available when their
services are needed, or fail to deliver products or services of acceptable
quality and price, we may default on contracts or lose money on contracts. As a
result, our trade reputation would decline as would our revenues and profits.
6
Many of our contracts are for a fixed price; if our estimates were incorrect, we
may lose money on such contracts which would result in negative cash flow.
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Many of the contracts on which we bid are fixed price contracts. Even if we
are chosen as a contracting party, our actual costs in performing contracts may
exceed the estimates upon which our bids were based. Thus, we may lose money on
the contracts we win. Thus, fixed price contracts may not be profitable and may
cause us negative cash flow.
We lack product liability insurance and, as a rsult, may be subject to product
liability claims which could erode our cash and destroy our profitability.
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We do not carry product liability or professional liability insurance which
would cover claims relating to the design, manufacture or installation of our
products. In addition, our failure to have insurance has excluded us from
obtaining contracts which are conditioned upon the vendor having insurance
coverage. We need additional funding before we can purchase product liability
insurance. Our continued inability to obtain adequate coverage not only
interferes with our ability to book new business, but also exposes us to
liabilities which could disrupt or destroy our business.
Our common stock may not be able to trade on the Over-the-Counter Bulletin Board
and, if our stock is unable to trade on the OTCBB, our investors may be unable
to sell their shares publicly and, Nexgen Holdings, the holder of our warrants
may be unable or unwilling to exercise them jeopardizing our attempt to fund our
operations.
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We intend that our securities trade on the Over-the-Counter Bulletin Board.
However, we can offer no assurance that our common stock will so trade and, if
our shares of common stock do trade on the OTCBB, whether an active trading
market will be established or, if established, whether it can be maintained. If
we fail to file reports with the SEC on a regular basis, our stock will be
delisted from the OTCBB and may trade on the Pink Sheets, a non-automated
market, with a consequential lack of liquidity. In that event, our investors may
be unable to sell their shares publicly and, Nexgen Holdings, the holder of our
warrants may be unable or unwilling to exercise our warrants jeopardizing our
attempt to fund our operations.
7
An active market for our common stock may not develop, making it difficult for
you to sell your stock and preventing us from raising money through our
warrants.
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Prior to the date of the prospectus, there has been no public market for
our common stock. It is uncertain the extent to which a trading market will
develop or how liquid that market might become. An illiquid market for our stock
may result in price volatility and poor execution of buy and sell orders for
investors. The price of our common stock may be lower than the exercise prices
of our warrants. Thus, the possibility of funding our ongoing business or
expanding our operations will ceease if an active trading market does not
develop.
The sale of material amounts of our common stock could reduce the price of our
common stock and encourage short sales which could lower the market price for
our stock.
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If and when Nexgen Holdings, our warrantholder, exercises its warrants and
sells the common stock, our common stock price may decrease due to the
additional shares in the market. Stock issuances may encourage short sales,
which could place further downward pressure on the price of our common stock.
Our plans to expand our business will be jeopardized if we cannot raise
sufficient funds through warrant exercise or other funding sources.
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In order for us to expand our business, we must be able to finance our
contracts and provide bonding where necessary. We must also expand our
marketing. Without funding we cannot achieve growth in our business; and there
is no assurance that Nexgen Holdings, the owner of our warrants, will exercise
them or that we will find other investors on suitable terms.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2003.
March 31
2003
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Total Long Term Liabilities 0
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STOCKHOLDERS' EQUITY
Preferred stock $ .001 par value, 0
5,000,000 shares authorized, -0- issued
Common stock, $0.001 par value,
50,000,000 shares authorized; 23,591
23,591,400, shares
issued and outstanding,
March 31, 2003.
Additional Paid in Capital 91,409
Retained Earnings ( Deficit) (363)
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Total Stockholders' Equity 114,637
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Total Long Term Liabilities and
Stockholders' Equity $114,637
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8
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock and do
not anticipate paying any cash dividends in the foreseeable future.
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following summary together with the more detailed
information in the prospectus including our financial statements and notes to
those statements appearing elsewhere in the prospectus. The prospectus contains
forward-looking statements based on current expectations of our company and our
industry. These forward-looking statements involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of the factors described in the "Risk
Factors" section and elsewhere in the prospectus.
Overview
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The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and notes
appearing elsewhere in the prospectus.
It is difficult for us to forecast our revenues or earnings accurately. We
believe that future period-to-period comparisons of our operating results may
not be meaningful and should not be relied upon as an indication of future
performance as we have and will have no backlog of orders. Our operating results
in one or more future quarters may fall below investor expectations which,
assuming our common stock trades on a recognized market, would almost certainly
cause the future trading price of our common stock to decline. You should read
the following discussion together with the consolidated financial statements and
their accompanying notes, included elsewhere in the prospectus.
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Six Months Ended March 31, 2003 and March 31, 2002
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The following discussion of our financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
thereto appearing elsewhere herein.
Results of Operations
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Results of Operations for the six months ended March 31, 2003 as compared to the
six months ended March 31, 2002
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Net sales were $1,983,761 for the six months ended March 31, 2003 as
compared to $1,816,655 for the six months ended March 31, 2002, representing an
increase of $167,106 or 9.1%. This increase in revenues is due to increased
shipments of completed orders.
Cost of goods sold for the six months ended March 31, 2003 was $1,134,116
or 57.2% of net sales as compared to $1,197,370 or 65.9% of net sales for the
six months ended March 31, 2002. The decrease in the cost of goods as a percent
of net sales resulted primarily from the improved profit margins of the orders
secured.
9
Selling, operations, and general and administrative costs increased
$251,259 or 45.6% to $802,819 for the six months ended March 31, 2003 compared
to $551,560 for the six months ended March 31, 2002. The increase is attributed
to the increase in advertising expense to $40,194 in March 31, 2003 from $14,505
in March 31, 2002 and an increase in salary expense to $469,726 in March 31,
2003 from $344,351 in March 31, 2002. These higher expenses reflect our efforts
in trying to expand into new markets.
Management believes that the amount of selling, operations, and general and
administrative costs will increase as we continue to create the necessary
infrastructure to meet our goals in connection with our marketing of our
products and services.
Net profit for the six months ended March 31, 2003 was $30,458 compared to
a net profit of $55,244 for the six months ended March 31, 2002.
During the six months ended March 31, 2003 and 2002, we paid our officers
and directors an aggregate of $31,250 and $31,250 respectively in salary and
related compensation.
We have never paid any dividends on our shares of common stock and
anticipate that all future earnings, if any, will be retained for use in our
business.
Liquidity and Capital Resources
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Cash used in Operations for the six months ended March 31, 2003 as compared to
the six months ended March 31, 2002
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Net cash used by operating activities was $367,745 for the six months ended
March 31, 2003 compared to net cash provided by operating activities of $78,208
for the six months ended March 31, 2002. The net cash used by operating
activities in the six months ended March 31, 2003 reflects net profit of $30,458
depreciation and amortization of $ 21,135 offset by a increase in accounts
receivable of $161,601 and an decrease in accounts payable of $257,574. The net
cash provided by operating activities in the six months ended March 31, 2002
includes an increase in accounts payable of $181,397, along with a net income of
$55,244, increases in accounts receivable $110,485 and increases in inventory of
$28,660. Inventory consists of pollution monitoring equipment and spare parts.
Net cash used in investing activities was $3,454 for the six months ended
March 31, 2003 compared to net cash used in investing activities of $150,000 for
the six months ended March 31, 2002 used to purchase distribution rights for a
line of pollution monitoring equipment.
Net cash provided from financing activities was $180,761 for the six months
ended March 31, 2003 from an increase in notes payable of $303,372 compared to
net cash provided by financing activities of $109,183 for the six months ended
March 31, 2002, primarily due to a increase in note payable of $52,791 and an
acquisition note payable of $50,000.
At March 31, 2003 and 2002, we had cash and cash equivalents of $62,373 and
$130,218 respectively. This cash amount is a direct result of the levels of
accounts receivable collected and accounts payables carried.
10
We believe that our existing cash, cash equivalents and short-term
investments and any cash generated from operations will be sufficient to fund
our operating activities, capital expenditures and other obligations for the
foreseeable future. However, if during that period or thereafter, we are not
successful in generating sufficient cash flow from operations or otherwise when
required in sufficient amounts and on terms acceptable to us, we would cease
marketing initiatives and new products, and would decrease our payroll to levels
which can support our present level of business but leave no room for expansion.
As of March 31, 2003, we had stockholders' equity of $114,637 compared to
the stockholders' equity of $69,179 as at September 30, 2002.
We anticipate that the warrants, if exercised by their holder, Nexgen
Holdings, will be sufficient to meet our cash needs. However, there can be no
assurance that we will be able to obtain needed equity financing as the market
price of our stock may not exceed the exercise price of the warrants. In
addition, the warrants held by Nexgen Holdings can only be exercised upon the
effectiveness of this registration statement with the SEC, and then only if
certain conditions are met and certain conditions precedent exist. It is
possible due to market conditions that the amount of funding available under the
warrants may be limited and not necessarily cover funding for capital
requirements and bonding needed for larger scale projects. In such an event, we
may raise additional operating capital through private placements of equity
and/or debt securities. However, we have made no attempt to place equity or debt
privately; and there can be no assurances that we will be successful in our
endeavors.
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Years Ended September 30, 2002 and September 30, 2001
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Results of Operations
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Results of Operations for the Fiscal Year Ended September 30, 2002 as compared
to the Fiscal Year Ended September 30, 2001
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Net sales were $3,790,496 for the year ended September 30, 2002 as compared
to $4,270,282 for the year ended September 30, 2001, representing a decrease of
$479,786 or 11.2%. This decrease in revenues resulted from the timing of
bookings and completion of projects.
Cost of goods sold for the year ended September 30, 2002 was $2,379,733 or
62.8% of net sales as compared to $3,111,744 or 72.9% of net sales for the year
ended September 30, 2001. The percent of cost of goods compared to net sales
decreased primarily from the improved profit margins of the projects completed.
Selling, operations, and general and administrative costs increased $97,626
or 8.5% to $1,249,110 for the year ended September 30, 2002 compared to
$1,151,484 for the year ended September 30, 2001.
Management believes that the selling, operations, and general and
administrative costs will increase as we continue to create the necessary
infrastructure to increase our revenues by marketing our products and services.
Net profit for the year ended September 30, 2002 was $138,277 compared to a
net loss of $53,021 for the year ended September 30, 2001.
11
During years ended September 30, 2002 and 2001, we paid our officers and
directors an aggregate of $125,000 and $125,000 respectively in salary and
related compensation.
We have never paid any dividends on our shares of common stock and
anticipate that all future earnings, if any, will be retained for use in our
business.
Liquidity and Capital Resources
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Cash used in Operations for the Fiscal Year Ended September 30, 2002 as compared
to the Fiscal Year Ended September 30, 2001
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Net cash provided by operating activities was $170,673 for the year ended
September 30, 2002 compared to net cash used in operating activities of $103,055
for the year ended September 30, 2001. The net cash provided by operating
activities in the year ended September 30, 2002 was primarily due to the net
profit of $138,277, depreciation and amortization of $33,033 and a decrease in
accounts receivable of $123,484 partially offset by a decrease in accounts
payable of $42,929 and a $95,422 increase in inventory. The net cash used in
operating activities in the year ended September 30, 2001 was primarily due to a
net loss of $53,021 and an increase in accounts receivable of of $241,080,
partially offset by an increase in accounts payable of $173,197.
Net cash used in investing activities was $150,000 for the year ended
September 30, 2002 for the acquisition of distribution rights to a line of
pollution monitoring devices compared to net cash used in investing activities
of $-0- for the year ended September 30, 2001.
Net cash provided from financing activities was $139,312 for the year ended
September 30, 2002. This consisted primarily of an acquisition note payable of
$50,000 and $95,404 in notes payable; compared to net cash provided by financing
activities of $164,311 for the year ended September 30, 2001. This was primarily
due to an increase in note payable of $173,358 and a decrease in capital leases
of $9,047.
On March 26, 1999, we entered into a line of credit with First Commercial
Capital Co. which is beneficially owned by Anandi Lal Gupta. The maximum limit
of the credit line is $500,000. The outstanding balance bears interest at 8% per
annum and is secured by our accounts receivable. The owner of First Commercial
Capital Co., is an affiliated party, the father of our Secretary.
At September 30, 2002 and 2001, we had cash and cash equivalents of
$252,811 and $92,827, respectively. This cash amount is a direct result of the
levels of account receivable collected and accounts payables carried.
We believe that our existing cash, cash equivalents and short-term
investments and any cash generated from operations will be sufficient to fund
our operating activities, capital expenditures and other obligations for the
foreseeable future.
You may rely only on the information contained in the prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. Neither the delivery of this prospectus nor sale of common
stock means that information contained in the prospectus is correct after the
date of the prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy these shares of common stock in any circumstances under which
the offer or solicitation is unlawful.
12
BUSINESS
Introduction
------------
We design, engineer, manufacture and sell advanced and custom engineered
environmental control and flue gas emissions measurement systems to the
chemical, pulp and paper, steel, textile, mining, fertilizer, food, power, coal
and petrochemical industries, as well as municipalities, hospitals, and state
and federal governments.
Our air pollution equipment is used to control toxic fumes, sulfur dioxide,
hydrogen chloride, hydrogen sulfide, nitrous oxides and particulates from
gaseous streams. Our incineration equipment is used to dispose hospital waste
and municipal sludge. We also supply instrumentation that allows our clients to
monitor the concentrations of pollutants in flue gases and control their
process.
We were formed under the laws of Delaware on October 27, 1998, as World
Wide Yacht Delivery, Inc. On November 15, we entered into a merger agreement
with Texxar, Inc., the sole stockholder of Ducon Technologies, Inc. and on
November 29, 2001, Texxar merged into us and we were the surviving company. We
issued as consideration 22,000,000 shares of which 20,200,000 shares were issued
to the stockholders of Texxar, Inc. After the merger, on November 29, 2003, we
changed our name to Texxar, Inc. and became the sole stockholder of Ducon
Technologies, our operating company.
Systems
-------
We offer a range of systems, incorporating diverse technologies, to address
industrial processing, air pollution control and other environmental management
needs. We provide single source process design, engineering, manufacturing and
construction services on a variety of industrial, utility and energy - related
projects.
Our systems include:
o wet scrubbers,
o electrostatic precipitators,
o cyclone collectors,
o fabric filters,
o activated carbon absorbers,
o selective catalytic reduction nitrogen oxide systems
o flue gas desulfurization systems,
o incinerators and
o continuous emission and opacity monitors.
Among the products we market and manufature are the following:
Flue Gas Desulfurization Systems
We custom design, manufacture and install both wet and dry flue gas
desulfurization systems to remove sulfur dioxide from flue gases using a variety
of reagents, such as caustic, lime, limestone, ammonia, flyash, magnesium oxide,
soda ash, sea water or double alkali. Our systems can be designed to recover
sulfur, sulfuric acid or make dry gypsum from waste product. We provide a
complete turnkey installation including effluent treatment systems.
13
High Efficiency Cyclones
Available in several design configurations, our cyclones have met all
federal and local standards for particulate removal. filter. We test the
efficiency of our cyclones subsequent to installation. Our cyclones feature
compact assembly, design selection, a wWide variety of construction materials
and single or multiple layer refractory lining.
Our cyclones are used in
o spray drying of dedydrated foods, instant cofees, detergent, chemicals and
pharmaceuticals
o fluid bed processes such as Catalytic cracking of oil, calcining, coal
drying and ore roasting
o rotary dryers of fertilier, asphalt and lime
o conveying of mineral crushing and pulverizing
Electrostatic Precipitators
Our wet electrostatic precipitator unit is designed to eliminate opacity in
gas flow by using an electrical field to precipitate out particles. They are non
clogging because of the wide spacing between electrodes. They feature:
o Simple, heavy duty, maintenance-free design
o High intensity electrical field: The entire power is used to remove
pollutant.
o Provides charge and collection of superfine particles from the gas.
o Can be installed on any existing wet scrubber installation in order to
upgrade and improve the particulate removal efficiency of the existing unit
in order to meet the requirement of zero opacity.
Baghouse Filters
Baghouse filters are cloth filters which remove particulates from the
exhaust gases of manufacturers and utilites. We supply baghouse filters for
industrial and utility applications for a variety of industries, such as coal,
cement, steel, power, mining and chemical. Our bag filters are state of the art,
high efficiency, modular filters designed to handle gas volumes from several
hundred to several thousand cubic feet per minute. They are custom designed for
optimum air-to-cloth ratios, longer bag life and high particulate removal
efficiencies.
Materials Handling and Pneumatic Conveying Systems
We also design, supply, and, where desired, the install complete turnkey
facilities for pneumatic bulk material handling. We supply systems to unload,
store, reclaim, weigh and process materials of all kinds for the power, metals,
petroleum, petrochemical and water and waste water treatment industries.
Materials range as follows:
o truck and railcar unloading systems
o vacuum and pressure systems
o limestone and flyash reinjection systems
o batching and blending
o silo loading and unloading systems
o limestone conveying systems
o cement transporters
o gravity flow conveying
We also provide systems for continuous monitoring of flue gas emissions. It
is a fully integrated monitoring concept from the basic analyzers and their
calibration verifications packages through digital communication, data logging,
automatic reporting and remote diagnostics. Monitoring of stack emissions is now
a fundamental condition for the operating permits for most utility and
industrial combustion processes.
14
Customers
---------
Our principal customers are engaged in refining, power, chemical, mining
and metallurgical processing. Some of our customers, primarily located outside
of the United States, are engaged in the incineration of sewage sludge and
solid, infectious medical and hazardous waste. Historically, most of our
customers have purchased individual systems which, in many instances, operate in
conjunction with systems supplied by others. For several years, we have marketed
integrated custom engineered air pollution control and environmental management
solutions.
Among our customers are Anaconda Copper, Butte, Montana, Asarco, Sahuarita,
Arizona, Babcock & Wilcox, Barbenton, Ohio, BASF, Rensellear, New York, Bayer
Corp., Pittsburgh, Pennsylvania, Coca Cola, Atlanta, Georgia, Coors Brewing,
Eastman Kodak, Rochester, New York, Golden, Colorado, Jordon Fertilizer, Amman,
Jordan and Bechtel Chile, Santiago, Chile.
Our Responsibilities
--------------------
For each project, we are responsible to our customers for all phases of the
design, fabrication and, if included, field installation of our products and
systems. We perform all process engineering. The successful consummation of our
contractual obligation is generally determined by performance tests conducted
either by our customers or by independent testing agencies chosen by our
customers.
Suppliers and Subcontractors
----------------------------
We do not manufacture or fabricate our own systems. Rather, we engage
subcontractors who fabricate and manufacture products based on our design,
engineering and specifications. We also enter into subcontracts for field
construction, which we supervise; and we manage all technical, physical and
commercial aspects of the performance of our projects. To date, we have not
experienced difficulties either in obtaining fabricated components and other
materials and parts or in obtaining qualified subcontractors for installation
work.
Parts, Repair and Refurbishment Services
----------------------------------------
We provide replacement and spare parts and repair and refurbishment
services for our industrial processing and air pollution control systems
following the expiration of our warranties which generally range from 12 to 18
months. We have not experienced any costs from our warranties as our
subcontractors are responsible and have covered occasional post-installation
work.
Our standard project terms disclaim any liability for consequential or
indirect losses or damages stemming from any failure of our products or systems
or any component thereof. In the event of a warranty claim, we would seek
indemnification from our subcontractors for any loss, damage or claim arising
from the subcontractors' failure to perform. As a result, we have not paid any
claims under our warranties.
15
Technology
----------
We have developed a broad technological base. Our air pollution control
systems are used to control emissions in a variety of industrial, chemical
utility, and municipal applications and include flue gas desulfurization
systems, designed to control gaseous sulfur oxide emissions, a major cause of
acid rain. Our air pollution control equipment can achieve 99.99% removal
efficiencies, as determined by measurements of air pollutants entering and
leaving our equipment in post-installation testing, and are capable of meeting
and exceeding all current federal and local emission standards. Our waste
incineration equipment is used in hospitals to burn waste and in industry to
safety dispose off by-products and waste materials.
Our high efficiency systems are specifically used to:
(i) clean noxious and acid gases such as sulfur dioxide, hydrogen
chloride, hydrogen sulfide, chlorides, fluorides, blue smoke, organics
and nitrogen oxide from exhaust and power plant stacks prior to
discharging to the atmosphere;
(ii) remove corrosive fumes, mists, hydrocarbons, volatile organic
compounds, submicron particles and particulate from industrial
exhausts and boilers;
(iii) control odorous emission such as hydrogen sulfides, mercaptans,
aromatic hydrocarbons and fatty acids from industrial exhausts and
waste water treatment plants;
(iv) control emissions of coal, dust, sawdust, phosphates, flyash, cement,
carbon black, soda ash, silica and other materials; and
(v) recover catalysts in refineries and achieve and achieves required
removal efficiencies.
Other applications of our air pollution control systems are used by
industrial, commercial, and utility companies engaged in certain processing of
chemicals, metals, petroleum, textiles, paper and pulp, which result in
emissions of gases, vapors, solvents, fumes, smoke, particulate matter and in
some cases, odors. The facilities where the equipment and systems are installed
include oil production facilities, pulp and paper mills, power plants, food and
cereal plants, fertilizer plants, mining operations, boilers, waste water
treatment plants, coating operations, cement plants, lime plants, asphalt
plants, refineries, foundries, steel mills, nonferrous metal producing plants
and incinerators burning refuse, and hospital waste.
In October 2001, we bought, for $100,000 cash and a $50,000 non - interest
bearing note, the MIP OY Opacity Monitor Product line Division of Enertec Inc.
from KVB-Eneretc, Hatfield, PA which had been selling this product in North
America for ten years, The various assets included: equipment and spare parts,
contract rights, bills of materials, and customer list. Also acquired was the
exclusive North American distribution rights for products manufactured by MIP
Elektroniikka Oy of Finland. Although the $50,000 note payable was due April 1,
2002. we did not believe that the seller fully performed and we have not paid
the remaining balance due. The seller has not attempted to collect the note.
16
The product is a laser-based monitor used to measure opacity and dust
concentrations in the stack flue gases from power plants, refineries, cement
plants and glass furnaces. The EPA requires that operators of such facilities
measure the opacity in the flue gases being discharged into the atmosphere on a
continuous basis. The monitors are manufactured by MIP Oy, Finland; and there is
an installed base of approximately 500 monitors in North America. We are the
exclusive distributor of this product in North America.
The same customers who buy our pollution control equipment also buy this
product because they must also measure what they are discharging into the
atmosphere.
Marketing and Sales
-------------------
We rely on manufacturing representatives, distributors, direct sales
persons, magazine advertisements, trade shows, trade directories and catalogue
listings to market our products and services. A significant portion of our
domestic sales are made through the recommendation of architectural and
engineering firms, which play a significant role in the design and manufacture
of air pollution control systems and in customers' selection of the vendors of
such systems.
Although, we only gather about 20% of our gross sales through independent
manufacturing sales representatives, we use more than fifteen representatives in
the United States backed by our senior management and technical professionals.
Our arrangements accord each a defined territory within which to sell some or
all of our products and systems, provide for the payment of agreed-upon sales
commissions and are terminable at will. Our sales representatives sell other
products but may not sell products which are directly competitive with ours.
Sales representatives do not have authority to execute contracts on the our
behalf. Our sales representatives also serve as ongoing liaison function between
us and our customers during the installation phase of our products and systems
and address customers' questions or concerns arising thereafter. We select
representatives based upon industry reputation, prior sales performance
including number of prospective leads generated and sales closure rates, and the
breadth of territorial coverage, among other criteria.
Technical inquiries received from potential customers are referred to our
engineering personnel. Thereafter, our sales and engineering personnel jointly
prepare either a budget for future planning, a proposal or a final bid. The
period between initial customer contact and issuance of an order is generally
between two and twelve months. None of our customers represent more than 5% of
our annual revenues.
Intellectual Property
---------------------
Patents which were granted to us since our inception have expired. We have
improved and continue to improve all our products, in terms of performance,
cost, reliability and other critical factors, through analysis by our engineers
of installed systems, and treat the improvements as proprietary. These
improvements are not patented and, thus, we treat them as a combination of trade
secrets and know-how. However, we cannot prevent competitors from independently
developing or copying our products and using it in their projects or in
competitive bids. We do not consider the gradual improvements we make in the
design of our products as research and development.
17
Bonding and Insurance
---------------------
While only very few our existing contracts require us to procure bid and
performance bonds, such requirements are prevalent for large projects or
projects partially or fully funded by federal, state or local governments, such
as power plant flue gas desulfurization and waste incineration projects. A bid
bond guarantees that a bidder will execute a contract if it is awarded the job
and a performance bond guarantees performance of the contract. We do not
presently have a bank credit line to back bid or performance bonds. Thus, we
cannot bid on many large scale projects.
In certain cases, we are able to secure large contracts by accepting
progress payments in lieu of bonds.
We currently maintain different types of insurance, including general
liability and property coverage. We do not maintain professional liability or
product liability insurance with respect to our engineering and other
professional services.
Government Regulation
---------------------
Significant environmental laws, particularly the Federal Clean Air Act,
have been enacted in response to public concern about the environment. We
believe that compliance with and enforcement of these laws and regulations drive
the demand for our products and largely determine the level of expenditures that
customers will make to limit emissions from their facilities. The Federal Clean
Air Act, initially adopted in 1970 and extensively amended in 1990, requires
compliance with ambient air quality standards and empowers the EPA to establish
and enforce limits on the emission of various pollutants from specific types of
industrial facilities. States have primary responsibility for implementing these
standards, and, in some cases, have adopted more stringent standards.
The 1990 amendments to the Clean Air Act require, among other matters,
reductions in the emission of sulfur oxides, believed to be the cause of "acid
rain," in the emission of 189 identified hazardous air pollutants and toxic
substances and the installation of equipment and systems which will contain
certain named toxic substances used in industrial processes in the event of
sudden, accidental, high-volume releases. Such amendments also extend regulatory
coverage to many facilities previously exempt due to their small size and
require the EPA to identify those industries which will be required to install
the mandated control technology for the industry to reduce the emission of
hazardous air pollutants from their respective plants and facilities.
Although the Clean Air Act is a federal law covering the entire country,
the states do much of the work to carry out the Act. For example, a state air
pollution agency holds a hearing on a permit application by a power or chemical
plant or fines a company for violating air pollution limits. Under this law, EPA
sets limits on how much of a pollutant can be in the air anywhere in the United
States. This ensures that all United States residents have the same basic health
and environmental protections. The law allows individual states to have stronger
pollution controls, but states are not allowed to have weaker pollution controls
than those set for the whole country.
18
The law mandates that states take the lead in carrying out the Clean Air
Act, because pollution control problems often require special understanding of
local industries, geography, housing patterns and other features. States have to
develop state implementation plans (SIPs) that explain how each state carry out
its obligations under the Clean Air Act. A state implementation plan is a
collection of the regulations a state will use to clean up polluted areas. EPA
must approve each SIP, and if a SIP is not acceptable, the EPA can take over
enforcing the Clean Air Act in that state.
Thus, in order for us to obtain business, our products must be designed to
operate pursuant to state requirements mandated by the EPA under the Clean Air
Act. The specifications under which we manufacture products are set by the state
regulation authority where our customer's plant is located and our products must
meet those standards. Our products have in the past met or exceeded the required
specifications; however, if they cannot, we would lose that business. We do not
require any permits. The Clean Act applies to our customers. The Clean Air Act
established a permit program for larger sources that release pollutants into the
air. Approximately 35 states have permit programs for air pollution. The Clean
Water Act requires permits to release pollutants into lakes, rivers or other
waterways. Permits are issued by states or, when a state fails to carry out the
Clean Air Act satisfactorily, by EPA. The permit includes information on which
pollutants are being released, how much may be released, and what kinds of steps
the source's owner or operator is taking to reduce pollution, including plans to
monitor the pollution.
Market approaches for reducing air pollution; economic incentives
-----------------------------------------------------------------
The Clean Air Act lets businesses make choices on the best way to reach
pollution cleanup goals. These new flexible programs are called market or
market-based approaches. For instance, the acid rain clean-up program offers
businesses choices as to how they reach their pollution reduction goals and
includes pollution allowances that can be traded, bought and sold. It also
provides economic incentives for cleaning up pollution. For instance, gasoline
refiners can get credits if they produce cleaner gasoline than required, and
they can use those credits when their gasoline doesn't quite meet clean-up
requirements.
Competition
-----------
We face substantial competition in each of our principal markets. Most of
our competitors are larger and have greater financial resources than we do;
several are divisions of multi-national companies. Our major competitors are
Alstom (Sweden), General Electric, Diamond Power and Monitor Laboratories. We
compete on the basis of the acceptance of our products in past installations for
a given customer, our price compared to competitive bids, the speed of
performance, engineering and technological expertise in many areas of pollution
control and abatement, know-how in adapting our products to specific
installations and the quality of our products, systems and services.
Sspecifically, our ability to gain sales in the face of competition has depended
on higher efficiencies for removal of pollutants, lower maintenance, lower
operating costs and lower installed cost. Additionally, our management believes
that the successful performance of our installed products and systems is a key
factor in gaining business as customers typically prefer to make significant
purchases from a company with a solid performance history.
19
We obtain virtually all our projects through competitive bidding. Although
price is an important factor and may in some cases be the governing factor, it
is not always determinative; and contracts are often awarded on the basis of the
efficiency or reliability of products and the engineering and technical
expertise of the bidder.
Employees
---------
We employ fifteen full time employees, consisting of two executive
officers, seven engineers, two salespersons, two clerical persons and two
administrative support persons. None of our employees are represented by a labor
union. In addition, we use utilize commission sales personnel and contract
design engineers, on an as-needed basis. We have not entered into any employment
contracts with our personnel.
Properties
----------
We lease approximately 10,000 square feet of office and warehouse/shop
space in Farmingdale, New York in a single story commercial structure in a
business park for a term of five years with a renewal option for an additional
five years. Monthly rental is $8,000.00 with annual cost of living increases,
not to exceed 5% per year, based on the Consumer Price Index. We consider our
premises adequate for our present and foreseealbe needs in terms of location,
size, configuration and equipment. The building in which our office is located
is owned by our President, Aron Govil.
MANAGEMENT
Executive Officers and Directors
--------------------------------
The following table sets forth certain information regarding our executive
officers and directors:
Name Age Position Since
------------------------- --- --------------------------- ---------
Aron Govil* 47 President, Chief Executive 11/2001
19 Engineers Lane Officer, Treasurer and Chairman
Farmingdale, New York 11735 of the Board of Directors
Vandana Govil* 42 Vice-President-Marketing, 11/2001
19 Engineers Lane Secretary, and
Farmingdale, New York 11735 a Director
Aron Govil has been the our President since 2001 and President of Texxar,
Inc. the company we purchased, since 1997. From 1991 to 1997, Mr. Govil was
Managing Director of Zelcron Industries, Inc. a company involved in the
manufacture of environmental equipment which was liquidated by its owner in 1997
in which Mr. Govil was a director but did not own an equity interest in the
firm. From 1985 through 1991, Mr. Govil served as President of Texcel
International Inc., a company engaged in the manufacture of environmental and
process industrial equipment. Prior to 1985, Mr. Govil worked at various
management and technical positions in the environmental industry. Mr. Govil
earned his B. E. degree in Chemical Engineering 1975 and his M.B.A. in Finance
in 1978. He is also a licensed Professional Engineer in New York State and New
Jersey.
20
Vandana Govil has served as Vice President of Marketing of Texxar since
1997. Ms. Govil earned her B.S. in accounting and economics from State
University of New York at Old Westbury in 2000. From 1987 to 1995, Ms. Govil
served as a financial analyst for Zelcron Industries Inc. a company involved in
the manufacture of environmental equipment which was liquidated by its owner in
1997 in which Mrs. Govil was a director but did not pwn an equity interest..
---------------------------
* Aron Govil and Vandana Govil are husband and wife.
Director Compensation
---------------------
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable expenses for attending board
and board committee meetings. We have not paid any compensation or expenses to
our directors for acting as such
Executive Compensation
----------------------
The following table sets forth for the fiscal years ended September 30,
2002 and 2001, all compensation awarded to, earned by or paid to our Chief
Executive Officer(s) and any other executive officers who earned in excess of
$100,000 based on salary and bonus.
Summary Compensation Table
[Enlarge/Download Table]
Long Term
Compensation
Annual Compensation Awards
============================================================================================
Other Annual Securities
Name and Principal Compensation Underlying
Position Year Salary ($) Bonus ($) ($) Options/SARs (#)
============================================================================================
Aron Govil 2002 125,000 -0- 25,000 -0-
Chief Executive Officer 2001 125,000 -0- 25,000 -0-
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Option Grants for the fiscal years ended September 30, 2002 and 2001
--------------------------------------------------------------------
The following table sets forth information concerning the grant of stock
options to the named executive officer during the fiscal years ended
2002 and 2001.
[Enlarge/Download Table]
Individual Grants
===============================================================================================
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of
Shares Options Stock Price
Underlying Granted to Exercise Appreciation
Options Employees Price Per Expiration for Option Term
Name Granted in Year Share Date 5% 10%
===============================================================================================
Aron Govil -0- -0- -0- -0- -0- -0-
Aggregated Option Exercise for the fiscal years Ended May 31, 2002 and 2001 and
Fiscal Year-End Option Values
The following table sets forth information concerning the exercise of stock
options during the fiscal years ended May 31, 2002 and 2001 by the named
executive officer, and his options outstanding at the end of the transition
period.
[Enlarge/Download Table]
=====================================================================================================
Aggregate Option/SAR Exercises in Transition Period and TP-End Option/SAR Values
=====================================================================================================
Number of Securities
Underlying Unexercised
Options/SARs at TPY-End Value of Unexercised In-
Shares (#) the Money Options/SARs
Acquired on Value =========================== at TP-End ($)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
========================================================================================================
Aron Govil -0- -0- -0- -0- -0- -0-
========================================================================================================
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Indemnification of directors and executive officers and limitation of liability
-------------------------------------------------------------------------------
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. As permitted by the Delaware General
Corporation Law, our amended certificate of incorporation includes a provision
that eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any breach
of the director's duty of loyalty to our company or our stockholders, (2) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of the Delaware General
Corporation Law (regarding unlawful dividends and stock purchases) or (4) for
any transaction from which the director derived an improper personal benefit.
As permitted by the Delaware General Corporation Law, our Bylaws provide
that we are required to indemnify our directors and officers, consultants and
employees to the fullest extent permitted by the Delaware General Corporation
Law. Subject to certain very limited exceptions, we are required to advance
expenses, as incurred, in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law, subject to certain
very limited exceptions. The rights conferred in our Bylaws are not exclusive.
We have not obtained directors' and officers' liability insurance.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, 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.
CERTAIN RELATED PARTY TRANSACTIONS
We were formed under the laws of Delaware on October 27, 1998, as World
Wide Yacht Delivery, Inc. In September 2001, we merged with Texxar, Inc. and
were the surviving company. in consideration for 22,000,000 shares of which
20,200,000 shares were issued to Aron Govil, President/Treasurer, 660,000 shares
to Vandana Govil, Secretary, 660,000 shares to Anandi Lal Gupta and 660,000
shares to First Commercial Assets Management, Inc. Aron Govil and Vandana Govil
are husband and wife. The beneficial owner of First Commercial Assets
Management, Anandi Lal Gupta, is the father of Vandana Govil. In April 2003, we
issued 2,000,000 shares to Vandana Govil for services valued at $50,000 In June,
2003, Mr. Gupta transferred his shares to First Commercial Assets Management.
Our President, Aron Govil, owns the building in which we are located.
After the merger, we changed our name to Texxar, Inc. Our management
believed that it was in our best interest to merge into a company with a
shareholder base so that our company could trade on a public market.
23
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of December 31, 2002 by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock, each of our directors and executive officers and all executive officers
and directors as a group.
Shares of Common Stock Beneficially Owned(1)
--------------------------------------------
Name Title Number Percent
---------------------- ---------- -------------- -------
Aron Govil(2) President, Treasurer 22,860,000 89.0%
Vandana Govil (2) Secretary 22,860,000 89.0%
First Commercial Assets Management, Inc. (3) 1,140,000 4.4%
Directors and officers
(2 persons) 22,860,000 89.0%
------------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Unless otherwise indicated below, the persons and entity named
in the table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. We have no issued and outstanding warrants or options.
(2) Aron Govil and Vantana Govil are husband and wife. Aron Govil owns
20,200,000 shares of our common stock; and Vandana Govil owns 2,660,000
shares of our common stock. The share ownership of each includes the shares
of the other. However, each disclaims ownership of the other's shares of
our common stock.
(3) First Commercial Assets Management, Inc. is beneficially owned by Analdi
Lal Gupta. Mr. Gupta is the father of Vandana Govil, our Secretary and a
director. Each disclaims ownership of the other's shares of our common
stock.
DESCRIPTION OF SECURITIES
Common Stock
------------
We are authorized to issue 50,000,000 shares of common stock, $.001 par
value per share, of which 25,591,400 shares are issued and outstanding as of the
date of the prospectus. Each outstanding share of common stock is entitled to
one vote, either in person or by proxy, on all matters that may be voted upon by
their holders at meetings of the stockholders.
Holders of our common stock
(i) have equal ratable rights to dividends from funds legally available
therefor, if declared by our board of directors;
(ii) are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon our liquidation,
dissolution or winding up;
24
(iii) do not have preemptive, subscription or conversion rights, or redemption
or sinking fund provisions; and
(iv) are entitled to one non-cumulative vote per share on all matters on
which stockholders may vote at all meetings of our stockholders.
Cumulative voting for the election of directors is not provided for in our
amended certificate of incorporation, which means that the holders of a majority
of the shares voted can elect all of the directors then standing for election.
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of our common stock
are entitled to receive dividends out of legally available funds at such times
and in such amounts as our board of directors may from time to time determine.
Each stockholder is entitled to one vote for each share of our common stock held
on all matters submitted to a vote of stockholders. Our common stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Upon a liquidation, dissolution or winding-up, the assets legally available for
distribution to stockholders are distributable ratably among the holders of our
common stock and any participating preferred stock outstanding at that time
after payment of liquidation preferences, if any, on any outstanding preferred
stock and payment of other claims of creditors.
Preferred Stock
---------------
We may, subject to limitations prescribed by Delaware law, provide for the
issuance of up to 5,000,000 shares of our preferred stock in one or more series,
to establish from time to time the number of shares to be included in each such
series, to fix the rights, preferences and privileges of the shares of each
wholly unissued series and any qualifications, limitations or restrictions
thereon, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding) without any
further vote or action by the stockholders. Our board of directors may authorize
the issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of our common
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, have the effect of delaying, deferring or preventing a change in
control and may adversely affect the market price of the common stock and the
voting and other rights of the holders of common stock. We have no current plans
to issue any shares of preferred stock.
Common Stock Purchase Warrants
------------------------------
We have sold to Nexgen Holdings 2,100,000 common stock warrants equally
divided into three classes. Each class is exercisable for a period commencing
the date our common stock trades on a public market. Each warrant entitles the
holder to purchase one share of our common stock as follows:
o the Class "A" Warrants for $.75 for three months;
o the class "B" Warrants for $1.00 for six months; and
o the Class "C" Warrants for $1.25 for nine months.
25
Nexgen Holdings may only exercise its warrants when there is a current
effective registration statement covering resale of the underlying shares of
common stock. If we are unable to maintain a current effective registration
statement, Nexgen Holdings will be unable to exercise its warrants and they may
become valueless.
Warrants may be exercised by surrendering the warrant certificate, with the
form of election to purchase printed on the reverse side of the warrant
certificate properly completed and executed, together with payment of the
exercise price, to us. Warrants may be exercised in whole or from time to time
in part. If less than all of the warrants evidenced by a warrant certificate are
exercised, a new warrant certificate will be issued for the remaining number of
unexercised warrants.
Nexgen Holdings is protected against dilution of the equity interest
represented by the underlying shares of common stock upon the occurrence of
certain events, including, but not limited to, issuance of stock dividends. If
we merge, reorganize or are acquired in such a way as to terminate the warrants,
they may be exercised immediately prior to such action. In the event of
liquidation, dissolution or winding up, Nexgen Holdings, the holder of the
warrants is not entitled to participate in our assets.
For the life of the warrants, Nexgen Holdings is given the opportunity to
profit from a rise in the market price of our common stock. The exercise of the
warrants will result in the dilution of the then book value of our common stock
and would result in a dilution of the percentage ownership of then existing
stockholders. The terms upon which we may obtain additional capital may be
adversely affected through the period in which the warrants remain exercisable.
Nexgen Holdings may be expected to exercise the warrants at a time when we
would, in all likelihood, be able to obtain equity capital on terms more
favorable than those provided for by the warrants.
In the event the proceeds of warrant exercise are not sufficient for the
development and growth of our business, we may seek additional financing. We
believe that the proceeds of exercise of existing warrants will be sufficient
for such purpose and therefore do not expect to issue any additional securities
at this time. However, we may issue additional securities, incur debt or procure
other types of financing if needed. We have not entered into any agreements,
plans or proposals for such financing and have no plans to do so. If we require
additional financing, there is no guarantee that such financing will be
available to us or if available that such financing will be on terms acceptable
to us.
Reports to Stockholders
-----------------------
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable after the end of each fiscal
year. Our fiscal year ends on September 30th.
Transfer Agent
--------------
We have appointed Olde Monmouth Stock Transfer Company, Inc., Atlantic
Highlands, New Jersey as transfer agent for our shares of common stock.
26
SELLING STOCKHOLDERS
2,000,000 of the shares offered under this prospectus may be sold by
holders who have previously acquired their shares. We will not receive any of
the proceeds from sales of shares offered under the prospectus. All costs,
expenses and fees in connection with the registration of the selling
stockholdrs' shares will be borne by us. All brokerage commissions, if any,
attributable to the sale of shares by selling stockholders will be borne by
selling stockholders.
The selling stockholders are offering a total of 2,531,800 shares of our
common stock. The following table sets forth:
o the name of each person who is a selling stockholder;
o the title of each person who is one of our officers or directors;
o the number of securities owned by each such person at the date of the
prospectus; and
o the number of shares of common stock such person will own after
the offering.
The column "Shares Owned After the Offering" gives effect to the sale of
all the shares of common stock being offered by the prospectus.
[Enlarge/Download Table]
Shares Owned Prior to Shares Owned After
Nuumber of to the Offering the Offering
Shares --------------------- ------------------
Selling Stockholders Title Offered Number Percent Number Percent
-------------------- ------ ----------- --------- ------- ------ -------
Albright, Matt 200 200 * -0- -0-
Berger, Bradley 100 100 * -0- -0-
Berger, Bradley
c/f Amanda Berger (1) 100 100 * -0- -0-
Berger, Bradley
c/f Bennat Berger (1) 100 100 * -0- -0-
Budin, Phil 100 100 * -0- -0-
Burton, Raymond 5,000 5,000 * -0- -0-
Carnicelli, Debra 100 100 * -0- -0-
Cassin, Constance 100 100 * -0- -0-
Clissold, Lane 5,000 5,000 * -0- -0-
Columbo, Britt 100 100 * -0- -0-
Connors, Chris 100 100 * -0- -0-
Demeri, Laura (2) 1,000 1,000 * -0- -0-
Demeri, Theresa (2) 100 100 * -0- -0-
Falcon Crest Capital, Inc. (3) 500,000 500,000 1.9% -0- -0-
First Commercial Assets
Management, Inc. (5) 408,600 1,140,000 4.4% 731,400 2.9%
27
Graham, Sharie 10,000 10,000 * -0- -0-
Hines, James 100 100 * -0- -0-
Karam, Jake 100 100 * -0- -0-
Kenny, Denis 100 100 * -0- -0-
Luksich, Marco (4) 800 800 * -0- -0-
Luksich, Sam (4) 200 200 * -0- -0-
Mecurio, Marc 200 200 * -0- -0-
Mitchell, Robert 100 100 * -0- -0-
Munz, Russell 100 100 * -0- -0-
Naivar, Bud 2,500 2,500 * -0- -0-
Nickisch, Candace 2,100 2,100 * -0- -0-
O'Brien, Kevin 5,000 5,000 * -0- -0-
Palmietto, Richard 500 500 * -0- -0-
Pensley, Joel (6) 200,000 200,000 * -0- -0-
Rymniak, Jay 1,000 1,000 * -0- -0-
Shargel, Terry 5,000 5,000 * -0- -0-
Shirley, Dale (3) 750,000 750,000 2.9% -0- -0-
Sivori, Bob 5,100 5,100 * -0- -0-
Sheperger, Denis 100 100 * -0- -0-
Volpe, Mark 100 100 * -0- -0-
Walton, Tracy 1,000 1,000 * -0- -0-
Zuzic, Stan 100 100 * -0- -0-
-----------------
* The stockholder owns less than 1% of our issued and outstanding stock.
1. Bradley Berger controls the shares in the names of Amanda Berger and Bennat
Berger.
2. Laura Demeri is the beneficial owner of shares in the name of Theresa
Demeri.
3. Dale Shirley is the beneficial owner of Falcon Crest Capital, Inc.
4. Sam Luksich claims beneficial ownership of the shares in the name of Marco
Luksich.
5. First Commercial Capital Co. is beneficially owned by Anandi LawGupta. Mr.
Gupta is the father of Vandana Govil, Secretary and a director. They
disclaim ownership of each other's shares.
6. Joel Pensley is our securities counsel.
Common stock registered for resale constitutes approximately 9.3% of our
issued and outstanding common shares as of the date of the prospectus.
PLAN OF DISTRIBUTION OF SHARES OF EXISTING STOCKHOLDERS
The shares covered by this prospectus may be offered and sold from time to
time by the selling stockholders. The term "selling stockholders" includes
donees, pledgees, transferees or other successors-in-interest selling shares
received after the date of the prospectus from a selling stockholder as a gift,
pledge, partnership distribution or other non-sale related transfer. Selling
stockholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. Sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
in negotiated transactions. Selling stockholders may sell their shares by one or
more of, or a combination of, the following methods:
28
o purchases by a broker-dealer as principal and resale by such broker-dealer
for its own account pursuant to the prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o block trades in which the broker-dealer so engaged will attempt to sell the
shares as agent; and
o in privately negotiated transactions.
In addition, any shares that qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to the prospectus.
To the extent required, the prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In connection with
distributions of the shares or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers or other financial institutions.
In connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of the common stock in the course of
hedging the positions they assume with the selling stockholders. The selling
stockholders may also sell their common stock short and redeliver the shares to
close out such short positions. Selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions which
require the delivery to such broker-dealer or other financial institution of
shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to the prospectus (as supplemented or
amended to reflect such transaction). Selling stockholders may also pledge
shares to a broker-dealer or other financial institution, and, upon a default,
such broker-dealer or other financial institution, may effect sales of the
pledged shares pursuant to this prospectus (as supplemented or amended to
reflect such transaction).
In effecting sales, broker-dealers or agents engaged by selling
stockholders may arrange for other broker-dealers to participate. Broker-dealers
or agents may receive commissions, discounts or concessions from the selling
stockholders in amount to be negotiated immediately prior to the sale.
In offering the shares covered by the prospectus, selling stockholders and
any broker-dealers who execute sales for the selling stockholders may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales. Any profits realized by selling stockholders and the compensation of
any broker-dealer may be deemed to be underwriting discounts and commissions.
In order to comply with the securities laws of certain states, shares must
be sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states, shares may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.
We have advised the selling stockholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. Selling stockholders may indemnify any broker-dealer
participating in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
29
At the time a particular offer of shares is made, if required, a prospectus
supplement will be distributed that will set forth the number of shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public.
We have agreed to indemnify the selling stockholders against certain
liabilities, including certain liabilities under the Securities Act.
We have agreed with the selling stockholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of:
o such time as all of the shares covered by this prospectus have been
disposed of pursuant to and in accordance with the Registration
Statement or
o two years from the effective date of the registration statement.
NEXGEN HOLDINGS' PLAN OF DISTRIBUTION
Nexgen Holdings is free to offer and sell its shares of our common stock at
such times, in such manner and at such prices as it may determine on a best
efforts basis. The types of transactions in which the shares of our common stock
are sold may include transactions in the over-the-counter market (including
block transactions), negotiated transactions, or a combination of such methods
of sale. The sales will be at market prices prevailing at the time of sale or at
negotiated prices. Such transactions may or may not involve brokers or dealers.
Nexgen Holdings has advised us that it has not entered into any agreement,
understanding or arrangement with any broker-dealers regarding the sale of its
shares, and does not have a coordinating broker acting in connection with the
proposed sale of our common stock.
Nexgen Holdings may sell its shares directly to purchasers or to or through
broker-dealers, which may act as agents. These broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling shareholders. They may also receive compensation from the purchasers of
our common stock for whom such broker-dealers may act as agents.
Nexgen Holdings is an "underwriter" within the meaning of Section 2(a)(11)
of the Securities Act. Any commissions received by broker-dealers and any profit
on the resale of the shares of our common stock sold by them might be deemed to
be underwriting discounts or commissions. Nexgen Holdings may agree to indemnify
broker-dealers for transactions involving sales of our common stock against
certain liabilities, including liabilities arising under the Securities Act.
Because Nexgen Holdings is an underwriter within the meaning of Section
2(a)(11) of the Securities Act, it will be subject to prospectus delivery
requirements.
We have informed Nexgen Holdings that the anti-manipulation rules of the
SEC, including Regulation M promulgated under the Securities Exchange Act of
1934, will apply to its sales in the market, and have provided them with a copy
of such rules and regulations.
30
Regulation M may limit the timing of purchases and sales of any of the
shares of our common stock by Nexgen Holdings and any other person distributing
our common stock. The anti-manipulation rules under the Securities Exchange Act
may apply to sales of shares of our common stock in the market and to the
activities of Nexgen Holdings and its affiliates. Furthermore, Regulation M of
the Securities Exchange Act may restrict the ability of any person engaged in
the distribution of shares of our common stock to engage in market-making
activities with respect to the particular shares of common stock being
distributed for a period of up to five business days prior to the commencement
of such distribution. All of the foregoing may affect the marketability of our
common stock and the ability of any person or entity to engage in market-making
activities with respect to our common stock.
Rules 101 and 102 of Regulation M under the Securities Exchange Act, among
other things, generally prohibit certain participants in a distribution from
bidding for or purchasing for an account in which the participant has a
beneficial interest, any of the securities that are the subject of the
distribution. Rule 104 of Regulation M provides that no person, directly or
indirectly, may stabilize, effect any syndicate covering transaction, or impose
a penalty bid in connection with an offering of any security in contravention of
the rule's provisions.
Nexgen Holdings may not rely upon Rule 144 for the sale of our common
shares in the open market since it is an underwriter within the meaning of
Section 2(a)(11) of the Securities Act and the safe-harbor provided by Rule 144
is not available to underwriters of our common stock.
We will pay all expenses in connection with the registration and sale of
the common stock by Nexgen Holdings. Nexgen Holdings will pay all commissions,
transfer taxes and other expenses associated with their sales. The shares
offered hereby are being registered pursuant to our contractual obligations, and
we have agreed to pay the expenses of the preparation of this prospectus.
We have agreed to indemnify and reimburse Nexgen Holdings against any
losses, claims, damages or liabilities to which they may become subject under
the Securities Act of 1933, the Securities Exchange Act of 1934, or any other
federal or state law, insofar as such losses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
a registration statement, or (ii) the omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
We cannot issue additional shares to Nexgen Holdings that, when added to
the shares Nexgen Holdings owns, will result in Nexgen Holdings holding over
9.9% of our outstanding shares upon exercise of warrants.
31
SHARES ELIGIBLE FOR FUTURE SALE
No public trading market presently exists for our securities. The resale of
2,000,000 shares of our common stock presently held by our stockholders is being
registered and, thus, upon the effectiveness of the registration statement,
these shares of our common stock will be freely tradable without restriction
under the Securities Act. 408,600 of these shares are held by our affiliates as
that term is defined in Rule 144 under the Securities Act. In addition, the
resale of up to 2,100,000 shares of our common stock underlying the warrants is
being registered and, upon effectiveness of the registration statement, will be
freely tradable. No shares presently held by our stockholders are subject to
outstanding options or warrants to purchase or are securities convertibe into
shares of our common stock. We are not offering ot proposing to offer any of our
shares to the public. We have approximately 39 holders of our common stock which
is our only class of stock.
Shares held by our stockholders will be eligible for sale in the public
market, subject to certain volume limitations and the expiration of applicable
holding periods under Rule 144 under the Securities Act commencing one year from
the acquisition of such shares. In general, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated) who has beneficially
owned restricted shares for at least one year (including the holding period of
any prior owner except an affiliate) would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of
(1) 1% of the number of shares of common stock then outstanding (which will
equal approximately 25,591,400 shares assuming all the share underlying the
stock purchase agreement are issued) or
(2) the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us. Under Rule 144(k), a person who is not deemed to have been an
affiliate of us at any time during the three months preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
We can offer no assurance that an active public market in our shares or
warrants will develop initially on the OTCBB. Future sales of substantial
amounts of our shares (including shares issued upon exercise of outstanding
options) in the public market could adversely affect market prices prevailing
from time to time and could impair our ability to raise capital through the sale
of our equity securities.
WHERE YOU CAN FIND MORE INFORMATION
We have not previously been required to comply with the reporting
requirements of the Securities Exchange Act. We have filed with the SEC a
registration statement on Form SB-2 to register the securities offered by the
prospectus. We intend to file annual and quarterly reports, proxy statements and
other reports, if required, with the SEC. If, in the future, we are not required
to deliver an annual report to security holders, we will voluntarily send an
annual report which will include audited financial statements. The prospectus is
part of the registration statement, and, as permitted by the SEC's rules, does
not contain all of the information in the registration statement.
For further information about us and the securities offered under the
prospectus, you may refer to the registration statement and to the exhibits and
schedules filed as a part of the registration statement. You can review the
registration statement and its exhibits at the public reference facility
maintained by the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 Please call the SEC at 1-800-SEC-0330 for further
information on the public reference facility. The SEC maintains an Internet site
that contains reports, proxy and information statements, and other information
regarding issuers, such as our company, that file electronically with the SEC at
(http://www.sec.gov).
32
LEGAL PROCEEDINGS
We are not a party to nor are we aware of any material existing, pending or
threatened lawsuits or other legal actions.
LEGAL MATTERS
Certain legal matters, including the legality of the issuance of the shares
of common stock offered herein, are being passed upon for us by our counsel,
Joel Pensley, Esq., 211 Schoolhouse Road, Norfolk, Connecticut 06058. Mr.
Pensley owns 200,000 shares of our common stock.
EXPERTS
Our financial statements as of September 30, 2002 and 2001 have been
included herein and in the registration statement in reliance upon the report of
Baum and Company, P.A., independent certified public accountants, appearing
elsewhere herein, and upon the authority of Baum and Company, P.A. as experts in
accounting and auditing.
33
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
Financial Statements
March 31, 2003 and 2002 (unaudited)
September 30, 2002 and 2001
TABLE OF CONTENTS
Page
----
Auditor's Report F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5 - 7
Consolidated Statement of Cash Flows F-8 - 9
Consolidated Statement of Stockholders' Equity F-10
Notes to Financial Statements F-11 - 15
F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Texxar Inc. and Subsidiary
Farmingdale, New York
We have audited the accompanying consolidated balance sheets of Texxar,
Inc. (formerly World Wide Yacht Deliveries, Inc.) as of September 30, 2002 and
2001 and the related consolidated statements of operations, stockholders' equity
and cash flows for the years then. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements present fairly in all material
respects, the financial position of Texxar, Inc. (formerly World Wide Yacht
Deliveries), as of September 30, 2002 and 2001 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended September 30, 2002 and 2001 in conformity with accounting principles
generally accepted in the United States of America.
Coral Springs, Florida
November 1, 2002
F-3
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND SEPTEMBER 30 2002
March 31, September 30,
2003 2002
(audited)
---------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 62,373 $ 252,811
Accounts receivable (net 577,960 416,359
of allowance for doubtful
accounts of $50,000 at March 31,
2003 and $50,000 at
September 30, 2002).
Inventory 85,802 102,873
---------- ---------
Total current assets 726,135 772,043
---------- ---------
PROPERTY AND EQUIPMENT
(Net of accumulated 84,334 94,786
depreciation of $139,500
and $ 125,603 as of
March 31, 2003
and September 30 2002,
respectively)
---------- ---------
Total property and equipment 84,334 94,786
and equipment
---------- ---------
OTHER ASSETS
Goodwill 296,461 296,461
Deposits & Other Assets 120,530 125,335
---------- ---------
Total other assets 416,991 421,796
---------- ---------
Total Assets $ 1,227,460 $ 1,288,625
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued $ 554,824 $ 842,208
expenses
Note payable 50,000 50,000
Note payable- related party 507,999 327,238
---------- ---------
Total current liabilities 1,112,823 1,219,446
---------- ---------
Total Liabilities 1,112,823 1,219,446
---------- ---------
STOCKHOLDERS' EQUITY
Preferred stock $ .001 par 0 0
value, 5,000,000 shares
authorized, -0- issued
Common stock, $0.001 par
value, 50,000,000 shares 23,591 22,991
authorized; 23,591,400, and
22,991,400 shares issued and
outstanding, March 31, 2003
and September 30, 2002,
respectively.
Additional Paid in Capital 91,409 77,009
Retained Earnings (Deficit) (363) (30,821)
---------- ---------
Total Stockholders' Equity 114,637 69,179
=========== ===========
Total Liabilities and
Stockholders' Equity $ 1,227,460 $ 1,288,625
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-4
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
March 31, March 31,
2003 2002
---------- ---------
Unaudited Unaudited
---------- ----------
REVENUES $ 921,276 $ 788,257
COST OF GOOD SOLD 572,117 385,058
---------- ---------
Gross profit 349,159 403,199
OPERATING EXPENSES 362,226 235,804
---------- ---------
Net income (loss) before other
income (expense) and (13,067) 167,395
provision for income taxes
OTHER INCOME (EXPENSE)
Interest (Expense) (8,519) (6,505)
---------- ---------
Total Other Income (Expense) (8,519) (6,505)
---------- ---------
Net income (loss) before
provision for income taxes (21,586) 160,890
---------- ---------
Provision for income taxes
(benefit) 0 0
========== =========
Net income (loss) $ (21,586) $ 160,890
========== =========
Per Share Net income (loss) $0.00 $0.01
========== =========
Average Shares Outstanding 23,591,400 20,991,400
=========== ===========
The accompanying notes are an integral part of the financial statements
F-5
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 2003 AND 2002
March 31, March 31,
2003 2002
------------- ------------
Unaudited Unaudited
---------- ----------
REVENUES $ 1,983,761 $ 1,816,655
COST OF GOOD SOLD 1,134,116 1,197,370
---------- ----------
Gross profit 849,645 619,285
OPERATING EXPENSES 802,819 551,560
---------- ---------
Net income (loss) before
other income (expense) and 46,826 67,725
provision for income taxes
OTHER INCOME (EXPENSE)
Interest (Expense) (16,368) (12,481)
---------- ---------
Total Other Income (Expense) (16,368) (12,481)
---------- ---------
Net income (loss) before
provision for income taxes 30,458 55,244
---------- ---------
Provision for income taxes
(benefit) 0 0
---------- ---------
Net income (loss) $ 30,458 $ 55,244
========== =========
Per Share Net income (loss) $ 0.00 0.00
========== =========
Average Shares Outstanding 23,591,400 15,991,400
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-6
TEXXAR, INC.AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001
----------- ----------
REVENUES $ 3,790,496 $ 4,270,282
COST OF GOOD SOLD 2,379,733 3,111,744
------------ ------------
Gross profit 1,410,763 1,158,538
OPERATING EXPENSES 1,249,110 1,151,484
------------ ------------
Net income (loss) before other income
(expense) and provision for income taxes 161,653 7,054
OTHER INCOME (EXPENSE)
------------ ------------
Interest (Expense) (23,376) (60,075)
------------ ------------
Total Other Income (Expense) (23,376) (60,075)
------------ ------------
Net income (loss) before provision
for income taxes 138,277 (53,021)
------------ ------------
Provision for income taxes (benefit) 0 0
------------ ------------
Net income (loss) $ 138,277 $ (53,021)
============ ============
Per Share Net income (loss) $0.01 $(.05)
============ ============
Average Shares Outstanding 18,134,257 991,400
============ ============
The accompanying notes are an integral part of the financial statements.
F-7
TEXXAR, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $138,277 $ 53,021
Adjustments to reconcile net income
(loss) to net cash used for operations:
Depreciation & Amortization 47,313 26,594
Change in operating assets and liabilities:
(Increase) Decrease in accounts receivable 123,434 (241,080)
(Increase) decrease in inventory (95,422) (745)
(Increase) Decrease in other current assets
Increase (Decrease) in accounts payable (42,929) 173,197
--------- ----------
Increase (Decrease) in income taxes payable 0 (8,000)
--------- ----------
Net cash used by operating activities 170,673 (103,055)
--------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of assets (150,000) 0
--------- ----------
Net cash used by investing activities (150,000) 0
--------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in capitalized
lease payable (6,392) (9,047)
Issuance of note payable for acquisition 50,000 0
Increase in note payable to
related party 368,939 393,358
(Decrease) in note payable related party (273,235) (220,000)
--------- ----------
Net cash provided by financing activities 139,312 164,311
--------- ----------
Net increase (decrease) in cash 159,985 61,256
CASH, beginning of period 92,827 31,571
--------- ----------
CASH, end of period $ 252,812 $ 92,827
========== =========
The accompanying notes are an integral part of the financial statements.
F-8
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2002 AND 2001 AND SIX MONTHS ENDED
MARCH 31, 2003
[Enlarge/Download Table]
Preferred Common
Stock Common Stock
Number Stock Par Additional Retained Total
of Number of Value Paid-in Earnings/ Stockholders'
Shares Shares $.001 Capital (Deficit) Equity
--------- ----------- ------ ---------- ---------- -------------
BALANCE, September 30, 2000 0 991,400 $ 991 $ 99,009 $ 116,077 $ 16,077
Net (Loss) Year Ended
September 30, 2001 0 0 0 (53,021) (68,194)
------ --------- ------ --------- ---------- ----------
BALANCE, September 30, 2001 0 991,400 991 99,009 (169,098) (69,098)
Reverse Acquisition 22,000,000 22,000 (22,000) 0 0
------ ---------- ------ --------- ---------- ----------
Net Income Year
Ended September 30, 2002 0 0 0 138,277 138,277
------ ---------- ------ --------- ---------- ----------
BALANCE, September 30, 2002 0 22,991,400 $ 22,991 $ 77,009 $ (30,821) $ 69,179
------ ---------- ------- --------- ---------- ----------
Unaudited
Issuance of Stock for Services 600,000 $ 600 $ 14,400 0 $ 15,000
Net Income six months ended 30,458 30,458
March 31, 2003
------ ---------- ------- --------- ---------- ----------
BALANCE, March 31, 2003 0 23,591,400 $ 23,591 $ 91,409 $ (363) $ 114,637
------ ---------- ------- --------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
F-9
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2003 AND 2002
March 31 March 31
2003 2002
------------ -----------
Unaudited Unaudited
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 30,458 $ 55,244
Adjustments to reconcile net income
(loss) to net cash used for operations:
Depreciation & Amortization 21,135 14,298
Stock Issued for Services 15,000 - 0 -
Change in operating assets and liabilities:
(Increase) Decrease in accounts receivable (161,601) (110,485)
(Increase) decrease in inventory 17,071 (28,660)
(Increase) Decrease in other assets (2,335) (33,586)
Increase (Decrease) in accounts payable (257,574) 181,397
Increase (Decrease) in income taxes payable 0 0
---------- ----------
Net cash used by operating activities (367,745) 78,208
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of assets (3,454) (150,000)
---------- ----------
Net cash used by investing activities (3,454) (150,000)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in capitalized lease payable 0 6,392
Issuance of note payable for acquisition 0 50,000
Increase in note payable related party 303,372 120,000
(Decrease) in note payable related party (122,611) (67,209)
---------- ----------
Net cash provided by financing activities 180,761 109,183
---------- ----------
Net increase (decrease) in cash (190,438) 37,391
CASH, beginning of period 252,811 92,827
---------- ----------
CASH, end of period $ 62,373 $ 130,218
========== ==========
The accompanying notes are an integral part of the financial statements.
F-10
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
The Company was organized under the laws of the State of Delaware. The
Company is engaged in the sales and design of pollution control and measurement
devices.
History
The Company, in November 2001 (under the name World Wide Yacht Deliveries,
Inc.), enacted a reverse merger with Texxar, Inc. and changed its name to Texxar
Inc.
Basis of Accounting
The Company's policy is to prepare its financial statements using the
accrual basis of accounting in accordance with generally accepted accounting
principles.
Cash
All short term, highly liquid investments having original maturities of
three months or less are considered to be cash equivalents.
Inventory
Inventory, consisting of small parts, is stated at the lower of cost or
market value, on a Fifo basis.
Organization and start-up costs
In accordance with Statement of Position 98-5, the organization and
start-up costs have been expensed in the period incurred.
F-11
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of Texxar Inc.
and its wholly-owned subsidiary, Ducon Technologies Inc. All inter-company
transactions have been eliminated.
Revenue Recognition
The Company's revenue is derived primarily from the sale of its products to
its customers upon shipment or installation of product or upon the providing of
services based on firm sales orders. The terms and conditions of the Company's
sales are expressed in the purchase orders at fixed prices to large creditworthy
customers and revenues are recognized under the criteria expressed in the
purchase orders when products have been delivered or services rendered.
Fair value of financial instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments: Cash, accounts receivable, accounts
payable and notes payable-related party. The carrying amounts approximated fair
value because of the demand nature of these instruments.
Receivables
The allowance for uncollectable accounts is reviewed quarterly and each
receivable assessed versus the aging of the receivables, the contract and the
customer.
F-12
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
Note 2 - Property and Equipment
----------------------
Property and equipment consists of the following:
Mar. 31 Sept. 30
2003 2002
-------- ---------
Furniture Fixtures & Equipment $187,644 $184,199
Capitalized Leases 36,190 36,190
-------- --------
223,834 220,389
Less Accumulated Depreciation 139,500 125,603
-------- --------
Net property & Equipment 84,334 $94,786
======== ========
Depreciation for the six months ended March 31, 2003 and March 31, 2002
was, respectively, $13,798 and $13,720.
Note 3 - Note Payable - related party
----------------------------
On March 26, 1999, the Company entered into a line of credit. The maximum
limit of the credit line is $500,000. The outstanding balance bears interest at
8% per annum and is secured by the Company's accounts receivable and is
personally guaranteed by a shareholder of the Company. The owner of First
Commercial Capital Co., the entity granting the credit line, is an affiliated
party, related to the majority shareholder.
Note 4 - Commitments and Contingencies
-----------------------------
On November 28, 1998, the Company entered into a five year lease for its
office and warehouse facilities. Annual rent consists of $ 96,000 and various
operating expenses. Future annual rent for years through 2003 is approximately $
100,000 per year. The building is owned by the principal stockholder of the
Company.
Note 5 - Segment Reporting
-----------------
Pollution control products and systems is the only operating segment of
the Company.
F-123
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
Note 6 Concentration of Risk
The Company places its cash in high credit quality financial institutions.
Management does not believe that there is any concentration risk. At September
30, 2002, the Company has a receivables from four customers representing 54%,
18%, 11% and 11%, respectively, of total gross receivables. At March 31, 2003,
the Company had receivables from 5 customers representing 17%, 16 %, 13%, 12 %
and 12% of total receivables, respectively.
Note 7 Capital Stock Activity
The Company is in process of filing a registration statement with the
Securities and Exchange Commission on Form SB-2 relating to the resale of
4,100,000 shares of common stock. In conjunction with this registration
statement, in November 2002, 600,000 of common stock were issued for $15,000 of
financial and legal services.
The Company also authorized an increase in the $.001 par value common
shares to 50,000,000 shares and a new preferred stock (of $.001 par value) of
5,000,000 shares.
Note 8 Income Taxes
In accordance with FASB 109, deferred income taxes and benefits are
provided for the results of operations of the Company. The principle temporary
differences that will result in deferred tax assets and liabilities are certain
expenses and losses accrued for financial reporting purposes not deductible for
tax purposes until paid. The differences between Federal income tax rate and the
effective income tax rate as reflected in the accompanying consolidated
statement of operations. Benefits from deferred losses are not recognized until
the utilization can be assured.
At March 31, 2003, the Company had approximately $2,500,000 of deferred
loss carry forwards. Initial loss carry forwards expire as follows: $500,000 in
2006, $308,000 in 2007 $275,000 in 2008 and $1,417,000 from 2009 through 2012.
F-14
TEXXAR, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY
(Formerly World Wide Yacht Deliveries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
Note 9 Asset Purchase for Cash and Note
In November 2001, the Company acquired for $100,000 cash and a $50,000 non
- interest bearing note, the MIP OY Opactiy Monitor Product line Division of
KVB-Enertec Inc. The various assets included: equipment and spare parts,
contract rights, bills of materials, and customer list. Also acquired was the
exclusive North American distribution rights for products manufactured by MIP
Elektroniikka Oy of Finland. This right, valued at $100,000, expires in June,
2009, and is being amortized over 7 years.
The $50,000 note payable was due April 1, 2002. Management does not believe
that the seller has fully performed under the contract and has not paid the
remaining balance due; and the seller has not proceeded to collect the note.
Note 10 Goodwill
In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, ("SFAS 142") which is effective for fiscal years beginning after
December 15, 2001. SFAS 142, requires, among other things, the discontinuance of
goodwill amortization. In addition, the standard includes provisions upon
adoption for the reclassification of certain existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing of impairment of existing goodwill and other intangible. The Company
had recorded $ 396,461 of goodwill from the December 1997 acquisition of the
Ducon Technologies Inc. subsidiary, The balance at September 30, 2001 was
$296,461. No amortization was recognized since 2001.
The Company tests the impairment of goodwill and believes that no reduction
in value is anticipated to be provided for, and that the application of SFAS 142
will not have a material impact on its financial position and results of
operations.
Note 11 Subsequent Event
In April 2003, the Company issued 2,000,000 of stock valued at $50,000
to an officer and director for past and future services, of which $25,000 has
been accrued for prior services. Also, 100,000 shares, valued at $2,500 were
issued for legal services relating to preparation of the registration statement.
On June 11, 2003, Nexgen Holdings, Inc. purchased 700,000 Class "A",
700,000 Class "B" and 700,000 Class "C" warrants for an aggregate purchase price
of $1,000. The Class "A" Warrants are exercisable at $.75 per warrant for three
months from the date the common stock commences trading on a securities market
at prices ranging from $.75 to $1.25 per share. The warrants expire from three
months to nine months from the date the initial registered stock trades on a
securities market.
F-15
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM
THAT CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS LISTED IN THIS
PROSPECTUS ARE OFFERING TO SELL, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS
WHERE OFFERS AND SALES ARE PERMITTED.
Until --------, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
TEXXAR, INC.
4,100,000 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
------------------------
-------- ----, 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law provides for the indemnification of
the officers, directors and corporate employees and agents of Texxar, Inc. (the
"Registrant") under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (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 he 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. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which 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 reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he 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 except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstance of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections (a) and (b) of this section,
or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
II-1
(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made (1) by the board
of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(3) by the stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as authorized in this
section. Such expenses including attorneys' fees incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the board of directors deems appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers and
employees or agents so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, shall stand in the same position under this section
with respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
II-2
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation" as
referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
Articles Eighth and Ninth of the Registrant's certificate of incorporation
provide as follows:
EIGHTH
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (7) of
subsection (b) of Section 102 of the Delaware General Corporation Law, as the
same may be amended and supplemented.
NINTH
The Corporation shall, to the fullest extent permitted by the provisions of
Section 145 of the Delaware General Corporation Law, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action In another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. The foregoing right of
indemnification shall in no way be exclusive of any other rights of
indemnification to which such person may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors, or otherwise.
Article XII of the Registrant's by-laws provides as follows:
ARTICLE XII--INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. Indemnification. The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, trustee, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
II-3
and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person 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 such person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, by itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interest of the corporation, and with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was lawful.
2. Derivative Action. The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in the corporation's favor by reason of the fact that such person is or
was a director, trustee, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, trustee, officer,
employee or agent of any other corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation; provided, however, that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for gross negligence or
willful misconduct in the performance of such person's duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, by itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interest of the corporation.
3. Successful Defense. To the extent that a director, trustee, officer,
employee or agent of the corporation has been successful, on the merits or
otherwise, in whole or in part, in defense of any action, suit or proceeding
referred to in paragraphs 1 and 2 above, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
4. Authorization. Any indemnification under paragraph 1 and 2 above (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
trustee, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in paragraph 1 and 2
above. Such determination shall be made (a) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, (b) by independent legal counsel (selected by one or
more of the directors, whether or not a quorum and whether or not disinterested)
in a written opinion, or (c) by the stockholders. Anyone making such a
determination under this paragraph 4 may determine that a person has met the
standards therein set forth as to some claims, issues or matters but not as to
others, and may reasonably prorate amounts to be paid as indemnification.
II-4
5. Advances. Expenses incurred in defending civil or criminal actions,
suits or proceedings shall be paid by the corporation, at any time or from time
to time in advance of the final disposition of such action, suit or proceeding
as authorized in the manner provided in paragraph 4 above upon receipt of an
undertaking by or on behalf of the director, trustee, officer, employee or agent
to repay such amount unless it shall ultimately be determined by the corporation
that the payment of expenses is authorized in this Section.
6. Nonexclusivity. The indemnification provided in this Section shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any law, by-law, agreement, vote of stockholders or disinterested
director or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, trustee, officer, employee or
agent and shall insure to the benefit of the heirs, executors, and
administrators of such a person.
7. Insurance. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, trustee, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise, against any
liability assessed against such person in any such capacity or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability.
8. "Corporation" Defined. For purpose of this action, references to the
"corporation" shall include, in addition to the corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had the power and authority to indemnify its directors, trustees, officers,
employees or agents, so that any person who is or was a director, trustee,
officer, employee or agent of such of constituent corporation will be considered
as if such person was a director, trustee, officer, employee or agent of the
corporation.
ITEM 25. EXPENSES OF ISSUANCE AND DISTRIBUTION.
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
Securities and Exchange Commission Registration Fee............. $ 400
Legal Fees...................................................... 10,000*
Accounting Fees................................................. 15,000
Printing and Engraving.......................................... 500
Blue Sky Qualification Fees and Expenses........................ 500
Transfer Agent Fee.............................................. 500
Miscellaneous................................................... 600
-----------
Total.................................................... $ 27,500
* Counsel was issued 200,000 shares of common stock valued at $.025 each as
well as $5,000 for legal services in connection with the registration
statement.
===========
II-5
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
We were formed, as World Wide Yacht Deliveries, Inc., under the laws of
Delaware on October 27, 1998. Reverse Merger, Inc., conducted a yacht delivery
business heading by a licensed United States Coast Guard Captain. Reverse Merger
transfered the yacht delivery business to us, as World Wide Yacht Deliveries,
Inc., in consideration for 991,400 shares of our common stock. Reverse Merger
distributed these 991,400 shares of our common stock pro rata to its share-
holders in October, 1998.
On November 15, 2001, Texxar, Inc. merged into us and we, as World Wide
Yacht Deliveries, Inc., were the surviving company. Pursuant to the terms of the
merger, we issued 22,000,000 shares of our common stock ratably to the
stockholders of Texxar, Inc. in exchange for the all the capital stock of
Texxar, Inc. In November, 2002, we issued 500,000 shares for financial advisory
services to Falcon Crest Capital, Inc. and 100,000 shares for legal services to
Joel Pensley, for legal services valued at $.025 per share or an aggregate of
$12,500 and $2,500 respectively. On April 4, 2003, we issued 2,000,000 shares to
Vandana Govil, a director and our Secretary, for services including evaluating
purchase orders for our products and services and searching and evaluation
possible acquisitions valued at $.025 per share or an aggregate of $50,000, and
100,000 shares to Joel Pensley, Esq. for legal services, valued at $.025 per
share or an aggregate of $2,500. On June 11, 2003, we sold an aggregate of
2,100,000 stock purchase warrants equally divided into three classes to Nexgen
Holdings, Inc. for $1,000.
These securities were distributed and/or sold under the exemption from
registration provided by Rule 504 under Section 3(b) of the Securities Act.
Neither the Registrant nor any person acting on its behalf offered or sold the
securities by means of any form of general solicitation or general advertising.
All purchasers represented in writing that they acquired the securities for
their own accounts. A legend was placed on the stock certificates stating that
the securities have not been registered under the Securities Act and cannot be
sold or otherwise transferred without an effective registration or an exemption
therefrom.
ITEM 28. UNDERTAKINGS.
The Registrant undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement (the
"Registration Statement"):
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the Effective Date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in this
registration statement, including (but not limited to) the
addition of an underwriter.
(iv) To supplement the prospectus, after the end of the subscription
period, to include the results of the put. If the selling
stockholders make any public offering of the securities on terms
different from those on the cover page of the prospectus, to file
a post-effective amendment to state the terms of such offering.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
treated as a new registration statement of the securities
offered, and the offering of the securities at that time to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-6
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the Registrant has 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. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant 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, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-7
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certified that it has reasonable grounds to believe that it meets all
of the requirements of the filing on Form SB-2 and authorized the registration
statement to be signed on its behalf by the undersigned, in Farmingdale, New
York on August 11, 2003.
TEXXAR CORP.
By: /s/ Aron Govil
-----------------------------
Aron Govil
Chief Executive Officer
Chief Financial Officer
Chief Accounting Officer
In accordance with the requirements of the Securities Act of 1933, the
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATED
---------------------- ------------------------------ ---------------
/s/ Aron Govil
----------------------
Aron Govil President, Chief Executive August 11, 2003
Officer, Treasurer and Chairman
of the Board of Directors
/s/ Vandana Govil
----------------------
Vandana Govil Vice-President-Marketing, August 11, 2003
Secretary, Treasurer
and a Director
II-8
ITEM 27 EXHIBITS
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Merger Agreement and Plan of Reorganization between
World Wide Yacht Deliveries, Inc. Texxar, Inc.*
3.1 Certificate of Incorporation of World Wide Yacht Delivery, Inc.*
3.2 Certificate of Amendment of World Wide Yacht Delivery, Inc.*
3.3 Certificate of Amendment of World Wide Yacht Delivery, Inc.*
3.4 Certificate of Amendment of Texxar, Inc.*
3.5 Certificate of Amendment of Texxar, Inc.*
3.6 By-Laws*
4.1 Specimen Certificate of Common Stock*
4.2 Warrant Certificate
4.3 Warrant Agreement with Nexgen Holdings, Inc. and Olde Monmouth
Stock Transfer Co., Inc.
5.1 Opinion of Counsel*
5.2 Revised Opinion of Counsel
10.1 Stock Purchase Agreement with Nexgen Holdings, Inc.*
10.1 Purchase of air pollution monitor line from KVB-Enertec Inc.
23.1 Auditor's Consent to Use Opinion
23.2 Counsel's Consent to Use Opinion*
23.3 Counsel's Revised Consent to Use Opinion
------------------
* Previously submitted with the registration statement dated April 8, 2003
II-9
Dates Referenced Herein and Documents Incorporated by Reference
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