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Texxar Inc – ‘SB-2/A’ on 8/11/03

On:  Monday, 8/11/03, at 7:55pm ET   ·   As of:  8/12/03   ·   Accession #:  1184749-3-31   ·   File #:  333-104368

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/12/03  Texxar Inc                        SB-2/A      8/11/03    7:220K                                   Workplace Compliance Inc

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 


SB-2/A   —   First Amendment to Registration Statement
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
4Table of Contents
5Prospectus Summary
6The offering
"Summary Financial Information
7Risk Factors
10Capitalization
11Dividend Policy
"Management's Discussion and Analysis of Financial Condition and Results of Operations
15Business
22Management
25Certain Related Party Transactions
26Principal Stockholders
"Description of Securities
29Selling Stockholders
30Plan of Distribution of Shares of Existing Stockholders
32Nexgen Holdings' Plan of Distribution
34Shares Eligible for Future Sale
"Where You Can Find More Information
35Legal Proceedings
"Legal Matters
"Experts
36Financial Statements
52Item 24. Indemnification of Directors and Officers
56Item 25. Expenses of Issuance and Distribution
57Item 26. Recent Sales of Unregistered Securities
"Item 28. Undertakings
60Item 27. Exhibits
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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. ----------------------- (Name of small business issuer in its charter) Delaware 1623 13-4049603 ----------------------- ---------------------------- ------------------- (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 -------------------------------------------------------------------------------- (Address and telephone number of principal executive offices) 19 Engineers lane, Farmingdale, New York 11735 (631)756-9116 -------------------------------------------------------------------------------- (Address of principal place of business or intended principal place of business) Aron Govil, 19 Engineers lane, Farmingdale, New York 11735 (631)756-9116 -------------------------------------------------------------------------------- (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.
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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. / / ------------------------ 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 ------------------------------------------------------------------------------- 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 ----------- ---------- 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.
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The information in the prospectus is not complete and may be changed. --------------------------------------------------------------------- these securities may not be sold until the registration statement filed with the -------------------------------------------------------------------------------- Securities and Exchange Commission is effective. The prospectus is not an offer -------------------------------------------------------------------------------- to sell, nor does it seek an offer to buy, these securities in any state where ------------------------------------------------------------------------------ the offer or sale is not permitted. ----------------------------------- 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 ------------------------------------------------------------------------ described in "Risk Factors" beginning on page 4. ------------------------------------------------ Neither the Securities and Exchange Commission nor any state securities ----------------------------------------------------------------------- commission has approved or disapproved of these securities or passed on the --------------------------------------------------------------------------- accuracy or adequacy of this prospectus. any representation to the contrary is a -------------------------------------------------------------------------------- criminal offense. ----------------- The date of the prospectus is August , 2003
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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 ------------------------ 2
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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
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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, ---------------- ------------- 2003 2002 2002 2001 ------------- ------------- ----------- ----------- 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 ---------- ---------- ---------- ---------- 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 ---------- ---------- ---------- ---------- Income (loss) Before Income Taxes 30,458 55,244 138,277 (53,021) Income Tax Provision 0 0 0 0 ---------- ---------- ---------- ----------- 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
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Balance Sheet Data March 31, September 30, 2003 2002 ----------- ------------- Total Assets $1,226,460 $1,288,625 Total Liabilities 1,112,823 1,219,446 Stockholders' Equity $ 114,637 $ 69,179 ========== =========== ------------------ (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. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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
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?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. ----------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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
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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. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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
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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. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 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 ----------- Total Long Term Liabilities 0 ----------- 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) ----------- Total Stockholders' Equity 114,637 =========== Total Long Term Liabilities and Stockholders' Equity $114,637 =========== 8
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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 -------- 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 -------------------------------------------------------------------------------- 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 --------------------- Results of Operations for the six months ended March 31, 2003 as compared to the six months ended March 31, 2002 -------------------------------------------------------------------------------- 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
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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 ------------------------------- Cash used in Operations for the six months ended March 31, 2003 as compared to the six months ended March 31, 2002 -------------------------------------------------------------------------------- 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
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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 -------------------------------------------------------------------------------- Results of Operations --------------------- Results of Operations for the Fiscal Year Ended September 30, 2002 as compared to the Fiscal Year Ended September 30, 2001 -------------------------------------------------------------------------------- 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
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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 ------------------------------- Cash used in Operations for the Fiscal Year Ended September 30, 2002 as compared to the Fiscal Year Ended September 30, 2001 -------------------------------------------------------------------------------- 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
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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
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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
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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
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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
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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
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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
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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
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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
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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- 21
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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- ======================================================================================================== 22
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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
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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
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(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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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(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
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(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
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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
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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
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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
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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
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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
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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

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11/29/0315
Filed as of:8/12/03
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6/11/03557
6/2/035
4/8/03260SB-2
4/4/0357
3/31/031050
12/31/0226
11/29/025
11/1/0238
9/30/021349
5/31/0224
4/1/021850
3/31/021148
12/15/0150
11/29/0115
11/15/01557
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5/31/0124
3/26/991448
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10/27/981557
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