UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION UNDER THE SECURITIES ACT OF 1933
NexGen Steel, Inc.
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(Exact name of small business issuer in its charter)
Texas 3320
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of
incorporation or organization) Classification Code Number)Identification No.)
3939 Belt Line Road, Suite 440, Dallas, TX 75001, (972) 490-5566
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(Address and telephone number of principal executive offices)
Harmon S. Hardy, 3939 Belt Line Road, Suite 440, Dallas, TX 75001 (972) 490-5566
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(Name, address and telephone number of agent for service)
Copies of all communications to:
Robert A. Forrester, Esq.
1215 Executive Dr. West
Suite 102
Richardson, TX 75081
(972) 437-9898
(972) 480-8406 (FAX)
Approximate date of proposed sale to public: As soon as practicable after the
effective date of the Registration Statement.
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, 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
fort 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
Title of each Amount to be Proposed Proposed Amount of
Class of securities Registered(1) maximum offering maximum registration fee
To be registered Price per unit aggregate offering
price (1)
Units, each consisting of five shares of Common Stock and One Redeem- able
Common Stock
Warrant 10,000,000 $0.25 $ 2,500,000.00 $ 98.25
Common Stock,
$0.001 par value (2) 50,000,000 (2) (2)
Redeemable Series A
Common Stock
Warrants(2) 10,000,000 (2) (2)
Common Stock$0.001
par value (3) 10,000,000 $0.85 $ 8,500,000.00 $334.05
Total $11,000,000.00 $432.30
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) of the Securities Act of 1933.
(2) Included in the Units
(3) Issuable upon exercise of Redeemable Series A Common Stock Warrants.
(4) Issuable upon exercise of previous issued warrants.
The Registrant hereby amends this registration statement on such date of dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall be come
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATIN STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES INANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED
SUBJECT TO COMPLETION, DATED JULY __, 2008
Prospectus
NEXGEN STEEL, INC.
SUBSCRIPTION RIGHTS TO PURCHASE
10,000,000 UNITS
Each Unit Consisting of Five Shares of Common Stock and
One Redeemable Series A Common Stock Purchase Warrant
We are distributing, at no cost, the non-transferable right to acquire
units with each unit consisting of the right to purchase five shares of our
Common Stock, par value $0.001 per share, (the "Common Stock") and a warrant
(the "Warrant") entitling the holder to acquire one share of Common Stock at a
price of $0.85 per share (the five shares of Common Stock and the Warrant are
referred to as the Unit). Each Unit may be acquired for $0.25.
o These rights are being distributed, on a prorata basis, to those
owning shares of Common Stock of Stelax Industries, Ltd, a
Vancouver, B. C. company, ("Stelax Canada").
o We will issue up to 50,000,000 shares of our Common Stock in the
offering plus Warrants granting the right to acquire up to
another10,000,000 shares for purchasers of Units in this
offering.
o For every five shares of Stelax Canada you own you may purchase
one Unit. We will issue fractional Units with each fractional
Unit including a Warrant. A fractional Unit will cost an amount
equal to that portion of the Unit purchased bears to the cost of
a complete Unit.
o You will be able to exercise your rights to acquire Units only
during a limited period. If you do not exercise your rights
before 5:00 p.m., Eastern Standard Time on (30 days after the
effective date of the registration statement), 2008, your rights
will expire. We may decide to extend the rights offering, in our
discretion, to a date not later than (90 days after the effective
date of the registration statement), 2008.
o The Warrants may be immediately separated from the Common Stock
and the Warrants and are subject to redemption by us after six
months from the date of this Prospectus, on thirty days prior
written notice, provided the closing bid for the Common Stock has
equaled or exceeded $1.00 for ten consecutive trading days. The
Warrants expire five years from the effective date of this
offering and may be exercised only if there is a current
registration statement in effect at the time of exercise. See
"Description of Securities" and "Underwriting"
o Our offering is not conditioned on the sale of a minimum number
of Units.
This offering also relates to the issuance of up to 2,000,000 shares of
Common Stock at $0.85 per share upon the exercise of certain warrants granted to
certain of our shareholders.
No public market currently exists for our common stock.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE __
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of these securities or determined
if this prospectus is truthful or complete. It is illegal for any
person to tell you otherwise.
Subscription price per Unit $ 0.25
Maximum Offering $2,500,000.00
The date of this prospectus is July __, 2008
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................2
SUMMARY FINANCIAL INFORMATION.................................................4
RISK FACTORS..................................................................5
THE OFFERING.................................................................12
USE OF PROCEEDS
DIIDEND POLICY
CAPITALIZATION
DILUTION
MANAGEMENT DISCUSSION
BUSINESS
MANAGEMENT
EXECUTIVE COMPENSATION
CERTAIN BENEFICIAL OWNERS
TRANSFER AGENT
LEGAL MATTERS
EXPERTS
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seek offers to buy,
shares of our Common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our Common Stock.
2
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION, FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THE PROSPECTUS
ASSUMES THAT ANY OUTSTANDING OPTIONS TO PURCHASE SHARES OF COMMON STOCK HAVE NOT
BEEN EXERCISED.
OUR COMPANY
The Company seeks to produce carbon steel with a cost structure, both in
its manufacturing process and with respect to the capital required to
manufacture carbon steel, which is significantly less than current commercial
manufacturing processes. We believe we can achieve these goals with a process
that consumes less energy and reduces emission than processes used in a
traditional manufacturing environment. We believe that the process's energy
efficiency and reduction in emissions will enable us to have an additional
source of revenues from the sales of carbon offsets in the international market.
At the present time we plan to produce carbon steel. In our management's
opinion, carbon steel is a commodity, largely competing on price, and we plan to
have at least a five per cent price advantage over other manufacturers.
While our focus is upon carbon steel. we do own a substantial portion of Nx
Infrastructure, Ltd., a corporation formed in the United Kingdom that produces
carbon steel clad in stainless steel. Harmon S. Hardy is a director and founder
of Nx Infrastructure, Ltd. We have no present plans or intent to engage in
producing any products other than carbon steel.
Our headquarters are located at 3939 Belt Line Road, Suite 440, Dallas
Texas 75001 and our telephone number at that address is (972) 490-5566.
OUR RELATIONSHIP WITH NX INFRASTRUCTURE, LTD.
Nx Infrastructure, Ltd. is a company formed in the United Kingdom and
produces Nuovinox(TM). Nuovinox(TM) is carbon steel reinforcing bar, or rebar,
and dowels encased in stainless steel. Nuovinox's(TM) utility consists in the
fact that its outer casing consists of stainless steel and, accordingly, does
not corrode as quickly as carbon steel. The primary use of Nuovinox(TM) has been
as rebar in highways, bridges, and marine structures.
We will not engage in the production or distribution of the Nuovonix(TM)
products.
THE OFFERING
Description of the rights offering We are distributing the rights to
acquire Units in this offering to
stockholders of Stelax Canada other
than certain individuals who have
previously purchased stock from us
in a private placement. Each holder
of shares of Stelax Canada common
stock, other than as noted above,
will receive on the record date of
(immediately before the effective
date of the registration
statement), 2008 a right to acquire
one Unit for every five shares
owned, plus a fractional Unit, if
applicable, with any fractional
Unit including a Warrant.
Description of rights You may purchase less but not more
than the number of Units that you
are entitled to purchase. We are
offering up to 10,000,000 Units
which, if all are purchased, would
result in the issuance of up to
50,000,000 shares of Common Stock
and warrants entitling the holders
to purchase another approximately
10,000,000 shares of Common stock.
We will issue fractional Units with
each fractional Unit containing one
Warrant.
3
Description of the Units Each Unit consists of five shares
of Common Stock and one Warrant. We
will issue fractional Units and
each fractional Unit will contain a
Warrant. The right to acquire a
fractional Unit arises when the
number of shares of Common Stock of
Stelax Canada is not evenly
divisible by five.
Subscription price for Units The subscription price for the
Units is $0.25 per Unit, and if a
fractional Unit is purchased the
subscription price for the
fractional Unit will be equal to
$0.25 times the fraction, the
numerator of which is the remainder
after dividing the number of shares
of Stelax Canada owned by five and
the denominator of which is five.
Description of the Warrants in the Units Each Warrant in the Unit entitles
the holder to acquire one share of
our Common Stock for $0.85. The
Warrants may be immediately
separated from the Common Stock and
the Warrants are subject to
redemption by us after six months
from the date of this Prospectus,
on thirty days prior written
notice, provided the closing bid
for the Common Stock has equaled or
exceeded $1.00 for ten consecutive
trading days. The Warrants expire
five years from the effective date
of this offering and may be
exercised only if there is a
current registration statement in
effect at the time of exercise. See
"Description of Securities" and
"Underwriting"
Description of other warrants We have previously issued warrants
to purchase 2,916,426 shares of our
Common Stock to certain of our
shareholders. The warrants issued
to these holders is issued upon the
same terms as those set forth in
the Units except that the
previously issued warrants were not
registered.
Exercise period The rights will only be
exercisable, in whole or in part,
from the period beginning on
_________ __ {the effective date of
the registration statement}, 2008
and ending on {30 days after the
effective date of the registration
statement}, _______ __ 2008, at
5:00 p.m., Eastern Standard Time,
unless extended by us in our sole
discretion. In no event will we
extend the exercise period beyond
5:00 p.m., Eastern Standard Time,
{90 days after the effective date
of the registration statement},
2008. Once rights are exercised,
you may not revoke the exercise or
request a refund of monies paid.
Transferability of rights The rights to acquire Units are not
transferable.
Common stock outstanding before the offering 111,880,621
Common stock outstanding after the offering Assuming all of the shares offered
hereby are purchased and exclusive
of any warrants exercised, we will
have approximately 111,880,621
shares issued and outstanding
Use of proceeds Working capital
4
SUMMARY FINANCIAL INFORMATION
The following selected balance sheet and income statement data has been derived
from the audited statements of the Company as of December 31, 2006 and 2007 and
the unaudited statements of the Company as of March 31, 2007 and 2008. This
summary financial data should be read in conjunction with and are qualified by
reference to the financial statements of the Company and the related notes
thereto included elsewhere in this Prospectus. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Income Statement Data:
August 23, 2003
Three Months Ended (Inception)
Year Ended December 31 March 31, March 31,
2007 2006 2008 2007 2008
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(Unaudited) (Unaudited) (Unaudited)
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES $ 87,202 $ 178,207 $ 16,884 $ 16,461 $ 417,416
LOSS FROM OPERATIONS (87,202) (178,207) (16,884) (16,461) (417,416)
OTHER INCOME
Loss of investment - (7,872) - - (7,872)
Interest income 3,799 57,399 273 1,245 63,135
NET LOSS $ (83,403) $ (128,680) $ (16,611) $ 15,216) $ (362,153)
Weighted Average Shares of Common
Stock - Basic and Diluted 95,300,000 95,300,000 99,433,799 95,300,000
Balance Sheet Data
ASSETS
December 31, March 31,
2007 2006 2008
------------- ------------- --------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 83,450 $ 161,853 $ 83,450
TOTAL CURRENT ASSETS 83,450 161,853 83,450
INVESTMENT IN AFFILIATE 221,784 221,784 6,081,144
TOTAL ASSETS $ 305,234 $ 383,637 6,147,983
CURRENT LIABILITIES
Payable to related parties $ 151,599 $ 151,599 $ 151,599
TOTAL CURRENT LIABILITIES 151,599 151,599 151,599
STOCKHOLDERS' EQUITY
Common stock - 200,000,000 shares
authorized, no par value; 1,000 1,000 6,358,537
Unissued common stock 498,177 493,177 -
Accumulated deficit (345,542) (262,139) (362,153)
TOTAL STOCKHOLDERS' EQUTIY 153,635 232,038 5,996,384
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 305,234 $ 383,637 $ 6,147,983
5
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE
TO BUY OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN
THAT CASE THE TRADING PRICE OF OUR COMMON STOCK COULD FALL, AND YOU MIGHT LOSE
ALL OR PART OF THE MONEY THAT YOU HAVE PAID TO BUY OUR COMMON STOCK.
Risks Related to Our Business
We May not be Able to Produce Our Product.
Our present business plan is based upon the production of carbon steel with
less energy and lower emissions new techniques that requires extensive research
and development. Our ability to produce these products depends upon our ability
to implement these technologies which we have not done to date.
We believe our project is the first of its kind. It involves processes that
are based on various technical assumptions and new applications of technologies
that have yet to be commercially proven. While we believe that these new
technologies do not require substantial new technologies, radical engineering or
manufacturing processes, they have not been tested in either a laboratory or
field context. Before we can get to commercial levels of production, laboratory
and field testing will have to be conducted.
In addition, while difficulties with equipment, technology, systems and
processes can be resolved, we may not be able to operate consistently or be able
to provide product in commercial quantities. Even if the technologies prove to
be technologically feasible, we could be engaged in time consuming and expensive
redesign, re-engineering, reconstruction and retrofitting of major pieces of
equipment, systems and processes, eventually resulting in expenditure of
considerably greater resources than originally anticipated and delays in
realization of revenues. These difficulties would delay the commercialization of
our products and increase the funds needed to complete our research and
development.
Regardless of the success of the initial testing, research and development,
we will require additional testing, research and development and capital
spending to continuously improve our service capabilities and expand our
operations. In addition, regardless of the amount of testing, research and
development completed by us, our products may never be successful in commercial
operations.
Our cost Estimates May Prove to be Inaccurate.
Assuming that we overcome all technical difficulties in producing carbon
steel, our cost estimates may be erroneous. Since we believe that we will
compete on a cost basis, the failure to produce carbon steel at a cost lower
than competitors or to have lower capital costs could prove fatal to our ability
to enter the market on a commercially reasonable basis.
We do not have any manufacturing capabilities for any of our product
candidates.
Initially, we plan to outsource all of our manufacturing to third parties
for commercial quantities of any of our product candidates. Consequently, to
complete the commercialization process of any of our product candidates, we must
either acquire or build our internal manufacturing or fabrication capabilities
or rely on third parties to manufacture or fabricate these product candidates.
We cannot be sure that we will be able to accomplish any of these tasks. If we
are not able to do so, it would impede our efforts to bring product to market,
which would adversely affect our business. Moreover, if we decide to manufacture
one or more of our products ourselves (rather than engage a contract
manufacturer), we would incur substantial start-up expenses and hire additional
personnel.
We have no sales, marketing or distribution experience.
To develop internal sales, distribution and marketing capabilities, we
would have to invest significant amounts of financial and management resources.
If we decide to perform sales, marketing and distribution functions ourselves,
we may not be able to attract and build a significant marketing or sales force
and we may not be successful. Alternatively, we may rely on third parties to
launch and market our products. We may have limited or no control over the
sales, marketing and distribution activities of these third parties and our
future revenue may depend on the success of these third parties.
6
We have an absence of Operating History
We are a start-up company and have no operating history. We were formed in
June 2003, and our operations have not yet commenced. Because of our limited
operating history, you have limited operating and financial data about us upon
which to base an evaluation of our performance and an investment in our Common
Stock. You should consider our prospects in light of the risks, expenses and
difficulties we may encounter, including those frequently encountered by new
companies competing with new products. In addition, as a development stage
company, we have limited experience and have not yet demonstrated an ability to
overcome successfully many of the risks and uncertainties encountered by
companies in new and evolving fields. To execute our business plan we will need
to:
have the marketing and sales personnel and distribution channels to
distribute to those markets;
have the technical ability to produce product that meet the cost and
quality requirements of those markets;
have the resources to research and develop product; and
have the financial resources to invest in technology and capital
equipment to produce product.
The lack of an operating history makes it impossible to predict whether we
will operate profitably. If we are unable to execute our plans and grow our
business, either as a result of the risks identified in this section or for any
other reason, this failure would have a material adverse effect on our business,
prospects, financial condition and results of operations, and we may not be able
to raise capital, expand our business or continue what operations may exist.
We Will Need But May Be Unable to Obtain Additional Funding on Satisfactory
Terms, Which Could Dilute Our Stockholders or Impose Burdensome Financial
Restrictions on Our Business
We may require substantially more capital than that presently avail to us
to pursue our operating strategy and execute our business plan or from
operations. We presently anticipate that our present capital needs will be
modest. But, until we can generate a sufficient amount of product revenue to
finance our cash requirements, which we may never do, we expect to finance
future cash needs primarily through public or private equity offerings, debt
financings or strategic collaborations. We do not know whether additional
funding will be available on acceptable terms, or at all. If we are not able to
secure additional funding when needed, we may have to delay, reduce the scope
of, or eliminate one or more of our testing or research and development
programs.
This financing may also dilute existing stockholders. Any debt financing
will likely include financial and other covenants that will restrict our
flexibility. At a minimum, we expect these covenants to include restrictions on
our ability to pay dividends on our common stock, if any. See "Description of
Securities; Dividends." Any failure to comply with these covenants would have a
material adverse effect on our business, prospects, financial condition and
results of operation.
Our Failure to Manage Growth Effectively Could Impair Our Business
Our growth strategy subjects us to various risks. As part of our growth
strategy, we may build plants, acquire other steel assets, enter into joint
ventures, or form strategic alliances that we believe will complement our
existing business. These transactions could disrupt our ongoing business, divert
resources, create difficulties in working with joint venture or strategic
alliance partners or create difficulties in terminating those relationships if
they prove unsatisfactory, among other difficulties. Our inability to address
and respond to these circumstances promptly could have a material adverse effect
on our business, prospects, financial condition and results of operations.
We May be Able to Issue Preferred Stock on Terms that are Unfavorable to
Subscribers to the Common Stock
The Restated Articles of Incorporation of the Company authorize the
issuance of 2,000,000 shares of preferred stock without shareholder approval and
subject to such terms and conditions as determined by the Board of Directors
which could operate to the disadvantage of subscribers to this offering.
7
We depend heavily on our senior management and we may be unable to replace key
executives if they leave
The loss of the services of one or more members of our senior management
team or our inability to attract, retain and maintain additional senior
management personnel could harm our business, financial condition, results of
operations and future prospects. Our operations and prospects depend in large
part on the performance of our senior management team, particularly Harmon S.
Hardy, Chairman and Chief Executive Officer, and H. S. Hardy, III, President. In
addition, we may not be able to find qualified replacements for him if his
services are no longer available. We do not have key man insurance on Mr. Hardy.
Our business is affected by federal and state rules, regulations and orders
applicable to government contractors.
A number of our products could be sold under U.S. and state government
contracts or subcontracts. Consequently, we will be directly and indirectly
subject to various federal and state rules, regulations and orders applicable to
government contractors, including regulations that regulate the source of
materials used. Violation of applicable government rules and regulations could
result in the inability to obtain contracts, in civil liability, in cancellation
or suspension of existing contracts or in ineligibility for future contracts or
subcontracts funded in whole or in part with federal funds.
We may be unable to satisfy regulatory requirements relating to internal
controls over financial reporting.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and
report on our internal controls over financial reporting and have our auditor
attest to such evaluation. We have prepared an internal plan of action for
compliance and we are in the process of documenting and testing our system of
internal controls to provide the basis for our report. Due to ongoing evaluation
and testing of our internal controls and the uncertainties of the interpretation
of these new requirements, we cannot assure you that there may not be
significant deficiencies or material weaknesses that would be required to be
reported.
Risks Related to the Steel Industry
Environmental regulation imposes substantial costs and limitations on our
operations
The steel industry is subject to various health and safety laws and
regulations concerning such issues as air emissions, wastewater discharges,
solid and hazardous waste handling and disposal, and the investigation and
remediation of contamination. Steel making operations produce certain waste
products that are classified as hazardous waste and must be properly disposed of
under applicable environmental laws. These laws can impose clean up liability on
generators of hazardous waste and other substances that are shipped off-site for
disposal, regardless of fault or the legality of the disposal activities. Other
laws may require us to investigate and remediate contamination at our
properties, including contamination that was caused in whole or in part by third
parties. These laws and regulations are increasingly stringent.
We believe that our processes will not have the level of containments found
in traditional steel processing techniques, and we believe that our facilities
are and will continue to be in material compliance with all applicable
environmental laws and regulations. Nonetheless, the risks of substantial costs
and liabilities related to compliance with such laws and regulations could
affect our business.
The current period's strong demand for steel was preceded by a time of weak
demand for products, excess capacity and low prices, and this volatility creates
uncertainty in our pricing, competitiveness and competitive access to raw
materials.
Until a few years ago there had been an excess of global steel making
capacity over global consumption of steel products with a number of United
States steel facilities that had been closed have become operational again,
contributing to the overcapacity. This weak demand no longer exists and
currently, there is a strong worldwide demand for steel products and
manufacturing facilities. Many factors influence these results, including demand
in the domestic market, international currency conversion rates and domestic and
international government actions, and the economic growth of China and India.
Demand for steel products in Asia, a weak United States dollar, high ocean
freight cost, improving conditions in the manufacturing economy, and reduced
United States steel production capacity have significantly reduced worldwide
oversupply and excess capacity. As a result, the steel industry in general has
seen significant increases in the selling price of steel products and as a
8
result, net revenues and profitability have significantly increased. This
increase in prices gives uncertainty to our pricing, competitive pricing and
availability of raw material.
Operating Results for the steel Industry have Fluctuated Widely
The steel industry has been subject to wide variations in profitability,
largely being a cyclical industry. Because of the large capital expenditures
required to produce steel, large volumes have been required for profitability,
and when those volumes decrease during economic slowdowns, the industry
typically endures a significant lack of profitability. In such times, the level
of debt, the basic cost of facilities, and the level of the decline could
determine whether a company could continue in business. At such times, any price
advantage we may enjoy could be destroyed as competitors price product to
destroy any price advantage we may have. We anticipate being subject to those
pressures.
Our pricing depends on availability of raw materials.
A number of raw materials are in carbon steel. The availability and costs
of these metals may be influenced by private or government cartels, changes in
world politics, unstable governments in exporting nations, growth in China and
inflation. Similarly, supplies of high grade material used in our operations may
also be subject to variation in availability and cost. Recently, demand for
steel, which management believes to be driven by demand in China, has created
shortages of and price increases for certain raw materials, a pattern worldwide
that has occurred in the past and may occur in the future in some other form.
Future shortages or price fluctuations in raw materials could result in
decreased margins or otherwise adversely affect our business. The enactment of
new or increased import duties on raw materials also could increase the costs to
us of obtaining the raw materials and might adversely affect our business. We
expect these risks to extend indefinitely into the future.
Risks Related To The Purchase Of Our Shares In The Offering
There Has Been No Prior Public Market For Our Common Stock, And There May Be No
meaningful Public Market For Our Common Stock After This Offering; Our Stock
Price May Decline Below The Subscription Price And Could Be Highly Volatile.
There has been no public market for our common stock and an active public
market may not develop. If an active public market for our common stock does not
develop, you may be unable to sell any shares that you may purchase in this
offering, and the price of our common stock may decrease below the subscription
price. There can be no assurance that any shares of our common stock will be
sold in this offering.
The stock market in general and the price of the shares of specific stocks
have experienced extreme price and volume fluctuations, often unrelated or
disproportionate to the operating performance of these companies. Because we
have a new business without a history of profitable operations, we expect our
stock to be similarly volatile. Broad market and industry factors may reduce our
stock price, regardless of our operating performance. Many of the additional
factors that might cause volatility in our stock price are beyond our control.
Some of these factors include:
o changes in financial estimates by securities analysts;
o changes in the economic performance or market valuations of steel
companies;
o actions by institutional stockholders;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments or the
o market's response to any such announcements; and
o potential litigation.
Our common stock may not be listed on Nasdaq or any other stock exchange.
We intend to explore the possibility of listing the common stock on Nasdaq
or on one or more other national securities exchanges after the effective date
of this registration statement. However, there can be no assurance that we will
determine that it is feasible, practicable or advisable to list the common stock
or that, if an application is made, that the common stock would be approved for
9
listing. Our inability to secure the listing of the common stock or the decision
not to list the new common stock will affect the liquidity and marketability of
the common stock. In addition, the potentially large number of shares of common
stock that will be outstanding upon the exercise of rights to be issued under
this offering, could (i) depress the prices at which some or all of the common
stock will trade for the foreseeable future, (ii) limit the marketability of the
common stock and (iii) adversely affect our ability to list the common stock on
Nasdaq or any other national securities exchange. Whether or not the common
stock is approved for listing on Nasdaq or any other national securities
exchange, the common stock may trade in the over-the-counter market. Even if the
common stock is approved for listing on Nasdaq or any other national securities
exchange, there can be no assurance as to the price as to which any shares of
the common stock may be traded when issued or that an established market for
those securities will develop.
Shares of our common stock may be "penny stocks."
If our common stock becomes subject to the SEC's penny stock rules,
broker-dealers may experience difficulty in completing customer transactions and
trading activity in our securities may be adversely affected.
If at any time we have net tangible assets of $5,000,000 or less and our
common stock has a market price per share of less than $5.00, transactions in
our common stock may be subject to the "penny stock" rules promulgated under the
Securities Exchange Act of 1934, as amended. Under these rules, broker-dealers
who recommend such securities to persons other than institutional accredited
investors must:
make a special written suitability determination for the purchaser;
receive the purchaser's written agreement to a transaction prior to
sale;
provide the purchaser with risk disclosure documents that identify
certain risks associated with investing in "penny stocks" and which
describe the market for these "penny stocks" as well as a purchaser's
legal remedies; and
obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the required
risk disclosure document before a transaction in a "penny stock" can
be completed.
If our common stock becomes subject to these rules, broker-dealers may find
it difficult to effectuate customer transactions and trading activity in our
securities may be adversely affected. As a result, the market price of our
securities may be depressed, and you may find it more difficult to sell our
securities.
If you are not an institutional investor, you may purchase our securities in
this offering only if you reside within certain states and may engage in resale
transactions only in those states and a limited number of other jurisdictions.
We have applied to register our securities, or have obtained or will seek
to obtain an exemption from registration, in several states. If you are not an
"institutional investor," you must be a resident of these jurisdictions in order
to purchase our securities in the offering. Institutional Investors in every
state, except Idaho and Oregon, may purchase units in this offering pursuant to
exemptions provided to such entities under the Blue Sky laws of various states.
The definition of an "institutional investor" varies from state to state, but
generally includes financial institutions, broker-dealers, banks, insurance
companies and other qualified entities. In order to prevent resale transactions
in violation of states' securities laws, you may engage in resale transactions
only in these states and in a limited number of other jurisdictions in which an
applicable exemption is available or a Blue Sky application has been filed and
accepted. This restriction on resale may limit your ability to resell the
securities purchased in this offering and may impact the price of our
securities.
There is currently no market for our securities, and a market for our securities
may not develop, which could adversely affect the liquidity and price of our
securities.
There is no market for our securities. Therefore, stockholders should be
aware that they cannot benefit from information about prior market history as to
their decisions to invest, which means they are at further risk if they invest.
In addition, the price of the securities, after the offering, can vary due to
general economic conditions and forecasts, our general business condition and
the release of our financial reports.
10
Furthermore, an active trading market for our securities may never develop
or, if developed, it may not be maintained. Investors may be unable to sell
their securities unless a market can be established or maintained.
Insiders will continue to have substantial control over us after this offering
and could delay or prevent a change in corporate control.
After this offering, our directors, executive officers and principal
stockholders, together with their affiliates, will beneficially own, in the
aggregate, at least 83,600,000 shares or approximately 74.7% of our outstanding
common stock. As a result, these stockholders will have the ability to determine
the outcome of matters submitted to our stockholders for approval, including the
election of directors and any merger, consolidation or sale of all or
substantially all of our assets. In addition, these persons, acting together,
will have the ability to control the management and affairs of our company.
Accordingly, this concentration of ownership may harm the market price of our
common stock by:
delaying, deferring or preventing a change in control of our company;
impeding a merger, consolidation, takeover or other business
combination involving our company; or
discouraging a potential acquirer from making a tender offer or
otherwise attempting to obtain control of our company.
Future Sales by our Stockholders may Adversely Affect our Stock Price and our
Ability to Raise Funds in New Stock Offerings.
Sales of our common stock in the public market following this offering
could lower the market price of our common stock. Sales may also make it more
difficult for us to sell equity securities or equity-related securities in the
future at a time and price that our management deems acceptable or at all. All
shares of common stock held by existing stockholders are "restricted securities"
and may be resold in the public market only if registered or pursuant to an
exemption from registration.
Upon issuance of the maximum number of shares being registered in this
offering, there will be 111,880,621 shares of common stock outstanding. There is
essentially no limit on the number of shares that we can register in future
registration statements. All of the shares being registered hereunder may be
immediately resold in the public market upon effectiveness of the accompanying
registration statement and the issuance of shares upon subscription.
In addition, we may issue in this offering warrants to purchase up to a
total of 10,000,000 shares of our common stock, which have an exercise price of
$0.85 per share.
The subscription price may not reflect the value of our stock.
The subscription price does not necessarily bear any relationship to the
book value of our assets, historic or future cash flows, financial condition,
recent or historic prices for our existing common stock or other established
criteria for valuation. You should not consider the subscription price as an
indication of the value of our common stock. See "The Offering and Plan of
Distribution -- Determination of Subscription Price" for further detail
regarding the way in which the subscription price was determined.
Our common stock may not be listed on Nasdaq or any other stock exchange.
We intend to explore the possibility of listing the common stock on Nasdaq
or on one or more other national securities exchanges after the effective date
of this registration statement. However, there can be no assurance that we will
determine that it is feasible, practicable or advisable to list the common stock
or that, if an application is made, that the common stock would be approved for
listing. Our inability to secure the listing of the common stock or the decision
not to list the new common stock will affect the liquidity and marketability of
the common stock. In addition, the potentially large number of shares of common
stock that will be outstanding upon the exercise of rights to be issued under
this offering, could (i) depress the prices at which some or all of the common
stock will trade for the foreseeable future, (ii) limit the marketability of the
common stock and (iii) adversely affect our ability to list the common stock on
Nasdaq or any other national securities exchange. Whether or not the common
stock is approved for listing on Nasdaq or any other national securities
exchange, the common stock may trade in the over-the-counter market. Even if the
11
common stock is approved for listing on Nasdaq or any other national securities
exchange, there can be no assurance as to the price as to which any shares of
the common stock may be traded when issued or that an established market for
those securities will develop.
The subscription price may not reflect the value of our stock.
The subscription price does not necessarily bear any relationship to the
book value of our assets, historic or future cash flows, financial condition,
recent or historic prices for our existing common stock or other established
criteria for valuation. You should not consider the subscription price as an
indication of the value of our common stock. See "The Offering and Plan of
Distribution -- Determination of Subscription Price" for further detail
regarding the way in which the subscription price was determined.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements concerning our business, operations, financial performance and
financial condition. These statements can be identified by the use of
forward-looking terms such as "may," "will," "expect," "anticipate," "estimate,"
"continue," or other similar words. Forward-looking statements are included, for
example, in the discussions under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Our Business." The
forward-looking statements involve risks and uncertainties and actual results
may differ materially from those expressed or implied in those statements.
Factors that could cause differences, include, but are not limited to, those
discussed under "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
12
THE OFFERING
We are offering rights to acquire units of NexGen Steel, Inc securities.
Each unit (the "Unit") may be purchased for $0.25 and consists of our Common
Stock, par value $0.001 per share and a warrant entitling the holder to purchase
one share of such Common Stock for $0.85. To certain of our existing
stockholders, we are offering Common Stock that may be purchased pursuant to
warrants they have each been previously issued; the offer of the Units is not
being made to these stockholders.
We are distributing the rights at no cost to those persons that are holders
of outstanding shares of Stelax Industries, Ltd, ("Stelax Canada") common stock
on the record date, {immediately before the effective date of the registration
statement}, 2008. Except as previously described, each person that is a holder
of shares of Stelax Canada common stock on the record date will receive the
right to purchase one Unit for each of five shares of Common Stock of Stelax
Canada owned on the record date. We are offering up to 10,000,000 Units in the
aggregate. You are not required to exercise any or all of your rights.
Fractional Units will be issued if the holder owns a number of shares of
Stelax Canada that is not evenly divisible by five. The fractional Unit will
consist of one warrant plus the number of shares equal to the remainder after
dividing the total number of shares owned by five.
Purpose Of The Offering
This rights offering is, essentially, our initial public offering. The
rights offering is different from a traditional initial public offering in that
it is initially directed only to Stelax Canada's stockholders. The primary
purposes of the offering are to give Stelax Canada's stockholders an opportunity
to purchase shares of our common stock, to create an initial public market for
our common stock, to facilitate future access to public markets, to give us the
option of using shares of our common stock to finance future acquisitions, if
any, and to obtain additional capital. We believe that the rights offering has
an advantage over a traditional initial public offering because we believe that
persons who already have an initial interest in us, by virtue of their ownership
interest in Stelax Canada are more likely to purchase our stock than would be
persons who were not already familiar with us.
Determination Of Subscription Price
Prior to the rights offering, there has been no public market for our
common stock. We determined the subscription price based upon our assessment of
our business potential and prospects and current market conditions. We wanted to
enable the Stelax Canada stockholders to have the opportunity to acquire the
stock at a low price. Any valuation of our business and our common stock, given
the fact that there has been no public market for our common stock and the
potential for volatility in the market place, is highly speculative.
Accordingly, the actual value or resale value of our common stock may be
significantly higher or lower than the subscription price.
Subscription Privileges
The holders of rights have a basic subscription privilege which entitles
them to purchase one Unit for each right held. You are not required to exercise
any or all of your rights. We will send you certificates representing shares and
warrants that you purchase with your subscription privilege as soon as
practicable after the rights offering closes.
Offering to Holders of Previously Issued Warrants
We have previously distributed warrants to purchase an aggregate of
2,889,812 shares of our Common Stock to certain of our shareholders. The
offering of the Units are not being made to holders of these warrants;
nonetheless the warrant held by these current shareholders may be exercised upon
the same terms and conditions as the warrant that is part of the Unit described
herein.
Plan Of Distribution
Other than as noted above, we are distributing the rights at no cost to
those persons that are holders of outstanding shares of Stelax Canada common
stock on the record date, {immediately before the effective date of the
registration statement}, 2008. Where shares are held indirectly through a
broker, bank or other institution, we will reimburse the institutions'
reasonable out-of-pocket costs in distributing this prospectus and other
materials to beneficial owners of the stock.
13
Under the securities laws of the states, the securities underlying the
rights may not be sold unless the rights and securities have been registered or
qualified for sale in the states or an exemption from that requirement is
available and is complied with by us.
We have appointed Signature Stock Transfer, Inc., to assist with the rights
offering in the role of subscription agent. You should deliver your subscription
certificate, payment of the subscription price and notice of guaranteed
delivery, if applicable, to the subscription agent. The address to which these
documents and payment should be delivered is:
NexGen Steel, Inc., escrow account
c/o Signature Stock Transfer, Inc.
2301 Ohio Drive, Suite 100
Plano, TX 75093
Telephone: (972) 612-4120
Facsimile: (972) 612-4122
The subscription agent will be responsible for delivering stock
certificates and warrant certificates to those purchasing Units and will be
responsible for delivering refunds to rights holders if the rights offering is
terminated or if a subscription certificate is rejected. We will pay the fees
and expenses of the subscription agent in connection with the offering.
Exercise Of Rights
You may exercise your rights, in whole or in part, by delivering to the
subscription agent, at or prior to 5:00 p.m., Eastern Standard Time, on {30 days
after the effective date of the registration statement}, 2008, or such later
date to which we may extend the rights offering:
o your properly completed and duly executed Notice of Exercise of
Rights;
o any required signature guarantees or other supplemental documentation;
o your payment in full of $0.25 per Unit and Fractional Unit subscribed
for under your subscription privilege.
We may reject any subscription documents the subscription agent receives
after 5:00 p.m., Eastern Standard Time, on {30 days after the effective date of
the registration statement}, 2003, regardless of when the documents were
originally mailed.
Method Of Payment
Payments for the shares must be made in U.S. dollars for the full number of
shares for which you have subscribed either by:
o check or bank draft drawn upon a U.S. bank payable to Signature Stock
Transfer, Inc., as subscription agent, or
o wire transfer of immediately available funds to the subscription
agent.
For detailed wiring instructions, contact Signature Stock Transfer, Inc. at
(972) 612-4120. Any wire transfer of funds should clearly indicate the identity
of the rights holder who is paying the subscription price by the wire transfer.
Evidence of such wire transfer should be delivered to the subscription agent via
facsimile at (972) 612-4122. The subscription price will be deemed to have been
received by the subscription agent only upon:
o clearance of any uncertified check;
o receipt by the subscription agent of any certified check or bank draft
drawn upon a U.S. bank; or
o receipt of good funds in the subscription agent's account designated
in the wiring instructions provided by the subscription agent.
If paying by uncertified personal check, please note that funds paid in
this manner may take up to five business days to clear. Accordingly, holders of
rights who wish to pay the subscription price by means of uncertified personal
14
check are urged to make payment sufficiently in advance of the date on which the
rights expire to ensure that such payment is received and cleared by such date
and are urged to consider payment by means of certified or cashier's check,
money order or wire transfer of funds.
Expiration Date
The rights will expire at 5:00 p.m., Eastern Standard Time, on {30 days
after the effective date of the registration statement}, 2008 unless extended by
us. In no case will we extend the time to exercise the rights past {90 days
after the effective date of the registration statement}, 2008. After expiration
of the offering period, unexercised rights will be null and void and no longer
exercisable by the holder. We will not be obligated to honor any purported
exercise of rights received by the subscription agent after the expiration time,
regardless of when the documents relating to such exercise were sent, except
when you have timely transmitted the documents under the guaranteed delivery
procedures described below. Notice of any extension of the expiration time will
be made through a press release issued by us.
Guaranteed Delivery Procedures
If you want to exercise your rights, whether in whole or in part, but time
will not permit your Notice of Exercise of Rights to reach the subscription
agent on or prior to 5:00 p.m., Eastern Standard Time, on {30 days after the
effective date of the registration statement}, 2008, you may exercise your
rights if you satisfy the following guaranteed delivery procedures:
o you send, and the subscription agent receives, payment in full for
each Unit being purchased through the subscription privilege in the
method described above under "The Offering--Method of payment," on or
prior to 5:00 p.m., Eastern Standard Time, on {30 days after the
effective date of the registration statement}, 2008;
o you send, and the subscription agent receives, on or prior to 5:00
p.m., Eastern Standard Time, on {30 days after the effective date of
the registration statement}, 2008, a notice of guaranteed delivery,
substantially in the form provided with the attached instructions,
from a member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in
the United States; and
o you send, and the subscription agent receives, your properly completed
and duly executed Notice of Exercise of Rights and the related nominee
holder certification, if applicable, including any required
guarantees, within three business days following the date of your
notice of guaranteed delivery.
A notice of guaranteed delivery must state your name, the number of rights
that you hold, and the number of shares of common stock that you wish to
purchase under the subscription privilege. A notice of guaranteed delivery must
also guarantee the delivery of your Notice of Exercise of Rights to the
subscription agent within three business days following the date of the notice
of guaranteed delivery. A notice of guaranteed delivery may be delivered to the
subscription agent in the same manner as your Notice of Exercise of Rights at
the address set forth above under "The Offering--Plan of Distribution" or may be
transmitted to the subscription agent by facsimile transmission, to facsimile
number (972) 612-4122. You can obtain additional copies of the form of notice of
guaranteed delivery by requesting it from the subscription agent at the same
address.
Signature Guarantees
Your signature on each subscription certificate must be guaranteed by an
Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Securities
Exchange Act of 1934, and required under the standards and procedures adopted by
the subscription agent. Eligible Guarantor Institutions include banks, brokers,
dealers, credit unions, national securities exchanges and savings associations,
each as defined. Signatures on the Notice of Exercise of Rights do not need to
be guaranteed if the Notice of Exercise of Rights provides that the shares of
common stock to be purchased are to be delivered directly to the record owner of
such rights or if the Notice of Exercise of Rights is submitted for the account
of a member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States.
15
Shares Held For Others
If you hold shares of Stelax Canada common stock for others on the record
date, you should provide a copy of this prospectus to the respective beneficial
owners of those shares as soon as possible, ascertain such beneficial owners'
intentions and obtain instructions with respect to the rights, as set forth in
the instructions we have provided to you for your distribution to the beneficial
owners. If the beneficial owner so instructs, you should complete subscription
certificates and the related nominee holder certification and submit them to the
subscription agent with the proper payment. If you hold shares of Stelax Canada
common stock for the account(s) of more than one beneficial owner, you may
exercise the number of rights to which all such beneficial owners in the
aggregate otherwise would have been entitled had they been direct record holders
of Stelax Canada common stock on the record date for the rights offering,
provided that, you, as a nominee record holder, make a proper showing to the
subscription agent by submitting the form entitled "Nominee Holder
Certification" which we will provide to you with your rights offering materials.
If you are a beneficial owner of Stelax Canada common stock or you will
receive your rights through a broker, custodian bank or other nominee, we will
ask your broker, custodian bank or other nominee to notify you of this rights
offering. If you wish to exercise your rights, you will need to contact your
broker, custodian bank or nominee and request it to effect the transaction in
accordance with your instructions. To indicate your decision with respect to
your rights, you should complete and return to your broker, custodian bank or
other nominee the form entitled "Beneficial Owners Election Form." You should
receive this form from your broker, custodian bank or other nominee with the
other rights offering materials. You should be aware that nominee record holders
may establish deadlines for receiving instructions from beneficial holders
significantly in advance of the expiration date for the rights.
Ambiguities In Exercise Of The Rights
If you do not specify the number of rights being exercised on your
subscription certificate, or if your payment is not sufficient to pay the total
subscription price for Units you indicate you wish to purchase, you will be
deemed to have exercised the maximum number of rights that could be exercised
for the amount of the payment that the subscription agent receives from you.
If your payment exceeds the total subscription price for all of the rights
shown on your subscription certificate, your payment will be applied in the
following order:
o to subscribe for the number of Units, if any, that you indicated on
the Notice of Exercise of Rights that you wished to purchase through
your subscription privilege; then
o to subscribe for Units until your subscription privilege has been
fully exercised; then
Any excess payment remaining after the foregoing allocation will be
returned to you as soon as practicable following the closing of the rights
offering by mail, without interest or deduction.
Our Decisions Are Binding
All questions concerning the timeliness, validity, form and eligibility of
any exercise of rights will be determined by us and our determinations will be
final and binding. We reserve the right, in our sole discretion, to waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as we determine in
our sole discretion. We reserve the right, in our sole discretion, to reject any
subscriptions not properly submitted or the acceptance of which would, in the
opinion of our counsel, be unlawful. None of Stelax Canada, us or the
subscription agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of subscription certificates or
incur any liability for failure to give such notification.
Right To Terminate Or Modify Rights Offering
We may withdraw the rights and terminate the rights offering at any time
prior to the expiration of the rights, for any reason. If we withdraw the rights
and terminate the rights offering, any funds received from rights holders will
be promptly refunded by the subscription agent without interest or penalty. Our
board of directors, in its sole discretion, may amend the terms and conditions
16
of the rights and the offering at any time prior to the expiration of the
rights. If we amend the terms of the rights (other than by extending the
expiration time), an amended prospectus will be distributed to all holders of
record of rights, including all holders of rights who have previously exercised
rights, and thereafter subscriptions will only be accepted from holders of
rights who acknowledge receipt of the amended prospectus. All holders of rights
who exercised their rights prior to receiving the amended prospectus will be
required to confirm the exercise of their rights by executing and delivering a
consent form on or prior to the Expiration Date, as it may be extended.
Risk Of Loss On Delivery Of Subscription Certificate Forms And Payments
The instructions accompanying the Notice of Exercise of Rights should be
read carefully and followed in detail. Do not send Notice of Exercise of Rights
to Stelax Canada or to us. The method of delivery of Notice of Exercise of
Rights and payment of the subscription price to the subscription agent will be
at the election and risk of the rights holders but, if sent by mail it is
recommended that such certificates and payments be sent by registered mail,
properly insured, with return receipt requested, and that a sufficient number of
days be allowed to ensure delivery to the subscription agent and clearance of
payment at or prior to 5:00 p.m., Eastern Standard Time, on {30 days after the
effective date of the registration statement}, 2008.
No Minimum Subscription Requirement
You may exercise less than all of the rights which you possess and are not
required to exercise all of the rights.
Non - Transferability Of Rights
You may not transfer any of the rights to acquire Units.
If you do not exercise your rights prior to the expiration time, those
rights will expire and will no longer be exercisable by you.
Procedures For Depository Trust Company Participants
We expect that you will be able to exercise your subscription privilege
through the facilities of the Depository Trust Company. If your rights are held
of record through the Depository Trust Company, you may exercise your
subscription privilege by instructing the Depository Trust Company to transfer
your rights from your account to the account of the subscription agent, together
with certification as to the aggregate number of rights you are exercising and
the number of shares of our common stock you are subscribing for under your
subscription privilege and your subscription price payment for each share you
subscribed for under your subscription privilege.
Minimum Subscription Amount
We are conducting the rights offering on a best efforts basis. Thus, we
cannot guarantee that any of our Units will be sold. The rights offering is not
conditioned upon our receipt of subscriptions for any minimum number of Units.
However, we may cancel the rights offering at any time prior to its completion,
in which case all subscription payments will be returned without interest or
penalty.
No Revocation
Once you exercise your subscription privilege, you may not revoke that
exercise. Rights not exercised prior to their expiration will be null and void
as of and after such time.
No Board Recommendation
Neither our Board of Directors nor the Board of Directors of Stelax Canada
makes any recommendation to you about whether you should exercise any rights. To
the extent that this offer is being made to stockholders of Stelax Canada, the
offer will including the directors of Stelax Canada, and they are not excluded
from participating in this offering and subscriptions from them will be
accepted. We cannot assure you that anyone purchasing shares of our common stock
will be able to sell those shares in the future at a higher price. An investment
in our common stock must be made in accordance with your evaluation of your best
interest.
17
Fractional Units
Fractional Units will be issued to those whose total number of shares of
Stelax Canada are not evenly divisible by five. In such event, in addition to
the number of Units the shareholder may acquire by dividing the total number of
shares owned by five, the shareholder may purchase the fractional Units which
will consist of one warrant plus the number of shares equal to the remainder
after dividing the total number of Stetlax Canada shares held by such person by
five. The cost of the fractional Unit will equal the remainder divided by five
times $0.25.
State And Foreign Securities Law
The rights may not be exercised by any person, and neither this prospectus,
nor the Notice of Exercise of Rights shall constitute an offer to sell or a
solicitation of an offer to purchase any shares of our common stock, in any
jurisdiction in which such transactions would be unlawful. We will not sell
shares of our common stock to residents of the states of Minnesota or Vermont.
Subject to regulatory approval, we plan to offer the Units outside the
United States, although no assurance can be made that such regulatory approval
will be forth coming. Consequently, we may reject subscriptions that relate to
the exercise of rights by any holder of rights outside the United States, and we
may also reject subscriptions from holders in jurisdictions within the United
States and we may refuse to distribute rights to any eligible subscriber if we
should determine that we may not lawfully issue securities to such subscribers.
We may do so even if we could qualify the securities for sale or distribution by
taking other actions or modifying the terms of the offering or the distribution
in such jurisdictions, which we may decline to do in our sole discretion. In
such event, rights holders who are residents of these jurisdictions will not be
eligible to participate in the rights offering.
Subscription certificates will not be mailed to eligible subscribers whose
addresses are outside the United States or who have an APO or FPO military
address, but will be held by the subscription agent for their account. To
exercise such rights, these subscribers must notify the subscription agent by
the expiration date and must establish to our satisfaction that such exercise is
permitted under applicable law.
Issuance Of Stock Certificates
Certificates for securities comprising the Units purchased will be issued
to you as soon as practicable after the expiration date. Signature Stock
Transfer, Inc. will deliver subscription payments to us only after consummation
of the rights offering and the issuance of stock certificates to those
exercising rights.
If you exercise rights, you will have no rights as a stockholder until
certificates representing shares you purchased are issued. Unless otherwise
instructed in your subscription certificate form, shares purchased by the
exercise of rights will be registered in the name of the person exercising the
rights.
Questions Or Requests For Assistance
If you have questions or need assistance concerning the procedure for
exercising the rights, or if you would like additional copies of this
prospectus, the Instructions for Subscription Certificates or the Notice of
Guaranteed Delivery, you should contact the subscription agent at (972)
612-4120.
18
USE OF PROCEEDS
The proceeds of this offering will be utilized to develop the technology
transferred to the Company in anticipation of developing engineering models that
would demonstrate the technology's feasibility.
Market Information
Our Common Stock is not currently traded on any exchange, on any of the
various Nasdaq markets, or on the Over the Counter Bulletin Board ("OTCBB"). We
are attempting to make arrangements for our Common Stock to be quoted on the
OTCBB, but a market maker must file an application on our behalf to make a
market for our Common Stock. While we anticipate having informal discussions
with such a market maker, no such discussion have, in fact, occurred, and there
can be no assurance that a market, whether on the OTCBB o otherwise, will
develop.
As of July 15, 2008, we had 34 shareholders of record, and we have no
equity compensation plans.
DIVIDEND POLICY
We do not anticipate paying dividends on the Common Stock at any time in
the foreseeable future. Our Board of Directors currently plans to retain
earnings for the development and expansion of our business. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors and will depend on a number of factors including future
earnings, capital requirements, financial conditions and such other factors as
the Board of Directors may deem relevant.
DILUTION
Our net book value at March 31, 2008, was $5,996,384 or $0.054 per share.
Harmon S. Hardy has agreed to return to the Company shares he owns equal to
the number shares purchased, without giving effect to the shares that may be
purchased pursuant to the exercise of the warrants. Accordingly, the net book
value would increase for each share purchased pursuant to this offering. For
example, if 5,000,000 shares were sold pursuant to this offering, the gross
proceeds from the sale of those shares would be $250,000 and, without giving
effect to the costs of this offering, the net book value would increase to
$6,246,384 or $0.056. Under the same assumptions, if 10,000,000 or 15,000,000
shares are purchased pursuant to this offering, the net book value would
increase to $6,496,384 or $0.058 per share and $6,746,384 or $0.060 per share,
respectively.
MANAGEMENTS DISCUSSION
Of the $400,805 operating expenses incurred by the Company since its
inception through December 31, 2007, approximately $241,000 relates to accrued
salary of our Chief Executive Officer and related party expenses involving
Stelax Canada. The balance relates principally to legal expenses incurred in
connection with this offering and ______________.
Our plan of operation is to use the proceeds of this offering to test
technology relating to our ability to produce carbon steel on a low cost, low
carbon emission bases.
BUSINESS
Industry
Traditional methods of steel production require large capital investment,
have large operating expenses, consume large amounts of electricity and natural
gas, and emit large amounts of carbon dioxide. Steel is generally produced in
integrated mills and minimills. Integrated mills, whose raw material is iron ore
and coke, use blast furnaces to make molten steel. Minimills melt recycled scrap
steel with electric arc furnaces and are more energy efficient and less capital
intensive than blast furnaces. Both pose substantial environmental problems.
Our plan is to make carbon steel utilizing processes that require
substantially less capital investment than minimills and utilize substantially
less energy and thus are substantially more environmental friendly. Commodity
steel competes, assuming quality and service levels that match other producers,
almost exclusively on price. We believe that we can meet other competitive
factors and have a cost advantage of at least 5%.
19
The steel industry in the world, including the United States has been
marked by increased demand, largely attributed to demand from emerging markets,
particularly China. This demand has caused an increase in both raw materials and
sales prices for products.
Background
NexGen Steel, Inc. was incorporated as a Texas Corporation on August 22,
2003. In that year we raised some capital which was loaned to Nx Infrastructure,
Ltd. and for which we received our initial interest of 480,000 shares in that
entity. Originally our plan was to act as a reseller of that entity's products
in North America with a view to becoming licensed manufacturer of its products.
Subsequently, Nx Infrastructure Ltd. determined not to enter into those
arrangements, but we determined to exploit other processes we believed would
provide a cost advantage over other techniques of producing carbon steel.
We believe that we can achieve at least a substantial reduction in energy
consumption compared to existing minimill methods, eliminate significant
emissions, achieve a significant reduction in cost to manufacture over minimill
techniques as well as reduce the capital equipment cost on a per ton basis.
Plan of Operation
Over the next six to nine months we plan to complete research and
development of our technology. We anticipate that it will require another
trwelve months to build a small test facility. Thereafter, we anticipate either
expanding the original facility or constructing another. Each of these
subsequent constructions will require a substantial amount of capital which we
anticipate being provided through subsequent financings.
Nx Infrastructure, Ltd
Nx Infrastructure, Ltd. has a proprietary process to manufacture carbon
steel clad in stainless steel. Its processes are proprietary, its product is
unique, competes with stainless steel, and has a cost advantage over stainless
steel. The product failed for lack of financing in March 2002 but was
recommissioned in 2005 and began producing modest levels of product commercially
in 2007.
Competition
Carbon steel is a commodity product and competes almost exclusively on
pricing. Although we believe we will compete by providing a unique process, the
steel industry in general has been extremely competitive. There can be no
assurance that our processes cannot be duplicated circumvented with advances in
technology. There is extensive steel making capacity from within and without the
United States. Our product will compete with domestic and international mills,
including such United States operations from companies such as Nucor
Corporation, Steel Dynamics Inc., Gerdau AmeriSteel Corporation, and Commercial
Metals Company. All of these have substantially greater financial, technical,
personnel and marketing resources than we posses.
Some of these competitors have resources of sponsoring governments.
Governments are active in protecting steel manufacturers with tariffs and other
regulations that inhibit competition and provide price advantages, could inhibit
our ability to compete effectively and could have a material adverse effect on
our financial strength and development of market.
We also anticipate substantial international competition from China.
According to the American Iron and Steel Institute, Chinas' exports of carbon
steel grew by 114 percent between 2005 and 2006 with China exporting about half
as much steel as the United States produced. Total China production is
anticipated to increase by more than 30% in 2007. This production is believed to
be subsidized through such techniques as converting steel companies' debt into
equity, debt forgiveness and inaction regarding non-performing loans,
preferential loans, subsidized raw materials and energy, inadequate enforcement
of environmental and labor standards. These actions give a pricing advantage in
a market that competes principally on price and could jeopardize or eliminate
any pricing advantage we may have with our technology.
The need to increase the scale and scope of operations will create
significant personnel, operational, financial and marketing difficulties. There
can be no assurance that we will successfully meet all of these demands as we
grow, the failure or only partial success of any one of which could have a
severe material adverse effect upon us, particularly at a time when our
financial resources are limited. Further, there can be no assurance that we will
20
be able to significantly enlarge the scope of our operations without
encountering unexpected technical difficulties that we are now unaware of.
Patents
The owner of the technology which we anticipate licensing does not plan to
patent the technology because the owner does not wish to divulge the processes
to the public and to countries where there is weak protection for intellectual
property. Instead, the technology and know how will be protected through trade
secrets.
Marketing
We have not begun to establish a marketing arm. Most carbon steel is sold
directly to resellers.
Environmental Matters
Compliance with environmental laws and regulations is a significant factor
in our business. We are subject to local, state, federal and supranation
environmental laws and regulations concerning, among other matters, solid waste
disposal, hazardous waste disposal, air emissions, water quality and discharge,
dredging and employee health. Environmental legislation and regulations have
changed rapidly in recent years and it is likely that we will be subject to even
more stringent environmental standards in the future.
Employees
At July 1, 2008, we employed two people.
Management
Executive Officers and Directors
Set forth below is information concerning our executive officers and
directors as of July 1, 2008
Name Age Position
Harmon S. Hardy Director, Chairman of the Board and
Chief Executive Officer
H. S. Hardy Director, President
Harmon S. Hardy has been the President of the Company since its inception in
2003 and is Chairman and President of various other entities. Mr. Hardy devotes
a substantial portion of his time to the matters and business of the Company.
H. S. Hardy
H. S. Hardy is the son of Harmon S. Hardy and has worked with NexGen since its
inception along with other activities.
Audit Committee
The Company does not have an audit committee.
Board of Directors
Each of our directors is elected annually. Our next scheduled annual
meeting of stockholders is anticipated for the fourth quarter of calendar 2008.
All directors are elected by the holders of our common stock as provided in
provisions of our certificate of incorporation and our bylaws. Each of the
individuals will remain as a director until resignation or until the
stockholders elect each's replacement as provided in our certificate of
incorporation and our bylaws. Our executive officers are appointed by the Board
of Directors and serve until each's successor has been duly elected and
qualified. There are no family relationships among any of our executive officers
and directors.
Committees of Directors
Various securities regulations and the listing requirements of stock
exchanges and Nasdaq require us to form Audit and Compensation Committees. We do
not presently meet the listing requirements of those agencies and, at the early
stage of our development, do not plan to implement them until such time as we
21
have greater economic vitality. The various requirements of these agencies focus
on the independence of the directors constituting these committees and, in the
case of the audit committee, require accounting expertise with one member having
experience in accounting matters to be designated an expert. We believe,
however, that our directors bring substantial character, intellect, and
experience to the management of us. Some, however, regard the lack of separate
committees of directors, formal independence by a majority of our directors or
their being deemed "outside" directors, or the formal requirements of competence
or experience in accounting and finance to be critical attributes of directors.
We believe that our directors possess adequate financial and accounting
background and knowledge, but to the extent that we lack these committees or
members of our directors that would not meet other formal expectations, we could
be deemed to be deficient in our highest level of management. In any event, we
will have to meet various formal requirements with respect to committees of
directors to qualify our stock to trade on various stock exchanges or listing
agencies.
Director Compensation
Members of our Board of Directors who are our employees or employees of any
of our subsidiaries do not receive cash compensation for service on the Board of
Directors. Harmon S. Hardy has accrued back pay in the amount of $151,000 as of
December 31, 2007.
Compensation Committee and Compensation Committee Interlocks and Insider
Participation
Harmon S. Hardy is a founder, consultant with, and serves as directors of
Nx Infrastructure, Ltd.
Executive Compensation
For the last __ months, we have paid our sole executive officer, Harmon. S.
Hardy, $2,000 per month and his salary accrues at based on a salary of $5,000,
the balance accruing. As of December 31, 2008, the company had accrued $151,000
in accrued but unpaid salary for Harmon S. Hardy.
Director Compensation
Commencing in fiscal 2008, each director is to reimbursed for his out of
pocket expenses incurred in attending meetings of our Board of Directors. In
fiscal 2008, we anticipate adopting a stock option plan and we anticipate
granting to non-employee directors options pursuant to that plan.
Certain Beneficial Owners
The following table sets forth certain information regarding the beneficial
ownership as of July 1, 2008, of the Common stock by (a) each person known by
the Company to be a beneficial owner of more than 5% of the outstanding shares
of Common Stock, (b) each Director of the Company, (c) each Executive Officer,
and (d) Directors and Executive Officers of the Company as a group. Unless
otherwise noted, each beneficial owner named below has sole investment and
voting power with respect to the Common Stock as beneficially owned by him/her:
Name and Address of Beneficial Owner(1) Number of Shares Owned(2) Percent Owned
Harmon S. Hardy 73,600,000 65.8%
H. S. Hardy(3) 10,000,000 8.9%
M. J. Hardy(3) 10,000,000 8.9%
All directors and Executive Officers
as a group (three people) 83,600,000 74.7%
(1) The address of each of the above is 3939 Belt Line Road, Suite 440, Dallas,
TX 75001.
(2) On July 1, 2008, there were 111,880,621 shares of common stock issued and
outstanding.
(3) H. S. Hardy is the son of Harmon S. Hardy, and M. J. Hardy is the spouse of
Harmon S. Hardy. Harmons S. Hardy disclaims any beneficial ownership in the
shares of either H. S. Hardy or M. J. Hardy.
22
CERTAIN TRANSACTIONS
Harmon S. Hardy is a principal stockholder, director, consultant and
founder of Nx Infrastructure, Ltd.
The Company had subsidized the operating expenses of Stelax Canada an
affiliate, over several years. As of December 31, 2007 and 2006, the balances
owed by Industries were $12,932 and $89,875, respectively. These balances were
deemed by management uncollectible, and written off in their respective periods.
Our Chief Executive Officer, Harmon S. Hardy, contributed 7,512,000 shares
of Nx Infrastructure.
Description of Securities
Our authorized capital stock currently consists of 200,000,000 shares of Common
stock, $.001 par value per share, of which 111,880,621 shares were issued and
outstanding as of July 1, 2008 and 2,000,000 shares of Preferred Stock, none of
which were issued and outstanding on October 1, 2007. At January 1, 2008, our
common stock was held by 34 shareholders of record.
Common Stock
Voting Rights. The holders of our common stock have one vote per share and are
not entitled to vote cumulatively for the election of directors. Generally, all
matters to be voted on by stockholders must be approved by a majority or, in the
case of election of directors, by plurality of the votes cast at a meeting at
which a quorum is present and voting together as a single class, subject to any
voting rights granted to the holders of any then outstanding preferred stock.
Dividends. Holders of common stock are entitled to receive any dividends
declared by our board of directors, subject to the preferential rights of any
preferred stock then outstanding. Dividends consisting of shares of common stock
may be paid to holders of shares of common stock.
Other Rights. Upon our liquidation, dissolution or winding up, the holders of
common stock are entitled preferential to share ratably in any assets available
for distribution to holders of shares of common stock. No holders of shares are
subject to redemption or have preemptive rights to purchase additional shares of
common stock.
Preferred Stock
As of the date of this prospectus, there are no shares of preferred stock
issued and outstanding, and we have no current plans to issue any shares of our
preferred stock. It is not possible to state the actual effect of the issuance
of any shares of our preferred stock not currently authorized on the rights of
holders of shares of our common stock until the Board of Directors determines
the specific rights attached to the shares of any such class of preferred stock.
The effects of an issuance by us of preferred stock not currently authorized
could include one or more of the following: restricting dividends on shares of
our common stock, diluting the voting power of shares of our common stock,
impairing the liquidation rights of shares of our common stock, or delaying or
preventing a change of control.
Our Board of Directors has the authority under our certificate of
incorporation, without action by stockholders, to classify or reclassify any
unissued shares of our preferred stock from time to time by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of the shares of such preferred stock.
Warrants and Options
We have not issued any options but have outstanding warrants to purchase
2,889,812 shares of Common Stock for $0.85 pre share, said warrants to expire,
unless previously exercised, .five years from the effective of this prospectus.
Indemnification of directors and officers
Our Articles of Incorporation provide our directors with protection for
breaches of their fiduciary duties to us or our shareholders.
23
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons as provided in
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 unenforceable.
In the event that a claim for indemnification against such liabilities,
other than the payment by us of expenses incurred or paid by a director, officer
or controlling person in the successful defense of any action, suit or
proceeding, is asserted by a director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
TRANSFER AGENT
Transfer Agent. Our transfer agent and registrar for our common stock is
Signature Transfer, 2301 Ohio Drive, Suite 100, Plano, TX 75093
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Robert A. Forrester, Esq., Richardson, Texas. Mr.
Forrester owns 50,000 shares of Stelax Canada common stock and 200,000 shares of
the Company.
EXPERTS
Our consolidated financial statements as of and for the years ended March
31, 2006 and 2005, included in this prospectus have been audited by Killman,
Murrell & Company. PC, the registered independent public accounting firm, as
stated in their report appearing herein. We have included consolidated financial
statements in this prospectus in reliance on such report given upon their
authority as experts in auditing and accounting.
24
FINANCIAL STATEMENTS
NEXGEN STEEL INC.
(Formerly Stelax, Inc.)
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm ..................F-2
Balance Sheets, December 31, 2006 and 2007..................................F-3
Statements of Operations, Years Ended December 31, 2006 and 2007 and
for the period August 22, 2003 (Inception) to December 31, 2007...........F-4
Statements of Stockholders' Equity, Years Ended December 31, 2006 and 2007
and for the period August 22, 2003 (Inception) to December 31, 2007.......F-5
Statements of Cash Flows, Years Ended December 31, 2006 and 2007 and
for the period August 22, 2003 (Inception) to December 31, 2007.....F-6
Notes to Financial Statements...............................................F-7
F-1
Killman, Murrell & Company P.C.
Certified Public Accountants
3300 N. A Street, Bldg. 4, Suite 200 1931 E. 37th Street, Suite 7 2626 Royal Circle
Midland, Texas 79705 Odessa, Texas 79762 Kingwood, Texas 77339
(432) 686-9381 (432) 363-0067 (281) 359-7224
Fax (432) 684-6722 Fax (432) 363-0376 Fax (281) 359-7112
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
NexGen Steel, Inc. (formerly Stelax, Inc.)
Dallas, Texas
We have audited the accompanying balance sheets of NexGen Steel, Inc. (formerly
Stelax, Inc.) as of December 31, 2007 and 2006, and the related statements of
operations, stockholders' equity and cash flows for the years then ended, and
for the period August 22, 2003 (Inception) to December 31, 2007. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we can
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NexGen Steel, Inc. (formerly
Stelax, Inc.)as of December 31, 2007 and 2006, and the results of its operations
and its cash flows for the years then ended, and for the period August 22, 2003
(Inception) to December 31, 2007 in conformity with United States generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has suffered recurring losses from operations
and its limited capital resources raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
described in Note 5. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/Killman, Murrell & Company, P.C.
Odessa, Texas
May 11, 2008
F-2
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
(A Development Stage Company)
BALANCE SHEETS
ASSETS
December 31,
2007 2006
--------------- ---------------
CURRENT ASSETS
Cash and cash equivalents $ 83,450 $ 161,853
--------------- ---------------
TOTAL CURRENT ASSETS 83,450 161,853
--------------- ---------------
INVESTMENT IN AFFILIATE 221,784 221,784
--------------- ---------------
TOTAL ASSETS $ 305,234 $ 383,637
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to related parties $ 151,599 $ 151,599
--------------- ---------------
TOTAL CURRENT LIABILITIES 151,599 151,599
STOCKHOLDERS' EQUITY
Common stock - 200,000,000 shares
authorized, no par value;
95,300,000 shares issued
and outstanding 1,000 1,000
Unissued common stock 498,177 493,177
Accumulated deficit (345,542) (262,139)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUTIY 153,635 232,038
--------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 305,234 $ 383,637
=============== ===============
The accompany notes are an
integral part of these financial statements
F-3
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
August 22, 2003
(Inception) to
Years Ended December 31, December 31,
2007 2006 2007
-------------- --------------- ---------------
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES $ 87,202 $ 178,207 $ 400,805
-------------- --------------- ---------------
LOSS FROM OPERATIONS (87,202) (178,207) (400,805)
OTHER INCOME
Loss of investment - (7,872) (7,872)
Interest income 3,799 57,399 63,135
-------------- --------------- ---------------
NET LOSS $ (83,403) $ (128,680) $ (345,542)
============== =============== ===============
Weighted Average Shares of Common
Stock - Basic and Diluted 95,300,000 95,300,000
============== ===============
NET LOSS PER SHARE
Basic and Diluted $ (0.00) $ (0.00)
============== ===============
The accompany notes are an
integral part of these financial statements
F-4
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
Unissued
Common Stock Common Accumulated
Shares Amount Stock Deficit Total
Contributions - August 22, 2003 95,300,000 $ 1,000 $ - $ - $ 1,000
---------- ------------ ------------- ------------- -------------
BALANCE at December 31, 2003 95,300,000 1,000 - - 1,000
Net Loss - - (17,993) (17,993)
---------- ------------ ------------- ------------- -------------
BALANCE at December 31, 2004 95,300,000 1,000 - (17,993) (16,993)
Net Loss - - (115,466) (115,466)
----------- ------------ ------------- ------------- -------------
BALANCE at December 31, 2005 95,300,000 1,000 - (133,459) (132,459)
Common stock to be issued - - 493,177 - 493,177
Net Loss - 493,177 (128,680) (128,680)
----------- ------------ ------------- ------------- -------------
BALANCE at December 31, 2006 95,300,000 1,000 493,177 (262,139) 232,038
Common stock to be issued - - 5,000 - 5,000
Net Loss - - - (83,403) (83,403)
----------- ------------ ------------- ------------- -------------
BALANCE at December 31, 2007 95,300,000 $ 1,000 $ 498,177 $ (345,542) $ 153,635
=========== ============ ============= ============= =============
The accompany notes are an
integral part of these financial statements
F-5
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
August 22, 2003
(Inception) to
Years Ended December 31, December 31,
2007 2006 2007
-------------- ------------- ---------------
S CASH FLOW FROM OPERATING ACTIVITIES
Net Loss $ (83,403) $ (128,680) $ (345,542)
Changes in Operating Assets and Liabilities
Accounts Payable and Accruals - (62,388) -
Payable to Related Parties - (44,159) 151,599
------------- ------------- ---------------
NET CASH USED BY
OPERATING ACTIVITIES (83,403) (122,363) (193,943)
------------- ------------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES
Equity Investment - (221,784) (221,784)
------------- ------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from note borrowings - - 493,177
Common shares to be issued for cash 5,000 - 5,000
Common shares issued for cash - - 1,000
------------- ------------- ---------------
Net cash provided by financing activities 5,000 493,177 499,177
------------- ------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (78,403) 150,030 83,450
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 161,853 11,823 -
------------- ------------- ---------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 83,450 $ 161,853 $ 83,450
============= ============= ===============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest Paid $ - $ - $ -
============= ============= ===============
Income Taxes Paid $ - $ - $ -
============= ============= ===============
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common shares to be issued $ - $ (493,177) $ (493,177)
Notes payable - 493,177 493,177
------------- ------------- ---------------
$ - $ - $ -
============= ============= ===============
The accompany notes are an
integral part of these financial statements
F-6
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
NexGen Steel, Inc. ("NexGen" or the "Company") seeks to develop processes to
produce carbon steel with less energy and fewer emissions than processes used in
traditional steel manufacturing processes. The Company is awaiting financing to
commence implementation of its plan to commercialize its technologies.
The Company was formed in August 22, 2003 as a Texas corporation under the name
Stelax, Inc., and in April 2007, the Company changed its name to NexGen Steel,
Inc. Since 2003, the Company raised from several individuals $498,177 which was
converted to 16,580,621 shares of the Company's common stock in March 2008. The
Company used the funds to purchase 488,000 shares of Nx Infrastructure, Ltd., to
pay operating expense and provide a cash reserve for future expense. Nx
Infrastructure, Ltd., is a producer of carbon steel encased in stainless steel,
located in the Wales, United Kingdom and is an affiliate of Harmon Hardy, Jr.
the Chief Executive Officer of the Company.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
Loss Per Share
Losses per share have been computed in accordance with SFAS No. 128, Earnings
per Share. Basic and diluted losses per share are computed by dividing net loss
by the weighted average number of shares of Common Stock outstanding during the
year.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Income Taxes
The Company uses the liability method of accounting for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred income taxes are determined based upon enacted tax laws and
rates applied to the difference between the financial statement and tax bases of
assets and liabilities.
Financial Instruments
The fair values of financial instruments are determined by reference to various
market data and other valuation techniques, as appropriate. Unless otherwise
disclosed, the fair values of financial instruments approximate their recorded
values.
F-7
NOTE 2: RELATED PARTY TRANSACTIONS
The Company had subsidized the operating expenses of Stelax Industries, LTD,
("Industries) an affiliate, over several years. As of December 31, 2007 and
2006, the balances owed by Industries were $12,932 and $89,875, respectively.
These balances were deemed by management uncollectible, and written off in their
respective periods.
Harmon Hardy, Jr. is founder, Chairman of the Board and Chief Executive Officer
of the Company. As of December 31, 2007 and 2006, he is due $151,599 for accrued
salary and expenses.
NOTE 3: INCOME TAXES
At December 31, 2007, the Company had net operating loss carryforwards of
approximately $32,343, which expire in various years beginning in 2023. A
valuation allowance has been provided for the deferred tax assets as it is
uncertain whether the Company will have future taxable income.
A reconciliation of the benefit for income taxes with amounts determined by
applying the statutory federal income tax rate to loss before income taxes is as
follows:
Year Ended December 31,
2007 2006
------------ --------------
Benefit for Income Taxes Computed
Using the Statutory Rate of 34% $ 28,357 $ 43,751
Non-Deductible Expenses - (5,483)
Change in Valuation Allowance (28,357) $ (38,268)
------------ --------------
Provision for Income Taxes $ - $ -
============ ==============
Significant components of the Company's deferred tax liabilities
and assets were as follows at December 31, 2007 and 2006:
2007 2006
------------- --------------
Net Operating Loss Carryforward $ 112,001 $ 83,644
Valuation Allowance (112,001) (83,644)
Net Deferred Tax Asset $ - $ -
NOTE 4: STOCKHOLDERS' EQUITY
The Company has authorized 200,000,000 common shares, no par value and has
issued and outstanding 95,300,000 common shares for December 31, 2007 and 2006,
respectively. In March 2008, the Company issued 16,580,621 shares of its common
stock in settlement for the conversion of a note payable in the amount of
$493,177 and cash received of $5,000.
NOTE 5: GOING CONCERN
The financial statements have been prepared on the basis that the Company will
continue as a "going concern". In the absence of any debt forgiveness from the
affiliate or raising additional funds, the Company cannot pay its debts. The
Company currently has no operations. The Management of the Company does not
believe that any material adjustments to the values of assets or liabilities
would be necessary to reflect the "liquidation basis".
F-8
NEXGEN STEEL INC.
(Formerly Stelax, Inc.)
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets, March 31, 2008 and December 31, 2007.........................Q-2
Statements of Operations, Three Months Ended March 31, 2008 and 2007.........Q-3
Statements of Cash Flows, Three Months Ended March 31, 2008 and 2007.........Q-4
Notes to Financial Statements................................................Q-5
Q-1
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
BALANCE SHEETS
ASSETS
March 31, December 31,
2008 2007
--------------- -----------------
(Audited)
CURRENT ASSETS
Cash and cash equivalents $ 66,839 $ 83,450
--------------- ----------------
TOTAL CURRENT ASSETS 66,839 83,450
--------------- ----------------
INVESTMENT IN AFFILIATE 6,081,144 221,784
--------------- ----------------
TOTAL ASSETS $ 6,147,983 $ 305,234
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to related parties $ 151,599 $ 151,599
--------------- ----------------
TOTAL CURRENT LIABILITIES 151,599 151,599
--------------- ----------------
STOCKHOLDERS' EQUITY
Common stock - 200,000,000 shares
authorized, no par value; 111,880,621 and 95,300,000
shares issued and outstanding, respectively 6,358,537 1,000
Unissued shares - 498,177
Accumulated deficit (362,153) (345,542)
--------------- ----------------
TOTAL STOCKHOLDERS' EQUTIY 5,996,384 153,635
--------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 6,147,983 $ 305,234
=============== ================
The accompany notes are an
integral part of these financial statements
Q-2
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
STATEMENTS OF OPERATIONS
August 22, 2003
Three months ended March 31, (Inception) to
2008 2007 March 31, 2008
--------------- --------------- ---------------
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES $ 16,884 $ 16,461 $ 417,416
--------------- --------------- ---------------
LOSS FROM OPERATIONS (16,884) (16,461) (417,416)
OTHER INCOME
Loss of Investment - - (7,872)
Interest Income 273 1,245 63,135
--------------- --------------- ---------------
NET LOSS $ (16,611) $ (15,216) $ (362,153)
=============== =============== ===============
Weighted Average Shares of Common
Stock - Basic and Diluted 99,433,799 95,300,000
========== ==========
NET LOSS PER SHARE
Basic and Diluted $ (0.00) $ (0.00)
=============== ===============
The accompany notes are an
integral part of these financial statements
Q-3
NEXGEN STEEL, Inc.
(Formerly Stelax, Inc.)
STATEMENTS OF CASH FLOWS
August 22, 2003
Three months ended March 31, (Inception) to
2008 2007 March 31, 2008
--------------- --------------- ------------------
CASH FLOW FROM OPERATING ACTIVITIES
Net Loss $ (16,611) $ (15,216) $ (362,153)
Payable to Related Parties - - 151,599
--------------- --------------- ------------------
NET CASH USED BY OPERATING ACTIVITIES (16,611) (15,216) (210,554)
--------------- --------------- ------------------
CASH FLOW FROM INVESTING ACTIVITIES - - (221,784)
--------------- --------------- ------------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from note borrowings - - 493,177
Common shares issued for cash - - 6,000
--------------- --------------- ------------------
Net cash provided by financing activities - - 499,177
--------------- --------------- ------------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (16,611) (15,216) 66,839
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 83,450 161,853 -
--------------- --------------- ------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 66,839 $ 146,637 $ 66,839
=============== =============== ==================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest Paid $ - $ - $ -
=============== =============== ==================
Income Taxes Paid $ - $ - $ -
=============== =============== ==================
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Contribution of NX Infrastructure limited stock:
Common Stock $ (5,859,360) $ - $ (5,859,360)
Investment in affiliate 5,859,360 - 5,859,360
Issuance of common stock:
Common stock (498,177) - (493,177)
Notes Payable - - 493,177
Common Shares to be issued (498,177) - -
--------------- --------------- ------------------
$ - $ - $ -
=============== =============== ==================
The accompany notes are an
integral part of these financial statements
Q-4
Q-5
NOTE 1: THE COMPANY AND BASIS OF PRESENTATION
Organization
NexGen Steel, Inc. ("NexGen" or the "Company") seeks to develop processes to
produce carbon steel with less energy and fewer emissions than processes used in
traditional steel manufacturing processes. The Company is awaiting financing to
commence implementation of its plan to commercialize its technologies.
The Company was formed in August 2003 as a Texas corporation under the name
Stelax, Inc., and in April 2007, the Company changed its name to NexGen Steel,
Inc. Since 2003, the Company raised from several individuals $498,177 which was
converted to 16,580,621 shares of the Company's common stock in March 2008. The
Company used the funds to purchase 488,000 shares of Nx Infrastructure, Ltd., to
pay operating expense and provide a cash reserve for future expense. Nx
Infrastructure, Ltd., is a producer of carbon steel encased in stainless steel,
located in the Wales, United Kingdom and is an affiliate of Harmon Hardy, Jr.
the Chief Executive Officer of the Company.
Basis of Presentation
The Company has elected to prepare its financial statements in accordance with
generally accepted accounting principles (United States) with December 31, as
its year end. The financial statements and notes are representations of the
Company's management who are responsible fore their integrity and objectivity.
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
annual financial information and with the instructions to Form 10-Q and Article
10 of Regulation SX. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. All such
adjustments are of a normal and recurring nature.
NOTE 2: GOING CONCERN
The financial statements have been prepared on the basis that the Company will
continue as a "going concern". In the absence of any debt forgiveness from the
affiliate or raising additional funds, the Company cannot pay its debts. The
Company currently has no operations. The Management of the Company does not
believe that any material adjustments to the values of assets or liabilities
would be necessary to reflect the "liquidation basis".
NOTE 3: STOCKHOLDERS' EQUITY
The Company has authorized 200,000,000 common shares, no par value and has
issued and outstanding 111,880,621 and 95,300,000 common shares for March 31,
2008 and December 31, 2007, respectively. In March 2008, the Company issued
16,580,621 shares of its common stock for conversion of a note payable in the
amount of $493,177 and cash received of $5,000.
Q-5
PART II
Item 24. Indemnification of Directors and Officers.
Articles Eleven and Twelve of our Articles of Incorporation provide as follows:
ARTICLE ELEVEN
A director of the corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for any act or omission in
his capacity as a director, except to the extent otherwise expressly provided by
a statute of the State of Texas. The Corporation shall be obligated to indemnify
its officers and directors against any and all judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses incurred
by that person to the full extent permitted under Texas law. Any repeal or
modification of this Article shall be prospective only, and shall not adversely
affect any limitation of the personal liability or rights to indemnification of
a director of the Corporation existing at the time of the repeal or
modification.
ARTICLE TWELVE
No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, solely because the director or
officer is present at or participates in the meeting of the Board of Directors
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative
vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the shareholders; or
(c) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved, or ratified by the Board of
Directors, a committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
This provision shall not be construed to invalidate a contract or
transaction which would be valid in the absence of this provision or to subject
any director or officer to any liability that he would not be subject to in the
absence of this provision.
Article 7.7 of our Bylaws provides as follows:
The Corporation will indemnify its directors and officers to the fullest extent
permitted by the Texas Business Organizations Code and may, if and to the extent
authorized by the board of directors, indemnify any other person whom it has the
power to indemnify against liability, reasonable expense, or any other matter
whatever.
Section 2.101 of the Texas Business Organization Code provides as follows:
Except as otherwise provided by this code, a domestic entity has the same powers
as an individual to take action necessary or convenient to carry out its
business and affairs. Except as otherwise provided by this code, the powers of a
domestic entity include the power to:
(16) indemnify and maintain liability insurance for managerial
officials, owners, members, employees, and agents of the entity or the
entity's affiliate.
i
Chapter 8 of the Texas Business Organizations Code provides as follows:
CHAPTER 8. INDEMNIFICATION AND INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 8.001. DEFINITIONS. In this chapter:
(1) "Delegate" means a person who is serving or who has served as a
representative of an enterprise at the request of that enterprise at another
enterprise. A person is a delegate to an employee benefit plan if the
performance of the person's official duties to the enterprise also imposes
duties on or otherwise involves service by the person to the plan or
participants in or beneficiaries of the plan.
(2) "Enterprise" means a domestic entity or an organization subject to
this chapter, including a predecessor domestic entity or organization.
(3) "Expenses" includes:
(A) court costs, a judgment, a penalty, a settlement, a fine,
and an excise or similar tax, including an excise tax assessed against the
person with respect to an employee benefit plan; and
(B) reasonable attorney's fees.
(4) "Former governing person" means a person who was a governing person
of an enterprise.
(5) "Judgment" includes an arbitration award.
(6) "Official capacity" means:
(A) with respect to a governing person, the office of the
governing person in the enterprise or the exercise of authority by or on behalf
of the governing person under this code or the governing documents of the
enterprise; and
(B) with respect to a person other than a governing person,
the elective or appointive office, if any, in the enterprise held by the person
or the relationship undertaken by the person on behalf of the enterprise.
(7) "Predecessor enterprise" means a sole proprietorship or
organization that is a predecessor to an enterprise in:
(A) a merger, conversion, consolidation, or other transaction
in which the liabilities of the predecessor enterprise are transferred or
allocated to the enterprise by operation of law; or
(B) any other transaction in which the enterprise assumes the
liabilities of the predecessor enterprise and the liabilities that are the
subject matter of this chapter are not specifically excluded.
(8) "Proceeding" means:
(A) a threatened, pending, or completed action or other
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative;
(B) an appeal of an action or proceeding described by
Paragraph (A); and
(C) an inquiry or investigation that could lead to an action
or proceeding described by Paragraph (A).
(9) "Representative" means a person serving as a partner, director,
officer, venturer, proprietor, trustee, employee, or agent of an enterprise or
serving a similar function for an enterprise.
(10) "Respondent" means a person named as a respondent or defendant in
a proceeding.
Sec. 8.002. APPLICATION OF CHAPTER. (a) Except as provided by Subsection
(b), this chapter does not apply to a:
ii
(1) general partnership; or
(2) limited liability company.
(b) The governing documents of a general partnership or limited liability
company may adopt provisions of this chapter or may contain enforceable
provisions relating to:
(1) indemnification;
(2) advancement of expenses; or
(3) insurance or another arrangement to indemnify or hold harmless a
governing person.
Sec. 8.003. LIMITATIONS IN GOVERNING DOCUMENTS. (a) The certificate of
formation of an enterprise may restrict the circumstances under which the
enterprise must or may indemnify or may advance expenses to a person under this
chapter.
(b) The written partnership agreement of a limited partnership may restrict
the circumstances in the same manner as the certificate of formation under
Subsection (a).
Sec. 8.004. LIMITATIONS IN CHAPTER. Except as provided in Section 8.151, a
provision for an enterprise to indemnify or advance expenses to a governing
person is valid only to the extent it is consistent with this chapter.
SUBCHAPTER B. MANDATORY AND COURT-ORDERED INDEMNIFICATION
Sec. 8.051. MANDATORY INDEMNIFICATION. (a) An enterprise shall indemnify a
governing person or former governing person against reasonable expenses actually
incurred by the person in connection with a proceeding in which the person is a
respondent because the person is or was a governing person if the person is
wholly successful, on the merits or otherwise, in the defense of the proceeding.
(b) A court that determines, in a suit for indemnification, that a
governing person is entitled to indemnification under this section shall order
indemnification and award to the person the expenses incurred in securing the
indemnification.
Sec. 8.052. COURT-ORDERED INDEMNIFICATION. (a) On application of a
governing person, former governing person, or delegate and after notice is
provided as required by the court, a court may order an enterprise to indemnify
the person to the extent the court determines that the person is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances.
(b) This section applies without regard to whether the governing
person, former governing person, or delegate applying to the court satisfies the
requirements of Section 8.101 or has been found liable:
(1) to the enterprise; or
(2) because the person improperly received a personal benefit, without
regard to whether the benefit resulted from an action taken in the person's
official capacity.
(c) The indemnification ordered by the court under this section is limited
to reasonable expenses if the governing person, former governing person, or
delegate is found liable:
(1) to the enterprise; or
(2) because the person improperly received a personal benefit, without
regard to whether the benefit resulted from an action taken in the person's
official capacity.
SUBCHAPTER C. PERMISSIVE INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
Sec. 8.101. PERMISSIVE INDEMNIFICATION. (a) An enterprise may indemnify a
governing person, former governing person, or delegate who was, is, or is
threatened to be made a respondent in a proceeding to the extent permitted by
Section 8.102 if it is determined in accordance with Section 8.103 that:
(1) the person:
iii
(A) acted in good faith;
(B) reasonably believed:
(i) in the case of conduct in the person's official
capacity, that the person's conduct was in the enterprise's best interests; and
(ii) in any other case, that the person's conduct was
not opposed to the enterprise's best interests; and
(C) in the case of a criminal proceeding, did not have a
reasonable cause to believe the person's conduct was unlawful;
(2) with respect to expenses, the amount of expenses other than a
judgment is reasonable; and
(3) indemnification should be paid.
(b) Action taken or omitted by a governing person or delegate with respect
to an employee benefit plan in the performance of the person's duties for a
purpose reasonably believed by the person to be in the interest of the
participants and beneficiaries of the plan is for a purpose that is not opposed
to the best interests of the enterprise.
(c) Action taken or omitted by a delegate to another enterprise for a
purpose reasonably believed by the delegate to be in the interest of the other
enterprise or its owners or members is for a purpose that is not opposed to the
best interests of the enterprise.
(d) A person does not fail to meet the standard under Subsection (a)(1)
solely because of the termination of a proceeding by:
(1) judgment;
(2) order;
(3) settlement;
(4) conviction; or
(5) a plea of nolo contendere or its equivalent.
Sec. 8.102. GENERAL SCOPE OF PERMISSIVE INDEMNIFICATION. (a) Subject to
Subsection (b), an enterprise may indemnify a governing person, former governing
person, or delegate against:
(1) a judgment; and
(2) expenses, other than a judgment, that are reasonable and actually
incurred by the person in connection with a proceeding.
(b) Indemnification under this subchapter of a person who is found liable
to the enterprise or is found liable because the person improperly received a
personal benefit:
(1) is limited to reasonable expenses actually incurred by the person
in connection with the proceeding;
(2) does not include a judgment, a penalty, a fine, and an excise or
similar tax, including an excise tax assessed against the person with respect to
an employee benefit plan; and
(3) may not be made in relation to a proceeding in which the person has
been found liable for:
(A) wilful or intentional misconduct in the performance of the
person's duty to the enterprise;
(B) breach of the person's duty of loyalty owed to the
enterprise; or
iv
(C) an act or omission not committed in good faith
that constitutes a breach of a duty owed by the person to the enterprise.
(c) A governing person, former governing person, or delegate is considered
to have been found liable in relation to a claim, issue, or matter only if the
liability is established by an order, including a judgment or decree of a court,
and all appeals of the order are exhausted or foreclosed by law.
Sec. 8.103. MANNER FOR DETERMINING PERMISSIVE INDEMNIFICATION. (a) Except
as provided by Subsections (b) and (c), the determinations required under
Section 8.101(a) must be made by:
(1) a majority vote of a quorum composed of the governing persons who
at the time of the vote are disinterested and independent;
(2) if a quorum described by Subdivision (1) cannot be obtained, a
majority vote of a committee of the governing authority of the enterprise
designated to act in the matter by a majority vote of the governing persons and
composed solely of one or more governing persons who at the time of the vote are
disinterested and independent;
(3) special legal counsel selected by the governing authority of the
enterprise, or selected by a committee of the board of directors, by vote in
accordance with Subdivision (1) or (2) or, if a quorum described by Subdivision
(1) cannot be obtained and a committee described by Subdivision (2) cannot be
established, by a majority vote of the governing persons of the enterprise;
(4) the owners or members of the enterprise in a vote that excludes the
ownership or membership interests held by each governing person who is not
disinterested and independent; or
(5) a unanimous vote of the owners or members of the enterprise.
(b) If special legal counsel determines under Subsection (a)(3) that a
person meets the standard under Section 8.101(a)(1), the special legal counsel
shall determine whether the amount of expenses other than a judgment is
reasonable under Section 8.101(a)(2) but may not determine whether
indemnification should be paid under Section 8.101(a)(3). The determination
whether indemnification should be paid must be made in a manner specified by
Subsection (a)(1), (2), (4), or (5).
(c) A provision contained in the governing documents of the enterprise, a
resolution of the owners, members, or governing authority, or an agreement that
requires the indemnification of a person who meets the standard under Section
8.101(a)(1) constitutes a determination under Section 8.101(a)(3) that
indemnification should be paid even though the provision may not have been
adopted or authorized in the same manner as the determinations required under
Section 8.101(a). The determinations required under Sections 8.101(a)(1) and (2)
must be made in a manner provided by Subsection (a).
Sec. 8.104. ADVANCEMENT OF EXPENSES. (a) An enterprise may pay or reimburse
reasonable expenses incurred by a governing person, former governing person, or
delegate who was, is, or is threatened to be made a respondent in a proceeding
in advance of the final disposition of the proceeding without making the
determinations required under Section 8.101(a) after the enterprise receives:
(1) a written affirmation by the person of the person's good faith
belief that the person has met the standard of conduct necessary for
indemnification under this chapter; and
(2) a written undertaking by or on behalf of the person to repay the
amount paid or reimbursed if the final determination is that the person has not
met that standard or that indemnification is prohibited by Section 8.102.
(b) A provision in the governing documents of the enterprise, a resolution
of the owners, members, or governing authority, or an agreement that requires
the payment or reimbursement permitted under this section authorizes that
payment or reimbursement after the enterprise receives an affirmation and
undertaking described by Subsection (a).
(c) The written undertaking required by Subsection (a)(2) must be an
unlimited general obligation of the person but need not be secured and may be
accepted by the enterprise without regard to the person's ability to make
repayment.
v
Sec. 8.105. INDEMNIFICATION OF AND ADVANCEMENT OF EXPENSES TO PERSONS OTHER
THAN GOVERNING PERSONS. (a) Notwithstanding any other provision of this chapter
but subject to Sections 8.003 and 8.004 and to the extent consistent with other
law, an enterprise may indemnify and advance expenses to a person who is not a
governing person, including an officer, employee, agent, or delegate, as
provided by:
(1) the enterprise's governing documents;
(2) general or specific action of the enterprise's governing authority;
(3) resolution of the enterprise's owners or members;
(4) contract; or
(5) common law.
(b) An enterprise shall indemnify and advance expenses to an officer to the
same extent that indemnification or advancement of expenses is required under
this chapter for a governing person.
(c) A person described by Subsection (a) may seek indemnification or
advancement of expenses from an enterprise to the same extent that a governing
person may seek indemnification or advancement of expenses under this chapter.
Sec. 8.106. PERMISSIVE INDEMNIFICATION OF AND REIMBURSEMENT OF EXPENSES TO
WITNESSES. Notwithstanding any other provision of this chapter, an enterprise
may pay or reimburse reasonable expenses incurred by a governing person,
officer, employee, agent, delegate, or other person in connection with that
person's appearance as a witness or other participation in a proceeding at a
time when the person is not a respondent in the proceeding.
SUBCHAPTER D. LIABILITY INSURANCE; REPORTING REQUIREMENTS
Sec. 8.151. INSURANCE AND OTHER ARRANGEMENTS. (a) Notwithstanding any other
provision of this chapter, an enterprise may purchase or procure or establish
and maintain insurance or another arrangement to indemnify or hold harmless an
existing or former governing person, delegate, officer, employee, or agent
against any liability:
(1) asserted against and incurred by the person in that capacity; or
(2) arising out of the person's status in that capacity.
(b) The insurance or other arrangement established under Subsection (a) may
insure or indemnify against the liability described by Subsection (a) without
regard to whether the enterprise otherwise would have had the power to indemnify
the person against that liability under this chapter.
(c) Insurance or another arrangement that involves self-insurance or an
agreement to indemnify made with the enterprise or a person that is not
regularly engaged in the business of providing insurance coverage may provide
for payment of a liability with respect to which the enterprise does not
otherwise have the power to provide indemnification only if the insurance or
arrangement is approved by the owners or members of the enterprise.
(d) For the benefit of persons to be indemnified by the enterprise, an
enterprise may, in addition to purchasing or procuring or establishing and
maintaining insurance or another arrangement:
(1) create a trust fund;
(2) establish any form of self-insurance, including a contract to
indemnify;
(3) secure the enterprise's indemnity obligation by grant of a security
interest or other lien on the assets of the enterprise; or
(4) establish a letter of credit, guaranty, or surety arrangement.
(e) Insurance or another arrangement established under this section may be
purchased or procured or established and maintained:
(1) within the enterprise; or
vi
(2) with any insurer or other person considered appropriate by the
governing authority, regardless of whether all or part of the stock, securities,
or other ownership interest in the insurer or other person is owned in whole or
in part by the enterprise.
(f) The governing authority's decision as to the terms of the insurance or
other arrangement and the selection of the insurer or other person participating
in an arrangement is conclusive. The insurance or arrangement is not voidable
and does not subject the governing persons approving the insurance or
arrangement to liability, on any ground, regardless of whether the governing
persons participating in approving the insurance or other arrangement are
beneficiaries of the insurance or arrangement. This subsection does not apply in
case of actual fraud.
Sec. 8.152. REPORTS OF INDEMNIFICATION AND ADVANCES. (a) An enterprise
shall report in writing to the owners or members of the enterprise an
indemnification of or advance of expenses to a governing person.
(b) Subject to Subsection (c), the report must be made with or before the
notice or waiver of notice of the next meeting of the owners or members of the
enterprise and before the next submission to the owners or members of a consent
to action without a meeting.
(c) The report must be made not later than the first anniversary of the
date of the indemnification or advance.
Item 25. Other Expenses.
The following table sets forth an estimate of the costs and expenses, other than
the underwriting discounts and commissions, payable by the registrant in
connection with the issuance and distribution of the common stock being
registered
SEC registration fee $ 1,207
Blue Sky Expense 10,000
Legal fees and expenses 45,000
Accountants' fees and expenses 50,000
Printing expenses 5,000
--------------
Total $ 111,207
All amounts except the SEC registration fee are estimated. All of the expenses
set forth above are being paid by us.
Item 26. Recent Sales of Unregistered Securities.
In December 2005 and March 2006 we sold 615,000 shares of common stock for an
aggregate consideration of $23,500. In March of the same year, we sold an
additional 100,000 shares to another for $15,000. These transactions were exempt
from registration under the Securities Act pursuant to Section 4(2) thereunder
as transactions not involving a public offering.
In January 2006, we granted counsel to the company 200,000 shares of common
stock in consideration of services rendered to the company. This transaction was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereunder as transactions not involving a public offering.
Item 27 Exhibits.
Exhibit No. Item
Exhibit 3.1 Articles of Incorporation(1)
Exhibit 3.1(a) Certificate of Amendment (1)
Exhibit 3.1(b) Articles of Correction(1)
Exhibit 3.2 Bylaws(1)
Exhibit 5.1 Opinion of Robert A. Forrester, Esq.(1)
Exhibit 23.1 Consent of Killman, Murrell & Company, PC(1)
Exhibit 23.2 Consent of Robert A. Forrester is contained in his opinion filed as Exhibit 5.1 to this
registration statement. (1)
vii
(1) Filed Herewith
(2) To be Filed
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows:
(a) To File, during any period in which it offers or sells securities, a
post effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the for prospectus field with the Commission
pursuant to Rule 424(b) if, in the aggregate the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) Include any additional or changed material information on
the plan of distribution.
For determining liability under the Securities Act, treat each
post-effective amendment 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.
File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the
small business issuer 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 small business
issuer 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 such indemnification by it is against
public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
viii
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Dallas,
State of Texas on July 28, 2008
NexGen Steel, Inc.
By:/s/Harmon S. Hardy
- -----------------------------------------
Harmon S. Hardy, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
/s/Harmon S. Hardy Dated: July 28, 2008
- ----------------------------------------
Harmon S. Hardy, Director
/s/H.S. Hardy Dated: July 28, 2008
- ----------------------------------------
H. S. Hardy, Director
ix