Amendment No.1
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NANNACO, INC.
------------
(Exact Name of Registrant as Specified in its Charter)
TEXAS 1799 74-2891747
----- ---- ----------
(State of Incorporation) (Primary Standard (IRS Employer ID No.)
Classification Code)
16410 Blanco Road, Suite 4, San Antonio TX 78232
(210) 545 3570
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(Address and Telephone Number of Registrant's Principal
Executive Offices and Principal Place of Business)
Andrew DeVries III
16410 Blanco Road, Suite 4,
San Antonio TX 78232
(210) 545 3570
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(Name, Address and Telephone Number of Agent for Service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
class of Amount Maximum Maximum Amount of
securities to be offering price aggregate registration
to be registered registered per share offering price fee
- --------------------------------------------------------------------------------------
Common Stock of
Selling Securities
Holders 1,495,000 $1.00 $1,495,000 $400.66
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT 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 BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
THE EXHIBIT INDEX APPEARS ON PAGE II-6 OF THE SEQUENTIALLY NUMBERED PAGES OF
THIS REGISTRATION STATEMENT. THIS REGISTRATION STATEMENT, INCLUDING EXHIBITS,
CONTAINS 70 PAGES.
NANNACO INC.
CROSS REFERENCE SHEET FOR REGISTRATION STATEMENT ON FORM SB-2
ITEM REGISTRATION STATEMENT HEADING LOCATION IN PROSPECTUS
1. Forepart of Registration Statement and Outside Front Cover Page of
Outside Front Cover Page of Prospectus Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Outside Front Cover of Prospectus
and Selling Securities Holders
Plan of Distribution
6. Dilution Market for Nannaco's Common
Stock and Related Stockholder
Matters
7. Selling Security Holders Selling Securities Holders
8. Plan of Distribution Selling Securities Holders Plan
of Distribution
9. Legal Proceedings Not Applicable
10. Directors and Executive Officers Management
11. Security Ownership of Certain
Beneficial Owners and Management Security Ownership of Management
and Principal Shareholders
12. Description of the Securities to be
Registered Prospectus Summary; Description
of Securities; Outside Front
Cover of Prospectus;
13. Interest of Named Experts and Counsel Not Applicable
14. Statement as to Indemnification Indemnification
15. Organization within 5 Years Business of Nannaco
16. Description of Business Business of Nannaco
17. Management's Plan of Operation Business of Nannaco
18. Description of Property Business of Nannaco
19. Certain Relationships and Related
Transactions Transactions with Management
20. Market for Common Equity and
Related Stockholder Matters Market for Nannaco's Common
Stock and Related Stockholder
Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements With
Accountants Not Applicable
2
Prospectus
Nannaco Inc.
1,495,000 shares of common stock offered by the selling securities holders.
These selling securities holders are individually offering their shares.
The price of the shares and the number of shares sold will be determined by each
selling securities holder.
There is no time limit for the selling securities holders to sell the shares.
There are no minimum purchase requirements or escrow arrangements.
The selling securities holders may sell their shares in privately negotiated
transactions or in market transactions if a market develops.
No underwriters have been engaged to sell the shares for the selling securities
holders.
Nannaco Inc., is not offering these shares for sale and will not receive any
proceeds from the sale of the Shares.
The shares are not presently traded on any recognized exchange or market.
These are speculative securities involving a high degree of risk. These shares
should be purchased only by persons who can afford to lose their entire
investment. (see "Risk Factors, page 3.")
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
NANNACO LOGO
The date of this Prospectus is ___________, 2001
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Prospectus Summary
Securities Offered
This Prospectus describes the offering of 1,495,000 shares of Nannaco common
stock by the named selling securities holders.
These shares may be sold by their holders from time to time at prevailing market
prices.
There are no minimum purchase requirements.
There are no escrow provisions with respect to the offering by the selling
securities holders.
No underwriters or brokers have been engaged to sell the shares for the selling
securities holders.
We will not receive any of the proceeds from any sale of the selling securities
holders shares.
The Business of Nannaco Inc.
Our business is the residential and commercial cleaning, decoration and
preservation of various surfaces, including wood, concrete, aggregates and stone
surfaces of decks, fences, arbors, driveways and buildings. We clean the
surfaces using pressurized steam or chemical cleaners. We have obtained our
state and federal licenses to operate as a hazardous waste handler to clean and
remove contaminated salt water used to clean oil drilling and production
equipment and expect to begin our hazardous waste site remediation services
during the second quarter of 2001.
2
Risk Factors
------------
Investment in the shares offered involves a high degree of risk. Prospective
purchasers should consider carefully the following risks as well as the other
information in this Prospectus.
We may not be able to obtain the additional funding we require.
Our plan of operation calls for additional capital to facilitate growth and
support long-term development and marketing programs. It is likely that we will
seek additional financing through subsequent future public or private sales of
our securities, including equity securities. We may also seek funding for the
development and marketing of our services through strategic partnerships and
other arrangements with investment partners. There can be no assurance, however,
that such collaborative arrangements or additional funds will be available when
needed, or on terms acceptable to us, if at all. Any such additional financing
may result in significant dilution to existing stockholders. If adequate funds
are not available, we may be required to curtail one or more of our future
programs.
We face high insurance risks and the possiblity of uninsured losses.
There are certain risks associated with companies engaged in businesses
involving pressure cleaning, pre-coating and surface preparation, chemical
coating and historical preservation. The use of pressure machinery and chemicals
exposes us to potential liability if substances are inappropriately used.
Additionally, we could be exposed to certain risks for environmental damage and
manufacturer's and workers' liability costs. The combined insurance risks and
the possibility of uninsured losses could cause us irreparable financial harm
and force us to liquidate all or part of our assets. If that happens, investors
could lose all or part of their investment.
We are dependent upon our key personnel.
Our future success will depend largely on the efforts and abilities of our
management, specifically Andrew DeVries III, President. Our operations could be
adversely affected if, for any reason, Andrew DeVries III ceases to be active in
our management. The loss of the services of Andrew DeVries III could have a
substantial adverse effect on us. We have not obtained "key man" insurance
policies on any of our officers. Our ability to implement our strategies depends
upon our ability to retain and attract highly talented managerial and technical
personnel. Competition for qualified personnel is intense in the petrochemical
products industry. There can be no assurance that we will attract and retain
such employees in the future. The loss of key management or technical personnel
could materially and adversely affect our business, results of operations, and
financial condition.
3
Where You Can Get Additional Information
Nannaco will be subject to and will comply with the periodic reporting
requirements of Section 12(g) of the Securities Exchange Act of 1934. Nannaco
will furnish to its shareholders an Annual Report on Form 10-KSB containing
financial information examined and reported upon by independent certified public
accountants, and it may also provide unaudited quarterly or other interim
reports such as Forms 10-QSB or Form 8-K as it deems appropriate. Our
Registration Statement on Form SB-2 with respect to the Securities offered by
this prospectus, a part of the Registration Statement as well as our periodic
reports may be inspected at the public reference facilities of the U.S.
Securities and Exchange Commission, Judiciary Plaza, 450 Fifth Street N.W., Room
1024, Washington, D.C. 20549, or at the Commission's regional offices at
Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and at 7 World Trade Center, New York, New York 0007. Copies of
such materials can be obtained from the Commission's Washington, D.C. office at
prescribed rates or from the Commission's website "www.sec.gov" through its
EDGAR database. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
4
Management's Discussion and Analysis of Financial Condition and Results of
Operations
This section contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are not guarantees of our future
performance. They are subject to risks and uncertainties related to business
operations, some of which are beyond our control. Our actual results may differ
materially from those anticipated in these forward-looking statements. Amounts
presented here have been rounded to the nearest $1,000.
The Company's objective is to maximize shareholder value by focusing on growth,
product innovation and profitability. The following discussion highlights the
Company's performance and should be read in conjunction with the Consolidated
Financial Statements and related notes included therein.
Overview
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We have been in operation since October 1998, beginning with pressure washing
surfaces. Since that time we have expanded to include our residential services,
other commercial services, and vehicle cleaning. Beginning in the current fiscal
year, we have begun hazardous waste site remediation and equipment clean up.
Results of Operations for Fiscal Year Ended September 30, 2000 Compared to
Fiscal Year Ended September 30, 1999
We had income from operations of $275,000 for the fiscal year ended September
30, 2000 and $378,000 for the fiscal year ended September 30, 1999, our first
full year of operations. The decline in income from operations is due to greater
selectivity in accepting commercial business, including the institution of
credit application procedures in order to reduce the amount of bad debt write
off. Cost of Sales was $588,000 for fiscal 2000 as compared to $284,000 for
fiscal 1999. The increase in cost of sales is due to increased payroll expense
for additional employees and higher pay rates, as well as increased supply costs
of cleaning materials which increased approximately one third over the previous
year. Administrative and general expenses were $961,000 for fiscal 2000 as
compared with $205,000 for fiscal 1999. The increase in general and
administrative expense is due to several expense items which are expected to be
non-recurring, such as $72,000 paid in commissions on the sale of our
securities, $50,000 recorded as the expense for the issuance of 50,000 shares of
our common stock for services, $227,000 recorded as an expense of settling
potential litigation, $140,000 of bad debt expense and $35,000 for legal fees in
connection with securities law compliance.
We had a net loss from operations of $1,274,000 in fiscal 2000 as compared to a
net loss from operations of $129,000 for fiscal 1999. We believe the loss is not
indicative of future results because of non-recurring expenses which contributed
to greater general and administrative expenses. These include bad debt expense
of $140,000, an expense of $227,000 for the issuance of shares in settlement of
claims, and an expense of $50,000 for shares issued for consulting services.
Our revenues are derived from the various services we provide. Our residential
services include wood restoration, stone restoration, sealing and pressure
cleaning. These had revenues in the fiscal year ended September 30, 2000 as
follows:
5
Wood Restoration $47,000
Stone Restoration $19,000
Sealing $90,000
Pressure Cleaning $13,000
Our commercial services include pressure cleaning, environmental services such
as fleet cleaning and vent hood cleaning and historical restoration. The
environmental services do not include hazardous waste site remediation which
is not expected to produce revenues until the second quarter of the current
fiscal year. Please see Plan of Operation below. These commercial services had
revenues in the fiscal year ended September 30, 2000 as follows:
Pressure Cleaning $18,000
Fleet and Hood Cleaning $68,000
Historical Restoration $20,000
Liquidity and Capital Resources for Fiscal Year Ended September 30, 2000
Compared to Fiscal Year Ended September 30, 1999
For the fiscal year ended September 30, 2000 we had current assets of $487,000
while in the fiscal year ended September 30, 1999, we had current assets of
$259,022. The increase in current assets is due to cash held in certificates of
deposit of $41,000, cash held in mutual funds of $256,000 and prepaid expenses
of $117,000. At the same time trade accounts receivable decreased from $174,000
to $20,000 primarily reflecting the bad debt expense of $140,000.
Fixed assets in fiscal 2000 were $203,000 as compared to fixed assets of
$154,000 for fiscal 1999. We had current liabilities of $328,000 in fiscal 2000
and $84,000 for fiscal 1999 while long term liabilities were $29,000 in fiscal
2000 as compared with $81,000 in fiscal 1999. The increase in current
liabilities is due to $133,000 in accounts payable which represents a loan from
the brokerage firm secured by the mutual funds as well as increased payroll
taxes and an increase of $61,000 in the current portion of long term debt.
Our hazardous waste site remediation is expected to improve our liquidity.
Recently enacted Texas legislation requires the state to pay for the remediation
of abandoned or closed oil or gas well drilling sites which have pits and ponds
of used waste water and drilling sludge. During the fourth quarter of fiscal
2000 we have obtained the necessary licenses to provide remediation services and
anticipate obtaining contracts for specific sites. We have not yet obtained our
first contracts for hazardous waste site remediation and expect our first clean
up contracts during the second quarter of 2001. Revenue from these contracts is
expected to be realized monthly based upon invoices for services rendered and
quantity of materials removed.
During the second quarter of fiscal 2000, we converted debt in the total
principal amount of $1,009,950 into 1,464,200 shares of common stock and raised
$1,443,400 in the sale of 1,443,400 shares of common stock in a private
placement in July 2000. We also have a $35,000 line of credit with a commercial
bank, a $35,000 installment loan with the same bank and two secured lines of
credit totaling $40,000 with a second commercial bank. As January 31, 20001, we
had $10,000 of unused line of credit. In December 2000, we issued three
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convertible promissory notes totaling $345,500 of principal. The notes mature in
September 2001, accrue interest at ten percent per annum and are convertible
into common stock at the five day average closing bid price for our common
stock.
Weather can and does play a significant factor in revenue and liquidity.
Throughout the summer of 2000, we were faced with the prospect of water
shortages which could have resulted in forced curtailment of operations due to
either higher water cost or actual restrictions on outdoor use. During the fall
of 2000, extensive rainfall limited the work that could be performed out of
doors.
Plan of Operations
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We intend to achieve profitability through increased revenue. During the past
fiscal year we hired the personnel we consider necessary to expand our
residential and commercial services as well as enter into the hazardous waste
remediation business including marketing expertise. The private placements
completed in July 2000 and December 2000 have provided the capital necessary to
acquire additional equipment required for expanded residential and commercial
services as well as our projected hazardous waste site remediation services
Our marketing plan is to publish testimonials from satisfied clients in trade
journals. We also intend to publish and distribute residential promotional
literature, information articles, and advertisements appearing in special
interest publications such as home guides. We will also participate in
appropriate trade shows, premise sales calls, and demonstrations of select
services.
Our plan of operations for our hazardous waste site remediation services or
"brown field clean-up" has been to first obtain the necessary licenses and
permits to handle and transport hazardous material in the State of Texas and
placed on the approved vendors list of the State of Texas. It is our intention
to bid on various clean-up projects as either the sole contractor or as a
sub-contractor for specific portions of the clean up plan. We will rely upon our
licensing consultant to keep us informed as to the timing and requirements of
specific bids. We also will rely upon the contacts of our Executive Vice
President with officers at Texas military bases to market our services for
military base brown field cleanup.
In January 2001 we entered into an agreement with Imbibitive Technologies
America, Inc., of St. Catharines, Ontario, to use and distribute its unique
organic liquids absorbent products, Imbiber Beads(R). Imbiber Beads are
spherical plastic particles designed to absorb a broad range of organic
chemicals including gasoline, diesel, jet fuels, solvents and many other
hazardous compounds. The Imbiber Beads absorb and molecularly bind the organic
chemicals and will not release the bound chemicals as a result of compression,
gravity, water or even physically breaking the absorbent beads. As Imbiber Beads
are hydrophobic, they are useful in the separation of organic chemicals from
polluted water. Imbiber Beads are already approved for use in brown field
cleanup. The principle terms of the agreement are a one year,
non-exclusive agreement to purchase, use and third party market the Imbiber
Beads(R) products in and for the chemical/petro-chemical industries in the State
of Texas. We believe that the ability to use and distribute Imbiber Beads will
give us an advantage in obtaining cleanup projects as well as opening a new
source of revenue through the distribution of Imbiber Beads.
7
Results of Operations for the Three Month Period Ended December 31, 2000
Compared to the Three Month Period Ended December 31, 1999
We had income from operations of $66,000 for the three months ended December 31,
2000 and $35,0000 for the three months ended December 31, 1999. The increase in
sales is due to a greater number of sources of revenue over the previous year.
However sales are believed to be below our capacity and expectations. Persistent
rains throughout the fall of 2000 substantially inhibited our ability to conduct
outdoor operations. The weather particularly deterred residential services which
are more discretionary than commercial services, however as most of our
commercial services are performed outdoors, much of these services were also
deferred. Beginning in January 2001, the persistent rain ended and we are
experiencing a substantial increase in demand for residential and commercial
services which we expect to be sustained through the next six to nine months.
Our cost of sales were $123,000 for the three month period ended December 2000
as compared to $121,000 for the three month period ended December 31, 1999.
General and Administrative expense was $229,000 as of December 31, 2000 as
compared to $122,400 for the three month period ended December 31, 1999. The
increased cost of sales and general and administrative expense are the result of
the increased personnel and capacity developed during the past fiscal year. As a
result we had a net loss from operations of $283,000 for the three month period
ended December 31, 2000 as compared to a net loss of $208,000 for the three
month period ended December 31, 1999.
Our revenues from services for the three months ended December 31, 2000 were as
follows:
Residential Services
Wood Restoration $ 11,000
Stone Restoration $ 940
Sealing $ 19,000
Pressure Cleaning $ 2,000
Commercial Services
Pressure Cleaning $ 5,500
Fleet and Hood Cleaning $ 19,400
Historical Restoration $ 8,000
Liquidity and Capital Resources for the Three Month Period Ended December 31,
2000 Compared to the Three Month Period Ended December 31, 1999
We had current assets of $334,500 for the three months ended December 31, 2000
as compared to $243,000 for the three months ended December 31, 1999. We had
fixed assets of $220,000 for the three months ended December 31, 2000 as
compared to $156,000 for the three months ended December 31, 1999. The increase
in assets is primarily due to equity investment which has been applied to
current assets as well as equipment and vehicles. As of January 31, 2001, we had
$10,000 of unused line of credit.
8
Nannaco and Its Business
Since our incorporation in October of 1998, we have focused on industrial
surface cleaning, surface protection and restoration. We specialize in:
* Pressure cleaning
* Pre-coating surface preparation
* Chemical coating on surfaces such as sidewalks and exterior walls
* Kitchen vent hood maintenance programs (primarily for restaurants)
* Providing historical preservation products and services
* Solid waste container maintenance
* Engine and machinery de-greasing
* Residential services
Management believes that we have developed efficient and useful systems for
carrying out these activities which places us in a strong market position. As a
result, we have determined a need to expand into additional markets.
Services
- --------
We provide surface maintenance and restoration services to the residential and
commercial markets. Much of our activity is based on custom tailored solutions
to our client's individual problems.
Specifically, our services include, but are not limited to:
Pressure Cleaning
- -----------------
Our pressure cleaning procedures vary with each application. We clean wood,
glass, stone, concrete, masonry and exposed aggregate. Each requires a different
cleaning approach. For example, the surface and other factors will determine
whether we use water vs. steam, heat vs. cold, wide-area attachment vs. wand
cleaning, sprayed-on or pump-injected chemical applications or water only
cleaning. We maintain a complete line of equipment and accessories as well as a
documented library of procedures for all applications. Since our incorporation,
we have continued to add new processes, chemicals, equipment and technique
documentation to our library as we develop new procedures. Currently, the trade
association Power Washers of North America can certify the extensive nature of
our pressure cleaning resources. NANNACO is a certified member of this trade
association.
9
Among other tasks, we pressure clean solid waste containers, we de-grease
engines with pressure, and we conduct fleet washing with pressure cleaning.
Pre-coating surface preparation for walls, exteriors, etc.
- ----------------------------------------------------------
Surface preparation usually follows pressure cleaning procedures. The primary
difference between pressure cleaning and surface preparation is that preparation
work requires either chemical or mechanical etching. That means that either
high-friction equipment or chemicals such as very strong acids are used to
prepare a surface to accept some type of sealant or coating. Two of the
processes we employ for preparation work are sandblasting and shot-blasting,
which is a process by which tiny metal ball bearings are propelled against
horizontal epoxy surfaces to break out existing coating. We also use
ultra-high-pressure water abrading systems, acid etching, and magnetized water
saturating on limestone applications.
As with pressure cleaning, the processes utilized in surface preparation are as
diverse as the substrate being prepared. We maintain a complete inventory of
equipment and chemicals for common applications. We also subcontract certain
types of high-rise set-up equipment to reduce liabilities.
Chemical coating applications for sidewalks and exterior walls
- --------------------------------------------------------------
Following is a partial list of some of the types of coatings we apply:
* Oil based, penetrating sealers for wood restoration
* Silicon-based, encapsulating sealers for masonry and some stone
applications
* Acrylic sealers on exposed aggregate and other "high gloss" horizontal
surfaces
* Xyloxenes to eliminate porosity in sedimentary stones such as limestones
Chemical coatings incorporate three of our processes: pressure cleaning, surface
preparation and the actual application of product.
Historical Restoration
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Historical Building Restoration is a process which incorporates three of our
services: pressure cleaning, surface preparation, and coating application. We
combine these services to provide the most delicate of our objectives, which is
reducing or eliminating evidence of time (erosion or other damage) from a piece
of historically significant architecture. These processes are often time
consuming and labor intensive since pressure cleaning is generally substituted
with steam applications, and acid etchers are replaced by milder solvents to
achieve the type of substrate protection necessary to comply with many
preservation society maintenance codes. We have provided restoration services on
five projects for the South Texas Catholic Archdiocese in Texas to date.
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Kitchen Vent Hood Maintenance
- -----------------------------
Restaurants, delicatessens and other food service establishments generally have
big exhaust systems mounted over their cooking equipment. These hoods collect
grease and dirt, and can be hazardous if not properly maintained. Fire Marshals
require hoods to be cleaned from the hanging hood and fan, all the way up the
flue, through the ceiling and out the vents which are mounted on the roof. We
begin on the roof, using a special synthetic de-greaser and steam machines at
high pressure with a low flow-rat to clean the entire system down to the bare
metal. We then check the safety system latches and tag the system for inspection
by the Fire Marshal.
Fleet and Heavy Equipment Services
- ----------------------------------
We clean fleet service vehicles and de-grease engines on heavy equipment in
order to keep them running cooler. This service is part of one of our regular
preventative maintenance programs. Water temperatures range from 140-200 degrees
Fahrenheit, and we use pressure anywhere from 3000 to 6000 psi. For aluminum
trailers, we utilize acidizing techniques.
Solid Waste Containers
- ----------------------
We provide an on-site service for some of our waste management clients. We
regularly visit receptacle sites and provide exterior cleaning, graffiti removal
and touch-up painting on solid waste containers.
Residential Services
- --------------------
We offer complete restoration and preservation services in the exterior
residential market. Wood, stone, and concrete cleaning and sealing are our
primary services.
Hazardous Waste Cleaning and Removal
- ------------------------------------
In the state of Texas there are currently an estimated 45,000 oil
industry-related abandoned contaminated sites. We have chosen oil field site
remediation as our entry point into this market. We are currently in
negotiations with the state of Texas to clean up an abandoned salt-water
decontamination site.
These sites are typically less than a half acre in size and our services will be
sub-contracted from the State or other responsible party which drafts and
supervises the entire cleanup process for the site. The sites are typically
abandoned well drilling sites, some of which have pits or open tanks with used
drilling equipment cleaning sludge. We expect our abandoned oil industry site
remediation will involve the removal of contaminated water and sludge using
vacuum pumps to tanker trucks to be delivered to a hazardous waste disposal
site. We will also remove debris and the top layer of contaminated soil for
transport to a disposal site. Well holes will be capped with concrete. Cleaned
pits will be lined with a water impermeable layer and sealed with concrete.
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We have applied for the permits for hazardous material transportation from the
U.S. Department of Transportation, are in the final stages of permitting for
Environmental Protection Agency hazardous material handling under the Resource
Conversation and Recovery Act. We have also obtained the full time service of
key environmental personnel with the proper licenses and experience. The
personnel include federally registered Environmental Compliance Officers,
Department of Transportation-permitted Environmental Emergency and First
Responders, EPA Hazardous Material Handlers, and Department of Defense-licensed
Hazardous Material Waste Site Managers.
In January 2001 we entered into an agreement with Imbibitive Technologies
America, Inc., of St. Catharines, Ontario, to use and distribute its unique
organic liquids absorbent products, Imbiber Beads(R). Imbiber Beads are
spherical plastic particles designed to absorb a broad range of organic
chemicals including gasoline, diesel, jet fuels, solvents and many other
hazardous compounds. The Imbiber Beads absorb and molecularly bind the organic
chemicals and will not release the bound chemicals as a result of compression,
gravity, water or even physically breaking the absorbent beads. As Imbiber Beads
are hydrophobic, they are useful in the separation of organic chemicals from
polluted water. Imbiber Beads are already approved for use in brown field
cleanup. The principle terms of the agreement are a one year,
non-exclusive agreement to purchase, use and third party market the Imbiber
Beads(R) products in and for the chemical/petro-chemical industries in the State
of Texas. We believe that the ability to use and distribute Imbiber Beads will
give us an advantage in obtaining cleanup projects as well as opening a new
source of revenue through the distribution of Imbiber Beads.
Customer List
- -------------
Our customers come from both the commercial and residential market sectors. The
most typical commercial customer is a store or commercial truck company. A
partial list of current customers includes San Antonio to Houston, Texas
locations of American Freightways, Earth Grains, St. Mary's University, Allied
Van Lines, Continental Airlines, North American Van Lines, HEB Grocery Company,
Albertson's Groceries, the Kroger Company, Texas Disposal Systems, Southton
Convenience Stores, Olmos Construction, TETCO, Fiesta Texas, Lozano Trucking,
Diamond Shamrock, Otis Spunkmeyer Cookies, and Scobey Moving Services. The
Archdiocese of San Antonio and the San Antonio Preservation Society have both
recommended us for restoration and historic preservation work. We are on the
Texas State Contracts Vendors list.
The Market
- ----------
We have not prepared or commissioned an in-depth study of the market for our
services in south and central Texas or other urban, suburban or industrial areas
of the United States. However, based upon our growth with limited marketing
efforts, we believe that the market for our services exceeds our present and
planned capacity. We believe that our market crosses many industrial
classifications with hundreds of thousands if not millions of potential
customers.
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We believe the categories of potential customers include:
Homeowners with decks, driveways and fences
Retail businesses with outdoor exteriors and walkways
Businesses using fleets of vehicles such as trucks, vans, earth moving
equipment, airplanes, boats and ships
Office building owners
Historical building owners
Businesses using oil, natural gas and mining equipment
Restaurants
Marketing Plan
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Historically, referrals have been our largest source of new customers. During
the current fiscal year we have begun a marketing campaign with direct mail
advertising to potential residential customers. In addition, our residential
specialist, Barry Hagendorf, is the host of a half hour, Saturday morning radio
show focused on home improvement and maintenance.
Pricing
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Pricing for our services varies greatly depending on specific needs of each
project, such as equipment, chemicals or personnel required. We periodically
review the advertised prices of competitors for standard pressure washing and
attempt to maintain prices 25% below comparable competitor pricing.
Competition
- -----------
Our competitors tend to be relatively small businesses working primarily on
referral basis. We believe the means of competition is predominately based upon
customer satisfaction with timeliness and results. With respect to fleet
washing, we also compete with the cost of in-house fleet cleaning. We also
compete with a Houston, Texas based company which handles substantially larger
commercial businesses than we do. This competitor has substantially greater
resources than we do. Our strategy to compete with this competitor is primarily
by servicing residential and smaller commercial projects that the competitor
does not pursue.
Governmental Regulation
- -----------------------
We are subject to general business regulations, including Texas and Federal
environmental and hazardous material handling regulations. The majority of our
services do not result in air pollution emissions or waste water discharge and
no special environmental permits or licenses are required. However, projects
that involve the cleaning and removal of hazardous waste do require specific
permits which are obtained by the site owner or operator who then contracts with
licensed handlers and disposal sites. We have applied for the necessary licenses
from the State of Texas to conduct this portion of our business. In addition,
our products are used by companies which are subject to regulation by various
governmental agencies, such as the Environmental Protection Agency, Edwards
Aquifer Authority, Texas Natural Resources Commission and the Bexar County Water
District, and our services must comply with such regulations.
13
The environmental regulation of fleet-cleaning services involves the containment
of the oil and grease runoff that results when large pieces of equipment are
washed with pressure washers. The regulatory agencies include the U.S.
Environmental Protection Agency and the Edwards Underground Water District
because much of our work is performed within this district. We use a wastewater
containment system that meets the standards set by the District and the
Environmental Protection Agency. Our containment mat and pumping system allows
our clients to meet Department of Transportation requirements set up to regulate
the over-the-road trucking industry as well as Edwards aquifer restrictions.
We were issued a permanent Hazardous Waste Transportation Registration, Number
072400 851 0081, by the U. S. Department of Transportation. Annual registration
costs for the license are $350.00. The permit allows us to evacuate hazardous
materials from immediate response site remediation locations and deposit it at
approved disposal locations. It also allows us to clean and pump runoff to
tankers at oil cleanup operations. Costs associated with Environmental Emergency
Response and Site Cleanup Operations include annual re-certification
requirements for team members to meet the requirements of 29CFR1910.120, NAPA
472, and NFPA 1561, and purchase of specialized hazardous materials certified
equipment. Costs for certification/re-certification courses for four team
members total $2850.00 per year. Purchase of start-up equipment to meet
regulatory agency certifications is estimated at $6,300.00.
Employees
- ---------
As of January 31, 2001, Nannaco employed 24 people, all of whom are
full-time individuals whose principal responsibilities are: Operations/Labor has
14 employees, Sales, Marketing and Customer Service has 5 employees, and
Administration has 5 employees. Our staff is not presently covered by any
collective bargaining or union relationship. Skilled labor is available from San
Antonio and the surrounding communities with a population of approximately 1.5
million. We have a training program for all staff.
Properties
- ----------
Nannaco operates out of two primary locations, both located in the north-central
area of San Antonio. The first is a 10,000 square foot warehouse facility
housing all equipment, chemical inventories and operations offices. This
facility is leased on a yearly basis at a cost of $19,200 per year.
Our second facility is our administrative office. We currently lease this 2500
square foot facility on a yearly basis at $30,000 per year. All administrative
duties are conducted at this location.
14
Security Ownership of Management and Principal Shareholders
The following table sets forth the persons known to us as beneficially owning
more than five percent (5%) of the 14,957,600 shares outstanding as of February
16, 2001 plus 60,000 shares underlying exercisable options held by certain
directors. The table also shows the number of shares of Common Stock
beneficially owned as of February 16, 2000, by individual directors and
executive officers and by all directors and executive officers as a group. The
number of shares shown for Linda Morton, W.M. Jackson and Mark Triesch include
currently exercisable Options to acquire 20,000 shares of common stock at $1.00
per share expiring April 24, 2005 for each officer and director. The Joy
Foundation is an unincorporated business trust organization. Jack Malone is the
managing director.
Name/Address/Title Shares % Ownership
- --------------------------------------------------------------------------------
The Joy Foundation 1,443,400 9.6%
2915 State Rd. 590 Ste.19
Clearwater, FL 33759
Andrew DeVries III 11,000,000 73.2%
President, CEO, Chairman
807 Arizona Ash
San Antonio, TX 78232
Linda Morton 20,000 0.1%
Director
1305 Woodbranch
San Antonio, TX 78232
W. M. Jackson 90,000 0.6%
Director
12024 Hart Path
San Antonio, TX 78249
Mark Triesch 49,000 0.3%
Director
353 South Hackberry Ave
New Braunfels, TX 78130
Barry Hagendorf 0 0.0%
Director
157 Bryn Mawr
San Antonio, TX 78209
All Executive Officers and Directors 11,159,000 74.3%
(5 persons)
15
Management
The executive officers and directors of the Company and their ages are as
follows:
Name Age Position Position Since
- --------------------------------------------------------------------------------
Andrew DeVries, III 34 President, CEO, 1998
Chairman of the Board
Linda Morton 51 Secretary, Treasurer, Director 1998
Mark A. Triesch 41 Director 1999
Barry Hagendorf 48 Director 1999
W.M. Jackson 70 Director 1998
The Directors serve until their successors are elected by the shareholders.
Vacancies on the Board of Directors may be filled by appointment of the majority
of the continuing directors. The executive officers serve at the discretion of
the Board of Directors.
Business Experience
- -------------------
Board of Directors/Executive Officers
ANDREW DEVRIES III is President of Nannaco, Inc. Mr. DeVries is also the
Principal Shareholder. He founded the Nannaco in 1998 and has served as
President since that time. Mr. DeVries develops the policies and objectives of
the Nannaco. He manages market planning, advertising and public relations, and
he directs sales and distribution. Prior to this, Mr. DeVries was Sales Director
for Internet Direct, Inc. in San Antonio from 1994 to 1997. In 1993, Mr. DeVries
founded DeVries and Associates, a financial services company and serves as its
president until the founding of Nannaco. Mr. DeVries holds a Bachelor of Arts
from North Texas State University and a Master of Arts from the University of
North Texas.
LINDA MORTON is our Corporate Secretary, Treasurer and a Director. She has
an officer and director of Nannaco and a a shareholder since October 1998. Prior
to her position with Nannaco, Inc., Ms. Morton was Manager of the Classifieds
Department, Texas City Sun Newspapers Corp. for five years, where she managed
sales and staff operations. Ms. Morton's business experience includes
administration, accounting and personnel.
16
MARK A. TRIESCH is General Counsel and a Director to the corporation. Prior to
joining Nannaco, Inc. in September 1999, Mr. Triesch operated a general practice
that concentrated on business litigation, real estate and family law. He earned
his Juris Doctor's degree from St. Mary's University in San Antonio. Mr. Triesch
also holds Bachelor's and Master's degrees in English from Texas A&M University,
and taught American Literature and composition at the University of North Texas
and Texas A&M University. Currently, he handles transactional matters for
Nannaco, Inc., and acts in an advisory role concerning the day-to-day operations
of Nannaco.
BARRY HAGENDORF is Vice President of Residential Services and a Director. Mr.
Hagendorf founded Deck and Patio Care in 1984 after recognizing a need in the
local market of San Antonio. He has refinished over 1,700 residential decks. He
earned a degree in Business Administration from Sam Houston State University.
W. M. JACKSON is a Director and operates the Jackson Tax Service in San
Antonio, Texas. He has more than 30 years experience in the accounting,
financial and banking fields. He provides the management team with advice and
guidance in gathering and reporting financial data as needed for accounting,
internal budget preparation and analysis, financial reporting, and taxes.
Key Employees
- -------------
Operations
Douglas J. Frey, Executive Vice President
Douglas J. Frey is recognized as one of the top strategists in his field,
earning awards for public relations, advertising, promotion and media production
for government, military, education, and Fortune 500 clients. Doug has a
Master's Degree in Communications and a front-line doctorate in strategic
planning.
Ian Wellborn, Director of Commercial Sales
More than 10 years of sales experience in the heavy equipment industry, with a
principal focus on industrial pressure washing. Formerly leading producer for
the Hotsy Corporation, the largest pressure washing company in the U. S.
Jerry Birchard, Director of Residential Sales
Jerry Birchard has more than 11 years in sales and customer service. Previously
he owned and operated a commercial grade tool business in South Texas.
Maintenance
Rick Watson, Director of Service Maintenance
Rick Watson is a graduate of West Texas State University. He entered the surface
coating business in 1972 and has been refining restoration techniques and
sealing applications ever since. In 1976, he participated in the restoration of
the historic Menger and Crockett Hotels in San Antonio, and has since been
involved in historic restorations throughout the Southwest. His company is the
premier service provider for the renovation of high-rise structures because of
the specially developed processes and equipment that he has created. His
alignment with NANNACO, Inc., brings the two top service providers in the
industry together and provides synergistic marketing opportunities to both
entities.
Family Relationships
- --------------------
Andrew DeVries III is the son of Linda Morton. There are no other family
relationships between any Director, executive or person nominated or chosen by
the Company to become a Director or executive officer.
17
Executive Compensation
Summary Compensation Table
The following table shows for the fiscal years ending September 30, 2000 and
1999, the compensation awarded or paid by the Company to its Chief Executive
Officer and any of the executive officers of the Company whose total salary and
bonus exceeded $100,000 US during such year (The "Named Executive Officers"):
Summary Compensation Table
- -------------------------------------------------------------------------------------------------------
Long Term Compensation
- -------------------------------------------------------------------------------------------------------
Annual Compensation | Awards | Payouts |
- -------------------------------------------------------------------------------------------------------
| | | | Other | Restricted | Securities | LTIP | All Other
Name and | Year | Salary | Bonus | Annual | Stock | Underlying | Payouts | Comp. ($)
Principle | | ($) | | Comp. | Award(s) | Options/SARs | |
Position | | | | ($) | ($) | (#) | ($) |
- --------------------------------------------------------------------------------------------------------
A. DeVries 1999 $52,000 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------
A. DeVries 2000 $52,000 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------
No other executive officer earned more than $100,000 US during the most recent
fiscal year.
Employment Agreements and Executive Compensation
- ------------------------------------------------
Nannaco does not have written employment agreements with its executive officers.
Andrew DeVries is paid a salary of $5104,000 per annum effective October 1,
2000. Barry Hagendorff receives a salary of $96,800 per annum. Linda Morton
receives a salary of $39,000 per annum. Mark Triesch receives a salary of
$44,500 per annum.
Compensation of Directors
- -------------------------
Directors are entitled to receive reimbursement for all out-of-pocket expenses
incurred for attendance at Board of Directors meetings.
Other Arrangements
- ------------------
The Company has the Nannaco 2000 Stock Option Plan which was adopted on April
20, 2000. The purpose of the Plan is to advance the business and development of
the Company and its shareholders by affording to the employees, directors and
officers of the Company the opportunity to acquire a proprietary interest in the
Company by the grant of Options to such persons under the Plan's terms. The 2000
Plan reserved 5,000,000 shares for grant or issuance upon the exercise of
options granted under the plan. Stock Options under the Plan will be granted by
the Board of Directors or a Compensation Committee of the Board of Directors.
The exercise prices for Options granted will be at the fair market value of the
common stock at the time of the grant if a public market develops for the common
stock or not less than the most recent price at which the Company had sold its
common stock. As of February 16, 2001, the following options have been granted
by Executive Officers and Directors under the plan:
18
Name # of Shares Optioned Ex. Price Expiration Date
- --------------------------------------------------------------------------------
Mark Triesch 20,000 shares $1.00 April 24, 2005
Linda Morton 20,000 shares $1.00 April 24, 2005
W. M. Jackson 20,000 shares $1.00 April 24, 2005
Termination of Employment and Change of Control Arrangement
- -----------------------------------------------------------
There is no compensatory plan or arrangement with respect to any individual
named above which results or will result from the resignation, retirement or any
other termination of employment with the Company, or from a change in the
control of the Company.
Transactions with Management
- ----------------------------
On September 30, 2000 Nannaco's President, Andrew DeVries III, obtained the
assignment of the repayment rights of a shareholder loan to the Company in the
principal amount of $234,936 as of September 30, 1999. This debt was then paid
through the offset of funds paid to Mr. DeVries during the fiscal year ended
September 30, 2000.
Indemnification of Officers and Directors from Liability under the Securities
Act of 1933
- -----------------------------------------------------------------------------
The Nannaco Articles of Incorporation permit Nannaco to indemnify and hold
harmless its officers and directors from any liability and expenses incurred by
them as a result of being an officer or director. This right of indemnity would
include any liability arising under the Securities Act of 1933. However, in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy and is unenforceable. In the event that a claim for
indemnification against liabilities under the Securities Act is asserted by an
officer or director in connection with the securities offered by this
Prospectus, Nannaco will submit the question whether such indemnification by it
is against public policy to a court of appropriate jurisdiction and will be
governed by the final adjudication of such issue. Submitting the question of
indemnity for Securities Act liability to a court will not occur in the case of
the payment of expenses incurred in the successful defense of any action, suit
or proceeding or if in the opinion of its counsel the matter has been settled by
controlling precedent.
19
Market for Nannaco's Common Stock and Related Stockholder Matters
Market Information: Nannaco's common stock is not listed for trading on any
recognized market.
Securities Holders: As of February 16, 2001, Nannaco had 38 holders of record of
its common stock of which 11,099,000 are restricted securities held by three
members of Management which have held the shares for less than one year. There
are presently 14,957,600 shares of common stock outstanding as of February 16,
2001.
Dividend Plans: Nannaco paid no common stock cash dividends and has no current
plans to do so.
Dilution
At September 30, 2000, the net tangible book value of our common stock was
$331,230 or $0.02 per share. Assuming a public offering price of $1.00 per
share by the Selling Securities Holders, there would be an immediate dilution of
$0.98 per share or 98% to new investors. The actual price per share sold will be
determined by each Selling Securities Holder and may be higher or lower than
$1.00. Investors should be aware they are likely to experience approximately
100% dilution of the net tangible book value of their investment.
Description of Securities
Common Stock
- ------------
Nannaco is authorized to issue 50,000,000 shares of Common Stock, $.001 par
value. The holders of the Common Stock are entitled to one vote per share held
and have the sole right and power to vote on all matters on which a vote of the
stockholders is taken. Voting rights are non-cumulative. The holders of shares
of Common Stock are entitled to receive dividends when, as, and if declared by
the Board of Directors, out of funds legally available therefore and to share
pro rata in any distribution to stockholders. Upon liquidation, dissolution, or
winding up of Nannaco, the holders of the Common Stock are entitled to receive
the net assets of Nannaco in proportion to the respective number of shares held
by them after payment of liabilities which may be outstanding. The holders of
Common Stock do not have any preemptive right to subscribe for or purchase any
shares of any class of stock of Nannaco. The outstanding shares of Common Stock
will not be subject to further call or redemption and will be fully paid and
non-assessable.
Preferred Stock
- ---------------
Nannaco is authorized to issue up to 10,000,000 shares of preferred stock. The
preferred stock can be issued in different series. The rights and preferences of
different series of the preferred stock can be set from time to time by our
Board of Directors. These rights and preferences may include class voting
rights, specific dividend rights and priority over common stock with respect to
assets of Nannaco upon liquidation.
20
Selling Securities Holders
The following selling securities holders whose shares have been registered for
public resale under the registration statement are set forth below:
Selling Securities Securities Owned Shares / % Shares / %
Holder And Offered Before Off. After Offering
James Letsos, III 35,000 70,000 / * 35,000 / *
Dave Lennox 30,000 60,000 / * 30,000 / *
Vinh Bao-Phong 2,000 2,000 / * 0 / *
Eugenio Aguilar 5,000 5,000 / * 0 / *
Linda Conley 3,000 3,000 / * 3,000 / *
Edward Canahuati 10,000 10,000 / * 10,000 / *
Cameron Cappleman 1,000 1,000 / * ,000 / *
Kenneth Davidson 200,000 416,000 / 2.6% 216,000 / 1.3%
Joseph Shunta 40,000 80,000 / * 40,000 / *
The Joy Foundation 590,000 1,443,400 / 9.3% 853,400 / 5%
Robert Welch 5,000 5,000 / * 0 / *
John Starnes 15,000 15,000 / * 0 / *
Joseph Butler 15,000 15,000 / * 0 / *
Ralph Polito 15,000 15,000 / * 0 / *
Arthur W. Hughes 2,000 2,000 / * 0 / *
Dwayne Muzny 1,000 1,000 / * 0 / *
Michael Mason 3,000 3,000 / * 0 / *
Jeff Sergent 2,300 2,300 / * 0 / *
Hector Moreno 5,000 5,000 / * 0 / *
Brad Stapp 1,000 1,000 / * 0 / *
Brett Vallery 1,000 1,000 / * 0 / *
Johnny Alexander 2,000 2,000 / * 0 / *
Long H. Nguyen 5,000 5,000 / * 0 / *
Roger N. Schmidt 50,000 50,000 / * 0 / *
Lavon Dan Baker 4,500 4,500 / * 0 / *
Robert Martin 1,200 1,200 / * 0 / *
Richard Beymer 200 200 / * 0 / *
Carlivegen Enterprises 250,000 500,000 / 5.2% 250,000 / *
------
Total 1,495,000
The Joy Foundation is an unincorporated business trust organization. Jack Malone
is the managing director.
Carlivegan Interprises is an unincorporated business trust organization.
Genevieve Schiffmann is the managing director.
None of the selling securities holders have never held any position, office, or
other material relationship with the Company.
The selling securities holders do not own any other securities of Nannaco.
21
Selling Securities Holders Plan of Distribution
Selling security holders may sell or distribute their shares in transactions
through underwriters, brokers, dealers or agents from time to time or through
privately negotiated transactions, including distributions to shareholders or
partners or other persons affiliated with the selling securities holders.
The distribution of the selling securities holders shares may be effected from
time to time in one or more transactions that may involve crosses or block
transactions. These transactions may occur in any of the following ways:
1. In Market Transactions;
2. In Privately Negotiated Transactions with Investors;
3. Through the writing of options on the shares, whether such options are
listed on an options exchange or otherwise.
Any such transactions may be effected at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices.
If the selling securities holders effect such transactions by selling the shares
to or through underwriters, brokers, dealers or agents, such underwriters,
brokers, dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the selling securities holders or commissions
from purchasers of the shares for whom they may act as agent, which discounts,
concessions or commissions as to particular underwriters, brokers, dealers or
agents might be in excess of those customary in the types of transactions
involved. Nannaco is not aware of any plan, agreement or understanding to use
underwriters in the distribution of the shares. In the event an underwriter or
underwriters are added to the offering, Nannaco will file a post effective
amendment to reflect the underwriter's involvement in the offering.
Selling securities holders and any brokers, dealers or agents that participate
in the distribution of the securities might be deemed to be underwriters, and
any profit on the sale of the securities by them and any discounts, concessions
or commissions received by any such underwriters, brokers, dealers or agents
might be deemed to be underwriting discounts and commissions under the
Securities Act.
Selling securities holders may pledge their shares from time to time in
connection with such selling securities holders' financing arrangements. To the
extent any such pledgees exercise their rights to foreclose on any such pledge,
and sell the shares, such pledgees may be deemed underwriters with respect to
such shares and sales by them may be effected under this Prospectus.
The Company will not receive any of the proceeds from the sale of any of the
shares by the selling securities holders.
Under the Exchange Act and applicable rules and regulations, any person engaged
in a distribution of any of the shares may not simultaneously engage in market
making activities with respect to the shares for a period, depending upon
certain circumstances, of either two days or nine days prior to the commencement
of such distribution. In addition, the selling securities holders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations, including Regulation M, which provisions may limit the timing of
purchases and sales of any of the shares by the selling securities holders.
22
Under the securities laws of certain states, the shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the shares may not be sold unless the shares have been registered
or qualify for sale in such state or an exemption from registration or
qualification is available and is complied with.
Transfer Agent
The transfer agent with respect to the shares is ComputerShare Investor
Services, Inc., Lakewood, Colorado.
Legal Matters
The legality of the securities of the Company offered have been passed on for
Nannaco by Dennis Brovarone, Attorney at Law, Littleton, Colorado.
Independent Public Accountant
The balance sheet as of September 30, 1999 and 2000 and the related statements
of income, retained earnings, and cash flows incorporated by reference in this
prospectus, have been included herein in reliance on the report of James J.
Taylor Certified Public Accountant given on the authority of that firm as
experts in auditing and accounting.
23
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
For the year ended September 30, 2000 and
for the period beginning October 20, 1998 (date of inception) and
ending September 30, 1999
TABLE OF CONTENTS PAGE
NUMBER
Independent Auditors' Review Report on Basic Financial Statements 1
Financial Statements:
Balance Sheet 2-3
Statements of Income and Retained Deficit 4-5
Statement of Cash Flows 6
Statement of Stockholders' Equity 7
Independent Auditors' Notes to Financial Statements 8-20
JAMES J. TAYLOR
Certified Public Accountant
Report of Independent Certififed Public Accountant
The Board of Directors
NANNACO, INC.
16410 Blanco Road, Suite 4
San Antonio, Texas 78232
I have audited the balance sheet of NANNACO, INC. (a Texas corporation) as of
September 30, 2000 and 1999, and the related statements of operation, retained
deficit, cash flows, and the statement of stockholders' equity for the year
ended September 30, 2000, and the period from October 20, 1998 (the date of
inception) and ended September 30, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on the financial statements based on my examination.
I conducted the audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. My audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluation the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
As discussed in Note 14 to the financial statements, certain errors resulting in
overstatement of previously reported benefit for income taxes and understatement
of organization expenses as of September 30, 1999, were discovered during the
current year. Accordingly, the September 30, 1999 financial statements have been
restated and an adjustment to retained deficit has been made to correct the
error.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NANNACO, INC. as of September 30,
2000 and 1999, and the results of its operations, changes in retained earnings,
and cash flows for the year ended September 30, 2000, and the period beginning
October 20, 1998 (date of inception) and ended September 30, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming NANNACO, Inc.
will continue as a going concern. As shown in the financial statements, the
Company has a deficit from operations for the period of October 20, 1998 (date
of inception) through September 30, 1999, in the amount of $131,495, and for the
year ending September 30, 2000, in the amount of $1,285,167. These conditions
raise substantial doubt about the Company's continued existence. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
January 4, 2001
/s/ James J. Taylor
----------------------------
James J. Taylor,
Certified Public Accountant
555 IH 35 South, Suite 312 * New Braunfels, Texas 78130
Telephone(830)624-0100 * Fax (830)624-0300
e-mail address: james_j_taylor@msn.com
-1-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
Balance Sheets
September 30, 2000 and 1999
ASSETS
------
September September
30, 2000 30, 1999
--------- ---------
Current Assets:
Cash on hand and in banks $ 0 $ 2,403
Certificates of deposit 40,624 5,000
Cash held in escrow 2,472
Accounts receiveable
Trade 20,304 174,364
Trade receiveable reserve
Other 51,000 2,634
-------- --------
Total accounts receiveable 71,304 204,085
-------- --------
Investment in mutual funds (at cost, fair market
value at September 30, 2000, $267,913) 255,555
Other Current Assets:
Prepaids and deposits 117,325 32,246
-------- -------
Total current assets 487,280 243,734
Fixed Assets:
Equipment and fixtures 192,485 132,489
Vehicles (66,714) 48,045
Less:accumulated depreciation (58,924) (26,925)
------- -------
Net property and equipment 200,275 153,609
------- -------
TOTAL ASSETS $687,555 $397,343
======== ========
See Accountants' Report and Note to Financial Statements
-2-
NANNACO, INC
(A Developement Stage Company)
d.b.a. Surface Pro
Balance Sheets
September 30, 2000 and 1999
LIABILITIES AND STOCKHOLDER'S EQUITY
September September
30, 2000 30, 1999
Current Liabilities: --------- ----------
Bank overdrafts $10,651 $8,623
Accounts payable - trade 23,134 4,212
Accounts payable - other 132,797 8,675
Current portion of notes payable 83,408 21,838
Sales taxes payable 27,367 29,832
Payroll taxes accured and/or withheld 50,432 10,991
--------- --------
Total current liabilities 327,789 84,171
Long-Term Liabilities:
Installment notes payable 39,514 29,581
Notes payable - banks (lines of credit) 72,430 40,000
Notes payable - individuals 32,950
Less: current portion (83,408) (21,838)
--------- --------
Net long-term debt 28,536 80,693
--------- --------
Other Liabilities:
Loans from shareholders 0 234,936
--------- --------
Total liabilities 356,325 399,800
Stockholders' Equity:
Common stock (1,000 shares $1 par value authorized 0 shares
issued and outstanding at 09/30/00.
200 shares issued and outstanding at 09/30/99) 200
(50,000,000 shares $0.001 par value authorized,
14,957,600 shares issued and outstanding at
09/30/00, 19,999,800 shares issued and outstanding
at 09/30/99) 14,958 19,999
Preferred stock - 10,000,000 shares authorized, none issued
and outstanding 0 0
Paid in surplus 1,735,810 108,839
Retained earnings (1,419,538) (131,495)
------------ -----------
Total stockholder's equity 331,230 (2,457)
------------ -----------
TOTAL LIABLITIES AND STOCKHOLDER'S EQUITY $687,555 $397,343
============ ===========
See Accountants' Report and Note to Financial Statements
-3-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
Statements of Operations and Retained Deficits
For the year ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through September 30, 1999
September September
30, 2000 30, 1999
--------- ---------
Income:
Residential wood restoration $ 47,023 $ 58,039
Residential stone restoration 19,137 27,085
Residential sealing 91,885 135,425
Residential pressure cleaning 13,395 19,346
Commercial pressure cleaning 18,469 23,217
Commercial environmental services 67,597 92,863
Commercial historical restoration 20,107 30,954
Less:refunds and adjustments (2,975) (8,707)
-------- --------
Total 274,638 378,222
Cost of Sales:
Wages 366,382 206,906
Supplies 89,532 60,229
Contract labor 30,993 16,844
-------- --------
Total cost of sales 486,907 283,979
-------- --------
Gross Profit (Loss) (212,269) 94,243
Administrative and General:
Advertising and public relations 54,437 8,696
Bank charges and wire fees 3,931 4,014
Commissions 72,482
Consulting fees 50,000
Gas, fuel and oil 35,122 22,341
Bad debt expense 139,762
Bonus expense 3,750 3,860
Depreciation 37,752 26,925
Dues and subscripitions 10,311 2,908
Equipment rental 7,055 2,340
Factoring fees 12,238
Insurance 28,352 10,099
Lawsuit settlement expense 227,000
Legal and professional 35,447 7,827
Meals and entertainment 6,945 1,067
Miscellaneous 18,076 2,196
-------- --------
Subtotal administrative and general expenses $730,422 $104,511
(Continued)
See Accountants' Report and Notes to Financial Statements
-4-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
Statements of Operations and Retained Deficits
For the year ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through September 30, 1999
September September
30, 2000 30, 1999
--------- -----------
Subtotal administrative and general expenses -
(Brought forward): $730,422 $104,511
Office supplies 18,900 6,384
Officer compensation 136,500 14,080
Organization expense 20,315
Payroll tax expense 36,865 18,711
Rent 53,487 23,013
Repairs and maintenance 26,421 23,854
Other taxes 5,506 640
Stock registration expense 1,924
Supplies and tools 1,170
Telephone 33,864 9,471
Trade show expense 1,967
Travel and entertainment 16,541 1,125
Utilities 2,562 408
--------- ---------
Total administrative and general expenses 1,064,959 223,682
--------- ---------
Net Income (Loss) from Operations (1,277,228) (129,439)
Other Income (Expense)
Interest income 1,679 87
Divivdend income 672
Loss on disposition of securities (321)
Interest Expense (12,845) (2,143)
--------- --------
Total other income (expense) (10,815) (2,056)
--------- --------
Net Income (Loss) to Retained Earnings (1,288,043) (131,495)
Deficit, Beginning of period (131,495) 0
------------- ----------
Deficit, End of Period ($1,419,538) (131,495)
============= ==========
Net (loss) per share of common stock ($0.1287) ($0.0066)
============= ==========
See Accountants' Report and Notes to Financial Statements
-5-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
Statements of Cash Flows
For the year ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through September 30, 1999
September September
30, 2000 30, 1999
----------- ----------
Cash flows from operating activities:
Net income (loss) ($1,288,043) ($131,495)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 37,752 26,925
(Increase) decrease in accounts receivable 132,781 (204,085)
Increase in bank overdraft 2,028 8,623
Increase (decrease) in accounts payable 143,044 12,887
Increase (decrease) in taxes payable 36,976 40,823
---------- ---------
Total adjustments 352,581 (114,827)
---------- ---------
Net cash provided (used) by operating
activities (935,462) (246,322)
Cash Flows from investing activities:
(Purchase) of equipment (84,418) (180,534)
(Increase) in prepaids and deposits (85,079) (32,246)
(Increase) in investments (291,179) (5,000)
---------- ---------
Net cash provided (used) by investing
activities (460,676) (217,780)
Cash Flows from financing activities:
(Decrease) in individual and stockholder loans (234,936) 234,936
Proceeds from loans convertible for common stock 519,700
Proceeds from loans 50,000 110,000
(Retirement) of loans (40,587) (7,469)
(Retirement) of loans for convertible common stock (519,700)
Stock issued for services 50,000 19,999
Proceeds from sale of stock (5,251) 200
Paid in capital 1,576,981 108,839
--------- ---------
Net cash provided (used) by investing
activities 1,396,207 466,505
--------- ---------
Net increase (decrease) in cash and equivalents 69 2,403
Cash and equivalents, beginning of period 2,403 0
--------- ---------
Cash and equivalents, end of period $2,472 $2,403
========= =========
See Accoutants' report and Notes to Financial Statements
-6-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
Statements of Stockholders' Equity
For the Period of October 20, 1998 (date of inception)
through September 30, 2000
SHARES COMMON STOCK DOLLARS
--------------------------------- --------------------------------------------------
1.00 PAR 0.001 PAR TOTAL 1.00 0.001 PAID IN RETAINED
DATE VALUE VALUE SHARES STOCK STOCK SURPLUS DEFICIT TOTAL
- ---- -------- --------- ------- ----- ----- ------- -------- -----
Balance at October 1, 1998 $ 0 $ 0 $0 $0 $0
10/20/98 Original capitalization 500 500 500 500 1,000
10/20/98 Property contributed by stockholder 0 0 108,039 108,039
02/15/99 Surrendered certificates (300) (300) (300) 300 0
06/1/99 Issued for services 19,999,800 19,999,800 19,999 19,999
09/30/99 Loss for period ending 09/30/99 (131,495) (131,495)
--------------------------------------------------------------------------------------
Total 09/30/99 200 19,999,800 20,000,000 200 19,999 108,839 (131,495) (2,457)
03/10/00 Reverse split (1,000,000 TO 1) (200) (19,999,788) (19,999,988) 0
--------------------------------------------------------------------------------------
Sub Total 0 12 12 200 19,999 108,839 (131,495) (2,457)
03/31/00 Forward split (1 to 1,000,000) 0 11,999,988 11,999,988 0
Fractional redemption (200) 199 (1)
Fractional redemption (7,999) (6,800) (14,799)
--------------------------------------------------------------------------------------
0 12,000,000 12,000,000 0 12,000 102,238 (131,495) (17,257)
05/22/00 Shares issued for services 50,000 50,000 0 50 49,950 50,000
05/22/00 Shares issued for claim settlement 435,000 435,000 435 226,565 227,000
05/22/00 Shares issued for debt 1,029,200 1,029,200 1,029 518,671 519,700
less $154,105 costs 0 (154,105) (154,105)
07/13/00 Shares sold at private placement 1,443,400 1,443,400 0 1,444 1,234,081 1,235,525
less $241,590 costs (241,590) (241,590)
09/30/00 Loss for FYE 09/30/00 (1,288,043)(1,285,167)
--------------------------------------------------------------------------------------
Total 09/30/00 0 14,957,600 14,957,600 $ 0 $14,958 $1,735,810 ($1,419,538) $331,230
======================================================================================
See Accountants' report and Notes to Financial Statements
-7-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 1 - OPERATING LOSSES
- ------
The accompanying financial statements of NANNACO, Inc. (a developement
stage company) have been prepared in conformity with generally accepted
accounting principles, which contemplate continuation of the Company as a
going concern. The Company has devoted substantially all of its efforts to
financial planning, raising capital, diversification of services, and
developing markets for existing and expanded services. These factors create
an uncertainty about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might be
neccessary, if the Company is unable to continue as a going concern.
Note 2 - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
- ------
POLICIES
A. ORGANIZATION AND NATURE OF THE BUSINESS
NANNACO, INC. (The Company) was incorporated under the laws of the State of
Texas on October 20, 1998, and began operations immediately. The Company
provides industrial surface cleaning, surface protection, surface
restoration, and other services to commercial and industrial businesses, as
well to the owners of historical buildings, operating under the trade name
of Surface Pro in order to relate to the principal business activity, since
the NANNACO name does not indicate the type of business.
B. REVENUE AND COST RECOGNITION
The Company provides its services on a direct basis. A sale is recognized
when the service is provided and an account receivable is recorded or
payment is received.
The criteria for recording a sale is that all agreed services have been
provided.
Supplies and materials are purchased and consumed as necessary.
The Company warranties its service within the standards and customs of the
industry. Refunds and adjustments are recognized when granted.
C. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from these
estimates. Such estimates relate primarily to depreciable assets and their
useful lives.
-8-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 2 (Continued):
D. SALES OF ACCOUNTS RECEIVABLE
The Company entered into a contract in December, 1998, to sell certain of
its accounts receivable as a means of facilitating cash flow and generating
working capital. The terms of the contract call for the establishment of a
reserve account for charge backs in an amount equal to ten percent (10%) of
the accounts sold. This amount is refunded in varying percentages based on
the collection of the purchaser. The Company's reserve may also be charged
for any account not collected in 90 days. As of September 30, 1999, the
Company was contingently liable on $26,340 of accounts receivable, which
was secured by a reserve account totaling $2,634. This practice was
terminated during the year ended September 30, 2000, and at that date there
were no accounts sold, therefore no reserves are withheld and no potential
future liability exists for uncollected accounts.
E. PROPERTY AND EQUIPMENT
Equipment and vehicles are stated at cost. Depreciation is calculated on
the straight- line method over the estimated useful lives of the assets for
book purposes and the Modified Accelerated Cost Recovery System (MACRS) for
tax purposes.
F. FEDERAL INCOME TAXES
Provisions for income taxes are calculated on pretax income reported for
financial statement purposes. Deferred income taxes or benefit from income
taxes are provided through timing differences between the reporting of
financial statement income and taxable income. These differences result
primarily from the use of straight line depreciation for reporting purposes
and Modified Accelerated Cost Recovery System for tax purposes. If
material, these differences will be recorded as deferred income taxes or
benefit from income taxes. Due to the accumulated deficit from inception to
September 30, 2000, no deferred taxes or benefit from income taxes has been
provided.
Note 3 - CERTIFICATES OF DEPOSIT
- ------
On April 16, 1999, the Company invested $5,000.00 in a certificate of
deposit at Frost National Bank for one year at the interest rate of 3.8%.
This certificate is pledged as security for a $5,000.00 line of credit,
which at September 30, 1999, was in full use by the Company. This
certificate matured April 16, 2000, paying $190 in interest, and was
renewed at a rate of 5.5% per annum, but was redeemed on July 6, 2000,
including $56 interest income.
On June 23, 2000, the Company invested in two certificates of deposit in
the amounts of $20,000 each, earning interest at the rate of 5.75%
annually. These certificates mature in one year from the date of purchase.
Both certificates secure notes payable and have interest income accrued in
the amount of $312 each at September 30, 2000.
-9-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 4 - CASH HELD IN ESCROW
- ------
On June 12, 2000, an amount of $20,000 was deposited into the Company
attorney's escrow account for the payment of Company expenses associated
with the attorney's activities. To September 30, 2000, expenses in the
amount of $17,528 have been paid out by the attorney for Company benefit.
This leaves the balance at $2,472 on deposit. All of this activity has been
included in the Company's books.
Note 5 - ACCOUNTS RECEIVABLE
- ------
A. ACCOUNTS RECEIVABLE - TRADE
The trade accounts receivable are recorded by the date of the invoice,
which is the date the work is completed. The terms on the invoices are due
upon completion, unless other arrangements are made prior to the beginning
of the project. At September 30, 2000, the balance of trade receivables was
$20,304, which is deemed to be 100% collectible in full. At September 30,
1999, there was a balance of $174,364 due, of which $150,000 has been
determined to be uncollectible. Texas sales taxes on this amounted to
$10,238, therefore the charge against income was $139,762.
B. TRADE RECEIVABLE RESERVE
In compliance with the agreement to sell receivables to a third party, an
amount equal to 10% of the balances of the accounts was required to remain
on deposit with the third party purchaser of the accounts. This amount was
adjusted monthly to equal the specified amount. At September 30, 1999,
there was a balance retained in the amount of $2,634. This amount was
refunded at the end of the agreement, which terminated during the year
ended September 30, 2000, and as of that date, there was no reserve deposit
in existence.
C. OTHER ACCOUNTS RECEIVABLE
At September 30, 2000, the other accounts receivable consisted $51,000 in
cash advances to individuals who are assisting in the expansion of the
Company. These advances are short term and are anticipated to be repaid in
full during the next fiscal year.
For the period ended September 30, 1999, the other receivables consisted of
$87 in interest accrued ont the $5,000 certificate of deposit and a $27,000
cash advance to an individual, which was repaid in the year ended September
30, 2000.
Note 6 - INVESTMENT IN MUTUAL FUNDS
- ------
On July 10, 2000, an amount of $520,000 was invested, through a broker, in
mutual funds and certificates of deposit in an effort to maximize earnings
on idle funds. During the period, funds were withdrawn as necessary to meet
obligations, leaving a cost basis of $255,555 invested at September 30,
2000. This amount had a market value of $267,913at September 30, 2000.
(Continued)
-10-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 6 - INVESTMENT IN MUTUAL FUNDS (Continued)
- ------
Beginning in August, 2000, the Company was allowed to draw cash amounts as
needed, using the invested funds as security. As of September 30, 2000,
funds in the amount of $132,797 had been withdrawn (see Accounts Payable
Other) and was secured by the mutual funds investment. Interest in the
amount $653 at the rate of 9.625 was charged for the month of September,
2000.
Note 7 - PREPAIDS AND DEPOSITS
- ------
The following schedule details the content of the asset Prepaids and
Deposits:
09/30/00 09/30/99
--------- ---------
Final month's rent on warehouse $ 1,600 $ 1,600
Prepaid office lease 24,480
Prepaid consulting fees 25,000
Prepaid legal fees 87,382
Prepaid interest on installment loan 3,863 5,646
--------- ---------
Total prepaids and deposits $117,325 $32,246
========= =========
The final month's rent on warehouse facility will be absorbed the last
month of occupancy of the facility, and the amount will become an expense
at that time.
The prepaid office lease consists of the unamortized portion of a year's
lease in the amount of $34,632 on the Company's office facility. The year's
lease was prepaid in full on June 14, 2000, with the lease on the premises
beginning on June 15, 2000, and continues for a period of twelve months.
Each calendar month, 1/12 of the total amount is taken into expense.
The prepaid consulting fees at September 30, 1999, was for services to be
rendered to the Company during the year ended September 30, 2000. The
services were rendered and the amount taken to the proper expense.
The prepaid legal fees was the result of an agreement between the Company
and their legal counsel. A retainer of $100,000 was paid to the attorney
for future services and applicable expenses. An amount of $5,000 per month
plus expenses was to be taken into income by the attorney and a like amount
expensed for legal expense by the Company. At September 30, 2000, an amount
of $12,618 had been treated in this manner, leaving the amount shown as
prepaid. On December 5, 2000, subsequent to the period covered in this
report, the attorney has refunded $45,000 to the Company, which will reduce
the amount prepaid at that time.
The prepaid interest amount carried on the balance sheet is the interest
included in an installment loan on a vehicle purchased by the company. The
amounts taken to expense each period are based on the straight line method
over the life of the loan.
-11-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 8 - EQUIPMENT AND FIXTURES AND VEHICLES
- ------
Fixed assets are recorded at cost and are summarized as follows:
09/30/00 09/30/99
--------- ---------
Equipment $ 192,485 $ 132,489
Vehicles 66,714 48,045
--------- ---------
Total Fixed Assets (at Cost) $ 259,199 $ 180,534
Less Accumulated Depreciation from
Inception (October 20, 1998) to
September 30, 2000 (58,924) (26,925)
--------- ---------
Net Fixed Assets at September 30, 2000 $200,275 $153,609
========= =========
Depreciation expense charged against operations for the period ending
September 30, 1999 totaled $26,925 and $37,752 for the year ended September
30, 2000.
Note 9 - CURRENT LIABILITIES
- ------
A. Bank overdrafts on September 30, 2000 and September 30, 1999 in the
amounts of $10,651 and $8,623 respectively, were created by the
practice of writing checks at the end of the month and clearing the
overdrafts by the first banking day of the following month.
B. Trade accounts payable of $23,134 and $4,212 for September 30, 2000 and
September 30, 1999 were the amounts owed to suppliers, utilities and
other monthly operating expenses at the end of the periods. These
amounts are cleared during the month following the purchase.
C. Other accounts payable for September 30, 2000, in the amount of
$132,767, is the amount owed to the brokerage firm cash account,
secured by mutual funds held by the firm. (See Note 6)
At September 30, 1999, the other accounts payable consisted of an
accumulation of payroll deductions from employees which were expended
for the benefit of the employee during the following year.
D. The accumulations in Sales Taxes Payable and Payroll Taxes
Accrued and/or Withheld are the amounts due to government agencies for
taxes. The Sales Taxes due is the aggregate unremitted amount due to
the State of Texas for sales taxes applicable to commercial jobs. The
Payroll Taxes are the employees' portions and the employers' portion of
payroll taxes.
-12-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 10 - LONG TERM LIABILITIES
- -------
A. INSTALLMENT NOTES PAYABLE
Installment obligations consist of two notes payable.
The first note is secured by a vehicle and the endorsement of the
Company President, for the purchase of a truck to transport Company
equipment from one job site to another. Interest on this obligation is
included in the note balance, and capitalized as a deferred charge.
This interest is being amortized straight-line method over the term of
the note. As of September 30, 2000 and 1999, the details are as
follows:
Note payable to Auto One Acceptance Corporation, payable in 60
monthly installments of $390 each, secured by a 1994 GMC
truck.
09/30/00 09/30/99
Original Amount $23,400 $23,400
Current Balance $10,140 $15,580
Long-Term Portion $ 5,460 $10,900
Portion due in twelve months $ 4,680 $ 4,680
Interest rate 20.75% 20.75%
Unamortized interest at 09/30/99 $ 3,863 $ 5,646
At September 30, 1999, a second note payable was secured by the
guarantee of the Company President and is payable to Frost National
Bank. Interest, at the rate of 10% per annum, is not included in the
balance and is taken into expense as it paid. This note is payable in
21 monthly installments at the amount of $750.00 each. This note was
retired during the year ended September 30, 2000. The details as of
September 30, 1999 were as follows:
Original Amount $14,000
Long-Term Portion at 09/30/99 $ 6,042
Portion due in twelve months
at September 30, 1999 $ 7,958
Interest Rate 10%
Due Date Monthly
Balance September 30, 2000$ -0-
On February 19, 2000, an installment loan was obtained from Bank One.
This note is secured by the personal guarantee of the Company president
and is payable in sixty monthly installments of $745 each. The interest
rate is 10% per annum. The details at September 30, 2000 are as
follows:
Original Amount $35,000
Current Balance $29,374
Long-Term Portion $23,076
Portion due in twelve months $ 6,298
Interest Rate 10%
Due Date Monthly
-13-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 10 - LONG TERM LIABILITIES (Continued)
- -------
B. NOTES PAYABLE - LINES OF CREDIT
At September 30, 1999, the Company has established a line of credit
with two banks. The Frost National Bank note is secured by a
certificate of deposit (Note 3). The details on the Frost National Bank
loan are:
Original Amount $5,000
Long-Term Portion at 09/30/99 -0-
Portion due in twelve months
at September 30, 1999 $5,000
Interest Rate 11.8%
Balance at September 30, 2000 $ -0-
The Bank One line of credit loan was originated on July 15, 1999, and
was secured by the personal guarantee of the Company president. The due
date is July 15, 2001, with interest at prime plus 1.25% to be paid
monthly.
Available Amount $35,000
Balance September 30, 2000 $34,980
Long-Term Portion at 09/30/00 $ -0-
Portion due in twelve months
at September 30, 2000 $34,980
Interest Rate Prime plus 1.25%
Due date 07/15/01
Additionally, on June 21, 2000, the company established two new line of
credit notes with the Frost National Bank. These notes are identical in
structure and allow draws up to $20,000 each. Both notes are secured by
certificates of deposit (See Note 3). The two notes are due June 21,
2001 and both require interest on the outstanding balance at the rate
of 9.5% per annum. The summary of both notes is as follows:
Note #1 Note #2
Available Amount $20,000 $20,000
Balances at 09/30/00 $19,450 $18,000
Long-Term Portion at 09/30/00 $ -0- $ -0-
Portion Due in Twelve Months $19,450 $18,000
Interest Rate 9.5% 9.5%
Due Dates 06/21/01 06/21/01
-14-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 10 - LONG TERM LIABILITIES (Continued)
- -------
C. NOTE PAYABLE - INDIVIDUAL
The Company obtained a startup loans from an individual. This loan is
due within five years of incorporation in cash or stock in the
corporation. There is no provision for interest. This note was
partially repaid and partially converted to common stock during the
year. The note is as follows:
Mark A. Tresch $ 32,950
========
Note 11- LOANS FROM SHAREHOLDER
- -------
Due to the rapidly expanding business opportunities, the Company has
been compelled to seek capital on an interim basis to support its
expanding operation and to purchase additional equipment to meet these
needs. One stockholder, Clifford Munson, has made these necessary
advances in the amount of $234,936 at September 30, 1999. These loans
were liquidated during the year ended September 30, 2000.
Note 12 - LEASE COMMITMENTS
- -------
The Company leases its warehouse location on an annual basis. This
lease for twelve months is in the amount of $18,674, payable in monthly
installments of $1,600 per month following an initial payment of
$1,074. The last month's rent in the amount of $1,600 remains on
deposit with the lessor.
The Company also leases office space for its operation. This lease is
for twelve months and is in the amount of $34,632, which was paid in
advance. The period of the lease is from June 15, 2000 through June 15,
2001. The prepayment is amortized each month in the amount of $2,886
(See Note 7).
Note 13 - COMMON STOCK, PREFERRED STOCK, PAID IN SURPLUS
- -------
NANNACO, Inc. was originally chartered on October 20, 1998, under the
laws of the State of Texas. 1,000 shares of $1 par value common stock
was authorized. Of this, 500 shares were issued on organization of the
corporation.
The Paid-In Surplus in the amount of $108,039 on organization was
generated from equipment contributed by the founder and president upon
incorporation of the Company and was approved by the board of
directors.
On June 1, 1999, the Company amended its charter to authorize the
issuance of additional common stock and one class of preferred stock.
This amendment authorized a change from one thousand (1,000) shares of
$1.00 par value common stock to fifty million (50,000,000) shares of
$0.001 par value common stock and 10,000,000 shares of preferred stock.
-15-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 13 - COMMON STOCK, PREFERRED STOCK, PAID IN SURPLUS (Continued)
- -------
During the period of June 1, 1999 through July 1, 1999, the Company or
converted 19,999,800 shares of this new value of common stock. To date,
no shares of the preferred stock have been issued.
On March 10, 2000, at a duly called stockholders meeting, a 1,000,000
to one reverse stock split was approved with all certificates under
1,000,000 shares being canceled. The result of this reverse stock split
resulted in only one stockholder, Andrew DeVries III, remaining.
Exhibit A on Page 18 of this report reflects this common stock
activity.
On March 31, 2000, a 1,000,000 to 1 forward split was declared by the
board of directors. This resulted in Andrew DeVries III, the only
stockholder, now holding 12,000,000 shares.
Subsequently, on May 22, 2000, debt being held for conversion was
converted and the appropriate shares were issued to the debtors. A
corrective issue took place on August 8, 2000.
On June 24, 2000, 1,443,400 shares of common stock were sold in a
Regulation D private offering. These shares were sold at $1 per share
pursuant to Rule 506 and were entirely private transactions.
On July 24, 2000, Andrew DeVries III canceled one of his 1,000,000
personal certificates and distributed it as a personal gift to ten
individuals.
EXHIBIT B ON PAGE 19 OF THIS REPORT REFLECTS THE ACTIVITIES OF MARCH 31,
MAY 22, JUNE 24, AND JULY 24, 2000
On August 21, 2000, Form SB-2 Registration Statement was filed under
the Securities Act of 1933 was filed with the Securities and Exchange
Commission of the United States. On October 5, 2000, the SEC issued
issued their comments, and at this time, the Company attorney is in the
process of preparing a response.
In April of 2000, NANNACO, Inc. became aware of the fact that certain
individuals had raised money from five investors on behalf of the
Company. These investors had been promised NANNACO, Inc. common stock
in exchange for their money. The Company never received any of the
funds raised from these investors. In an effort to protect the good
name of the Company, the Board of Directors agreed to honor the
investment
(Continued)
-16-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Note 13 - COMMON STOCK, PREFERRED STOCK, PAID IN SURPLUS (Continued)
- -------
made by these individuals and to issue them the appropriate number of
shares, in exchange for Memoranda of Agreement agreeing not to take
legal action against the Company. This transaction was treated as an
operating expense during the year ended September 30, 2000, with the
appropriate entries to Common Stock and Paid-In Surplus.
Exhibit C on Page 20 of this report reflects this common stock activity
On May 22, 2000, 50,000 shares of common stock in the Company were
issued in exchange for consulting services. This transaction was
treated as an operating expense for the year ended September 30, 2000,
and proper treatment in the Common Stock and Paid-In Surplus accounts
Exhibit D on Page 20 of this report reflects this common stock activity
Note 14 - ERROR CORRECTIONS
For the period beginning October 20, 1998 (date of inception) and ended
September 30, 1999, there is no basis for recording the income tax
benefits or the deferred tax asset reflected in the financial
statements for the period. Additionally, for the same period, it has
been deemed that all of the organization expenses should be expensed in
full, instead of amortized over a 60 month period, as previously
recorded. Proper adjustments have been made to the proper accounts and
the financial statements for the period have been restated.
Note 15 - SUBSEQUENT EVENTS
On December 7, 2000, an agreement was signed for the purchase of the
Company's Convertible Promissory Note in the amount of $140,000. This
note was for conversion to 140,000 shares of NANNACO, Inc. common
stock. The conversion date is set as September 25, 2001. Funds have
been received by the Company following the close of the Company's books
on September 30, 2000.
On December 11, 2000, two additional agreements were signed for the
purchase of the Company's Convertible Promissory Note in the amount of
$205,500. These notes were for conversion to 205,500 shares of NANNACO,
Inc. common stock. The conversion date is set as September 25, 2001.
Funds have been received by the Company following the close of the
Company's books on September 30, 2000.
-17-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
EXHIBIT A
N
O
ISSUE NANNACO, Inc. RELATED ACCOUNTING T ISSUED
DATE HOLDER RELATIONSHIP PARTY PRICE BASIS FOR PRICE TREATMENT E SHARES
- ---- ------ ------------ ------- ----- --------------- ---------- - ------
Original Incorporators ($1 Par Value Common Stock):
- ---------------------------------------------------
12/1/98 Linda J. Morton Administrative Systems Mother of President 1.00 Original Investment Paid Investment 125
12/1/98 Andrew DeVries, III President 1.00 Original Investment Paid Investment 75
12/1/98 Ian Wellborn Technical Advisor 1.00 Original Investment Paid Investment(1) 50
12/1/98 Mark Triesch Corporate Attorney 1.00 Original Investment Paid Investment(1) 50
12/1/98 Clifford Munson Accounting Consultant 1.00 Original Investment Paid Investment(1) 35
12/1/98 Mark Sarlo Procedures Consultant 1.00 Original Investment Paid Investment(1) 50
12/1/98 Albert Limon Technical Advisor 1.00 Original Investment Paid Investment(1) 15
12/1/98 Kevin Morton Consultant Step Father of Pres. 1.00 Original Investment Paid Investment 50
12/1/98 Andrew DeVries, Jr. Management Consultant Father of President 1.00 Original Investment Paid Investment 50
----
Total Original Issue 500
2/15/99 Certificates Surrendered:
- ------- -------------------------
Linda J. Morton (125)
Andrew DeVries, III (75)
Kevin Morton (50)
Andrew DeVries, Jr. (50)
----
Total Certificates Surrendered (300)
----
Balance Outstanding 200
Issued in Accordance with Charter Amendment of June 1, 1999:
- --------------------------------------------------------------
06/1/99 Linda J. Morton Administrative Systems Mother of President 0.001 Services Expensed (1) 8,000
06/1/99 Andrew DeVries, Jr. President 0.001 Services Expensed (1) 203,000
06/1/99 Ian Wellborn Technical Advisor 0.001 Services Expensed (1) 3,000
06/1/99 Mark Triesch Corporate Attorney 0.001 Services Expensed (1) 15,000
06/1/99 Mark Sarlo Procedures Consultant 0.001 Services Expensed (1) 3,000
06/1/99 Albert Limon Employment 0.001 Services Expensed (1) 3,000
06/1/99 Clifford Munson Accounting Consultant 0.001 Services Expensed (1) 30,000
07/1/99 WAPI Consultants 0.001 Services Expensed (1)
07/1/99 WAPI Consultants 0.001 Services Expensed (1)
07/1/99 WAPI Consultants 0.001 Services Expensed (1)
07/1/99 Petty Interna Consultant. 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 W.M. Jackson Escrow Agent Trust shares for expansion 0.001 Services Expensed (1) 300,000
07/1/99 Ley Industries, Inc Business Development Consultant 0.001 Services Expensed (1) 600,000
07/1/99 Millennium Business Assoc Public Relations Consultant 0.001 Services Expensed (1) 300,000
07/1/99 CPR Holdings, Inc Business Development Consultant 0.001 Services Expensed (1) 500,000
07/1/99 DPA Holdings Business Development Consultant 0.001 Services Expensed (1) 600,000
07/1/99 R. Jay Cassell Local Business Development 0.001 Services Expensed (1) 100,000
07/1/99 R. Jay Cassell Local Business Development 0.001 Services Expensed (1) 100,000
07/1/99 R. Jay Cassell Local Business Development 0.001 Services Expensed (1) 100,000
07/1/99 R. Jay Cassell Local Business Development 0.001 Services Expensed (1) 100,000
07/1/99 R. Jay Cassell Local Business Development 0.001 Services Expensed (1) 100,000
07/1/99 R. Jay Cassell Local Business Development 0.001 Services Expensed (1) 100,000
07/1/99 Andrew DeVries III President 0.001 Services Expensed(1&2)(1)12,099,800
07/1/99 Mark Triesch Corporate Attorney 0.001 Services Expensed (1) 200,000
07/1/99 Mark Triesch Corporate Attorney 0.001 Services Expensed (1) 200,000
07/1/99 Mark Triesch Corporate Attorney 0.001 Services Expensed (1) 200,000
07/1/99 Mark Triesch Corporate Attorney 0.001 Services Expensed (1) 200,000
07/1/99 Mark Triesch Corporate Attorney 0.001 Services Expensed (1) 200,000
07/1/99 W.M. Jackson Bookkeeper 0.001 Services Expensed (1) 35,000
Balances September 30, 1999
(1) Certificates cancelled in 1,000,000 to 1 reverse split on March 10, 2000.
(2) Certificate reissued for 12 shares as a result of 1,000,000 to 1 reverse
split on March 10, 2000, then cancelled and reissued for 12,000,000 shares
follwing 1,000,000 to 1 forward split on March 31, 2000.
-18-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
EXHIBIT B
ISSUE NANNACO, Inc SHARE DEBT ACCOUNTING TREATMENT NUMBER
DATE HOLDER RELATIONSHIP PRICE CONVERTED COMMON ST PAID IN CAP SHARES
- ---- ------ ------------ ----- ---------- --------- ----------- ------
5/22/00 Dave Lennox Lender 0.500 30,000 60 29,940 60,000
5/22/00 Vinh Bao Phong Lender 1.00 2,000 2 1,998 2,000
5/22/00 Joseph Shunta Lender 0.500 40,000 80 39,920 80,000
5/22/00 Kenneth Triesch Lender 0.500 20,000 40 19,960 40,000
5/22/00 W.M. Jackson Lender 0.500 35,000 70 34,930 70,000
5/22/00 Robert Welch Lender 1.00 5,000 5 4,995 5,000
5/22/00 John Starnes Lender 0.670 10,000 15 9,985 15,000
5/22/00 Joseph Butler Lender 0.670 10,000 15 9,985 15,000
5/22/00 Ralph Polito Lender 0.670 10,000 15 9,985 15,000
5/22/00 Arthur W. Hughes Lender 1.00 2,000 2 1,998 2,000
5/22/00 Dwayne Muzny Lender 1.00 1,000 1 999 1,000
5/22/00 Michael Mason Lender 1.00 3,000 3 2,997 3,000
5/22/00 Jeff Sergent Lender 1.00 2,300 2 2,297 2,300
5/22/00 Hector Moreno Lender 1.00 1,200 1 1,199 1,200
5/22/00 The Joy Foundation Lender 0.500 250,000 500 249,500 500,000
5/22/00 Brad Stapp Lender 1.00 1,000 1 999 1,000
5/22/00 Brett Vallery Lender 1.00 1,000 1 999 1,000
5/22/00 Johnny Alexander Lender 1.00 2,000 2 1,998 2,000
5/22/00 Long H. Nguyen Lender 5.00 5,000 5 4,995 5,000
5/22/00 Roger N. Smith Lender 0.500 25,000 50 24,950 50,000
5/22/00 Mark Sarlo Lender 0.100 5,000 50 4,950 50,000
5/22/00 Mark Triesch Lender 0.500 14,500 29 14,471 29,000
5/22/00 James Lestos III Lender 0.500 35,000 70 34,930 70,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
5/22/00 Andrew DeVries III Originator (1) 0.001 0 1,000 0 1,000,000
7/13/00 The Joy Foundation Investor 1.00 0 943 942,457 943,400
7/13/00 Carlievegen Enterprises Investor 1.00 0 500 499,500 500,000
5/22/00 Andrew DeVries III Personal Gift (2) 0.001 0 (1,000) 0 (1,000,000)
7/24/00 Shari Massey Personal Gift (2) 0.001 0 30 30,000
7/24/00 Shari Massey Personal Gift (2) 0.001 0 10 10,000
7/24/00 Shari Massey Personal Gift (2) 0.001 0 10 10,000
7/24/00 Linda Conley Personal Gift (2) 0.001 0 5 5,000
7/24/00 Eugenio Aguilar Personal Gift (2) 0.001 0 10 10,000
7/24/00 Roger N. Smith Personal Gift (2) 0.001 0 16 16,000
7/24/00 Arthur W. Hughes Personal Gift (2) 0.001 0 4 4,000
7/24/00 Jeff Sergent Personal Gift (2) 0.001 0 0 300
7/24/00 Mark Sarlo Personal Gift (2) 0.001 0 15 14,700
7/24/00 Robert Welch Personal Gift (2) 0.001 0 200 200,000
7/24/00 John G. Gutierrez Personal Gift (2) 0.001 0 50 50,000
7/24/00 Dale A. Heine Personal Gift (2) 0.001 0 200 200,000
7/24/00 Jerry Bromberg Personal Gift (2) 0.001 0 450 450,000
8/8/00 Lavon Dan Baker Lender 1.00 4,500 5 4,495 4,500
8/8/00 Hector Moreno Lender 1.00 3,800 4 3,796 3,800
8/8/00 Robert Martin Lender 1.00 1,200 1 1,199 1,200
8/8/00 Richard Beymer Lender 1.00 200 0 200 200
-----------------------------------------------
519,700 14,472 1,960,627 14,472,600
===============================================
(1) Issued in accordance with 1,000,000 to 1 split on March 31, 2000.
(2) Gift of personal holdings by President.
-19-
NANNACO, INC.
(A Developement Stage Company)
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2000 and
the Period of October 20, 1998 (date of inception) through
September 30, 1999
(See Accountants' Report)
Exhibit C
ISSUE NANNACO, Inc. SHARE EXPENSED ACCOUNTING TREATMENT NUMBER
DATE HOLDER RELATIONSHIP PRICE AMOUNT COMMON ST PAID IN CAP SHARES
5/22/00 Eugenio Aguilar Claim Settlement 1.000 5,000 5 4,995 5,000
5/22/00 Linda Conley Claim Settlement 1.000 3,000 3 2,997 3,000
5/22/00 Edward Canahuati Claim Settlement 1.000 10,000 10 9,990 10,000
5/22/00 Cameron Cappleman Claim Settlement 1.000 1,000 1 999 1,000
5/22/00 Kenneth Davidson Claim Settlement 0.500 208,000 416 207,584 416,000
--------------------------------------------
227,000 435 226,565 435,000
============================================
Exhibit D
5/22/00 Stephen Payne Consultant 1.00 50,000 50 49,950 50,000
===========================================
Total Common Stock Outstanding at September 30, 2000 14,957 2,237,142 14,951,600
==============================
-20-
NANNACO, INC
d.b.a. Surface Pro
Balance Sheets
December 31, 2000 and 1999
ASSETS
December December
31, 2000 31, 1999
-------- --------
Current Assets:
Cash on hand and in banks $ 932 $ 548
Certificates of deposit 41,443 5,135
Cash held in escrow 2,472
Accounts receivable
Trade 15,422 163,920
Trade receivable reserve 1,188
Other 2,429 38,500
-------- --------
Total accounts receivable 17,851 203,608
-------- --------
Investment in mutual funds (at cost, fair market
value at December 31, 2000-$178,996) 221,341
Other Current Assets:
Prepaids and deposits 50,478 33,949
-------- --------
Total current assets 334,517 243,240
Notes Receivable:
Loans receivable - investors (two year maturity) 135,000 15,935
Fixed Assets:
Equipment and fixtures 196,436 132,489
Vehicles 93,783 58,235
Less: accumulated depreciation (70,629) (34,569)
-------- --------
Net property and equipment 219,590 156,155
-------- --------
TOTAL ASSETS $689,107 $415,330
======== ========
UNAUDITED
-44-
NANNACO, INC
d.b.a. Surface Pro
Balance Sheets
December 31, 2000 AND 1999
LIABILITIES AND STOCKHOLDER'S EQUITY
December December
31, 2000 31, 1999
-------- --------
Current Liabilities:
Bank overdrafts $ 0 $ 37,230
Accounts payable - trade 28,918 5,812
Accounts payable - other 117,902 8,575
Current portion of notes payable 394,788 183,905
Sales taxes payable 31,682 40,620
Payroll taxes accured and/or withheld 41,071 45,731
---------- --------
Total current liabilities 614,361 321,873
Long-Term Liabilities:
Installment notes payable 37,614 14,410
Notes payable - banks (lines of credit) 65,835 49,799
Stock conversion notes payable 317,975 159,000
Less: current portion (394,788) (183,905)
---------- --------
Net long-term debt 26,636 39,304
---------- --------
Other Liabilities:
Loans from shareholders 0 267,886
---------- --------
Total liabilities 640,997 629,063
Stockholders' Equity:
Common stock (1,000 shares $1 par value authorized
0 shares issued and outstanding at 12/31/00
200 shares issued and outstanding at 12/31/99) 200
(50,000,000 shares $0.001 par value authorized,
14,957,600 shares issued and outstanding at
12/31/00, 19,999,800 shares issued and outstanding
at 12/31/99) 14,958 19,999
Preferred stock - 10,000,000 shares authorized, none issued
and outstanding
Paid in surplus 1,735,810 108,839
Retained deficit (1,702,658) (342,771)
---------- --------
Total stockholder's equity 48,110 (213,733)
---------- --------
TOTAL LIABLITIES AND STOCKHOLDER'S EQUITY $ 689,107 $415,330
========== ========
-45-
UNAUDITED
NANNACO, INC.
d.b.a. Surface Pro
Statements of Operations and Retained Deficits
For the three months periods ended December 31, 2000 and 1999
December December
31, 2000 31, 1999
-------- --------
Income:
Residential wood restoration $ 11,192 $ 3,833
Residential stone restoration 940 708
Residential sealing 18,787 7,593
Residential pressure cleaning 1,915 819
Commercial pressure cleaning 5,510 4,794
Commerdial environmental services 19,442 14,658
Commercial historical restoration 8,209 2,959
Less: refunds and adjustments 0 0
-------- --------
Total 65,995 35,364
Cost of Sales:
Wages 100,565 103,233
Supplies 16,777 17,369
Contract labor 5,390 55
-------- --------
Total cost of sales 122,732 120,657
-------- --------
Gross Profit (Loss) (56,737) (85,293)
Administrative and General:
Advertising and public relations 10,231 5,205
Bank charges and wire fees 258 1,669
Commissions 36,600 37,900
Gas, fuel and oil 5,021 9,504
Depreciation 11,705 7,644
Dues and subscripitions 1,031
Factoring fees 1,446
Insurance 7,292 2,290
Legal and professional 43,528 4,204
Meals and entertainment 62
Miscellaneous 3,629 159
-------- --------
Subtotal administrative and general expenses $119,295 $ 70,083
-46-
(CONTINUED)
NANNACO, INC.
d.b.a. Surface Pro
Statements of Operations and Retained Deficits
For the three months periods ended December 31. 2000 and 1999
December December
31, 2000 31, 1999
-------- --------
Subtotal administrative and general expenses -
(Brought forward): $119,295 $70,083
Office supplies 2,283 2,136
Officer compensation 48,425 22,400
Payroll tax expense 10,989 9,611
Penalties 7,084
Rent 19,358 4,800
Repairs and maintenance 6,700 152
Other taxes 230
Stock registration expense 7,035
Supplies and tools
Telephone 9,634 6,011
Trade show expense 1,333
Travel and entertainment 3,213
Utilities 561 181
-------- --------
Total administrative and general expenses 229,105 122,409
-------- --------
Net Income (Loss) from Operations (285,842) (207,702)
Other Income (Expense)
Interest income 3,249 48
Divivdend income 17,692
Loss on disposition of securities (1,906)
Interest Expense (16,313) (3,622)
-------- --------
Total other income (expense) 2,722 (3,574)
-------- --------
Net Income (Loss) to Retained Earnings (283,120) (211,276)
Retained earnings, beginning of period (1,419,538) (131,495)
---------- --------
Retained Earnings, End of Period ($1,702,658) ($342,771)
============ ==========
Net (loss) per share of common stock for three month period ($0.0189) ($0.0156)
======== ========
UNAUDITED
-47-
NANNACO, INC.
d.b.a. Surface Pro
Statements of Cash Flows
For the three months periods ended December 31. 2000 and 1999
December December
31, 2000 31, 1999
-------- --------
Cash flows from operating activities:
Net income (loss) ($283,120) ($211,276)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 11,705 7,644
(Increase) decrease in accounts receivable 53,453 390
Increase (decrease) in bank overdraft (10,651) 28,607
Increase (decrease) in accounts payable (9,111) 1,500
Increase (decrease) in taxes payable (5,046) 45,528
--------- ---------
Total adjustments 40,350 83,669
--------- ---------
Net cash provided (used) by operating
activities (242,770) (127,607)
Cash Flows from investing activities:
(Purchase) of equipment and vehicles (31,020) (10,190)
(Increase) in loans receivable (135,000) (15,935)
(Increase) decrease in prepaids and deposits 66,847 (1,703)
(Increase) decrease in investments 33,395 (48)
--------- ---------
Net cash provided (used) by investing
activities (65,778) (27,876)
Cash Flows from financing activities:
Proceeds from loans convertible for common stock 317,975 159,000
(Retirement) of loans (8,495) (5,372)
--------- ---------
Net cash provided (used) by investing
activities 309,480 153,628
--------- ---------
Net increase (decrease) in cash and equivalents 932 (1,855)
Cash and equivalents, beginning of period 2,472 2,403
--------- ---------
Cash and equivalents, end of period $ 3,404 $ 548
========= =========
-48-
UNAUDITED
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
three month periods ended December 31, 2000 and 1999
Note 1 - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
- ------
POLICIES
A. ORGANIZATION AND NATURE OF THE BUSINESS
NANNACO, INC. (The Company) was incorporated under the laws of the
State of Texas on October 20, 1998, and began operations immediately.
The Company provides industrial surface cleaning, surface protection,
surface restoration, and other services to commercial and industrial
businesses, as well to the owners of historical buildings, operating
under the trade name of Surface Pro in order to relate to the
principal business activity, since the NANNACO name does not indicate
the type of business.
B. REVENUE AND COST RECOGNITION
The Company provides its services on a direct basis. A sale is
recognized when the service is provided and an account receivable is
recorded or payment is received.
The criteria for recording a sale is that all agreed services have
been provided.
Supplies and materials are purchased and consumed as necessary.
The Company warranties its service within the standards and customs of
the industry. Refunds and adjustments are recognized when granted.
C. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from these estimates. Such estimates relate primarily to depreciable
assets and their useful lives.
D. PROPERTY AND EQUIPMENT
Equipment and vehicles are stated at cost. Depreciation is calculated
on the straight- line method over the estimated useful lives of the
assets for book purposes and the Modified Accelerated Cost Recovery
System (MACRS) for tax purposes.
E. FEDERAL INCOME TAXES
Provisions for income taxes are calculated on pretax income reported
for financial statement purposes. Deferred income taxes or benefit
from income taxes are provided through timing differences between the
reporting of financial statement income and taxable income. These
differences result primarily from the use of straight line
depreciation for reporting purposes and Modified Accelerated Cost
Recovery System for tax purposes. If material, these differences will
be recorded as deferred income taxes or benefit from income taxes. Due
to the accumulated deficit from inception to Decemberm31, 2000, no
deferred taxes or benefit from income taxes has been provided.
Note 2 - CERTIFICATES OF DEPOSIT
On April 16, 1999, the Company invested $5,000.00 in a certificate of
deposit at Frost National Bank for one year at the interest rate of
3.8%. This certificate is pledged as security for a $5,000.00 line of
credit, which at December 31, 1999, was in full use by the Company.
This certificate matured April 16, 2000, paying $190 in interest, and
was renewed at a rate of 5.5% per annum, but was redeemed on July 6,
2000, including $56 interest income.
-49-
UNAUDITED
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
three month periods ended December 31, 2000 and 1999
Note 2 - CERTIFICATES OF DEPOSIT (Continued):
On June 23, 2000, the Company invested in two certificates of deposit
in the amounts of $20,000 each, earning interest at the rate of 5.75%
annually. These certificates mature in one year from the date of
purchase. Both certificates secure notes payable and have interest
income accrued in the amount of $721 each at December 31, 2000.
Note 3 - CASH HELD IN ESCROW
On June 12, 2000, an amount of $20,000 was deposited into the Company
attorney's escrow account for the payment of Company expenses
associated with the attorney's activities. To December 31, 2000,
expenses in the amount of $17,528 have been paid out by the attorney
for Company benefit. This leaves the balance at $2,472 on deposit. All
of this activity has been included in the Company's books.
Note 4 - ACCOUNTS RECEIVABLE
A. TRADE RECEIVABLE RESERVE
In compliance with the agreement to sell receivables to a third party, an
amount equal to 10% of the balances of the accounts was required to remain
on deposit with the third party purchaser of the accounts. This amount was
adjusted monthly to equal the specified amount. At December 31, 1999, there
was a balance retained in the amount of $1,188. This amount was refunded at
the end of the agreement, which was subsequently terminated..
B. OTHER ACCOUNTS RECEIVABLE
At December 31, 2000, the other accounts receivable consisted of $2,429 in
accrued interest on loans to investors.
For the period ended December 31, 1999, the other receivables consisted of
$38,500 in a cash advance to an individual, which was repaid in a
subsequent period.
Note 5 - INVESTMENT IN MUTUAL FUNDS
On July 10, 2000, an amount of $520,000 was invested, through a broker, in
mutual funds and certificates of deposit in an effort to maximize earnings
on idle funds. Funds were have been as necessary to meet obligations,
leaving a cost basis of $221,341 invested at December 31, 2000. This amount
had a market value of $178,996at December 31, 2000.
Beginning in August, 2000, the Company was allowed to draw cash amounts as
needed, using the invested funds as security. As of December 31, 2000,
funds in the amount of $117,550 were owed, being secured by the
investments.
Note 6 - PREPAIDS AND DEPOSITS
The following schedule details the content of the asset Prepaids and
Deposits:
12/31/00 12/31/99
Final month's rent on warehouse $ 1,600 $ 1,600
Prepaid office lease 15,822
Prepaid consulting fees 27,000
Prepaid legal fees 29,639
Prepaid interest on installment loan 3,419 5,349
---------- --------
Total prepaids and deposits $ 50,478 $ 33,949
========== ========
-50-
UNAUDITED
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
three month periods ended December 31, 2000 and 1999
Note 6 - PREPAIDS AND DEPOSITS (Continued):
The final month's rent on warehouse facility will be absorbed the last
month of occupancy of the facility, and the amount will become an expense
at that time.
The prepaid office lease consists of the unamortized portion of a year's
lease in the amount of $34,632 on the Company's office facility. The year's
lease was prepaid in full on June 14, 2000, with the lease on the premises
beginning on June 15, 2000, and continues for a period of twelve months.
Each calendar month, 1/12 of the total amount is taken into expense.
The prepaid consulting fees at December 31, 1999, was for services to be
rendered to the Company during the year ended September 30, 2000. The
services were rendered and the amount taken to the proper expense. The
prepaid legal fees was the result of an agreement between the Company and
their legal counsel. A retainer of $100,000 was paid to the attorney for
future services and applicable expenses. An amount of $5,000 per month plus
expenses was to be taken into income by the attorney and a like amount
expensed for legal expense by the Company. For the period ended December
31, 2000, an amount of $12,743 was expensed. On December 5, 2000,
subsequent to the period covered in this report, the attorney has refunded
$45,000 to the Company, and reduced the amount prepaid at that time.
The prepaid interest amount carried on the balance sheet is the interest
included in an installment loan on a vehicle purchased by the company. The
amounts taken to expense each period are based on the straight line method
over the life of the loan.
Note 7 - LOANS RECEIVABLE - INVESTORS
Several unsecured loans have been made to corporate investors. These loans
are for the period of two years and earn interest at the rate of 9.75% per
annum.
Note 8 - EQUIPMENT AND FIXTURES AND VEHICLES
Fixed assets are recorded at cost and are summarized as follows:
12/31/00 12/31/99
--------- ---------
Equipment $ 196,436 $ 132,489
Vehicles 93,783 58,235
--------- ---------
Total Fixed Assets (at Cost) $ 290,219 $ 190,724
Less Accumulated Depreciation (70,629) (34,569)
--------- ---------
Net Fixed Assets at
December 31, 2000 and 1999 $ 219,590 $ 156,155
========= =========
Note 10 - LONG TERM LIABILITIES
A. INSTALLMENT NOTES PAYABLE
Note payable to Auto One Acceptance Corporation, payable in 60 monthly
installments of $390 each, secured by a 1994 GMC truck.
12/31/00 12/31/99
-------- --------
Original Amount $ 23,400 $ 23,400
Current Balance $ 8,240 $ 14,410
Long-Term Portion $ 3,560 $ 9,730
Portion due in twelve months $ 4,680 $ 4,680
Interest rate 20.75% 20.75%
Unamortized interest at 12/31/00 & 99 $ 3,418 $ 5,349
-51-
UNAUDITED
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
three month periods ended December 31, 2000 and 1999
Note 10 - LONG TERM LIABILITIES (Continued):
On February 19, 2000, an installment loan was obtained from Bank One. This
note is secured by the personal guarantee of the Company president and is
payable in sixty monthly installments of $745 each. The interest rate is
10% per annum. The details at December 31, 2000 are as follows:
Original Amount $35,000
Current Balance $29,374
Long-Term Portion $23,076
Portion due in twelve months $ 6,298
Interest Rate 10%
Due Date Monthly
B. NOTES PAYABLE - LINES OF CREDIT
The Company has established a line of credit with two banks. The Frost
National Bank note is secured by a certificate of deposit (Note2). The
details on the Frost National Bank loan are:
Original Amount $5,000
Long-Term Portion at 12/31/99 -0-
Portion due in twelve months
at September 30, 1999 $5,000
Interest Rate 11.8%
Balance at December 31, 2000 $ -0-
The Bank One line of credit loan was originated on July 15, 1999, and was
secured by the personal guarantee of the Company president. The due date is
July 15, 2001, with interest at prime plus 1.25% to be paid monthly.
12/31/00 12/31/99
-------- --------
Available Amount $35,000 $35,000
Balance December 31, 2000 $33,834 $35,000
Long-Term Portion at 12/31/00 & 99 $ -0- $28,702
Portion due in twelve months
at September 30, 2000 $33,834 $ 6,298
Interest Rate Prime plus 1.25%
Due date 07/15/01 07/15/01
Additionally, on June 21, 2000, the company established two new line of
credit notes with the Frost National Bank. These notes are identical in
structure and allow draws up to $20,000 each. Both notes are secured by
certificates of deposit (See Note 3). The two notes are due June 21, 2001
and both require interest on the outstanding balance at the rate of 9.5%
per annum. The summary of both notes is as follows:
Note #1 Note #2
Available Amount $20,000 $20,000
Balances at 12/31/00 $14,000 $18,000
Long-Term Portion at 12/31/00 $ -0- $ -0-
Portion Due in Twelve Months $19,450 $18,000
Interest Rate 9.5% 9.5%
Due Dates 06/21/01 06/21/01
-52-
UNAUDITED
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
three month periods ended December 31, 2000 and 1999
Note 10 - LONG TERM LIABILITIES (Continued)
C. CONVERSION NOTES PAYABLE
In October, 2000, the Company placed $317,975 in notes payable to investors
which can be converted to common stock. These notes are for one year and
pay interest at 10%.
Note 11- LOANS FROM SHAREHOLDER
Due to the rapidly expanding business opportunities, the Company has been
compelled to seek capital on an interim basis to support its expanding
operation and to purchase additional equipment to meet these needs. One
stockholder, Clifford Munson, has made these necessary advances in the
amount of $267,886 at December 31, 1999. These loans were liquidated during
the year ended September 30, 2000.
Note 12 - COMMON STOCK, PREFERRED STOCK, PAID IN SURPLUS
NANNACO, Inc. was originally chartered on October 20, 1998, under the laws
of the State of Texas. 1,000 shares of $1 par value common stock was
authorized. Of this, 500 shares were issued on organization of the
corporation.
The Paid-In Surplus in the amount of $108,839 on organization was generated
from equipment contributed by the founder and president upon incorporation
of the Company and was approved by the board of directors.
On June 1, 1999, the Company amended its charter to authorize the issuance
of additional common stock and one class of preferred stock. This amendment
authorized a change from one thousand (1,000) shares of $1.00 par value
common stock to fifty million (50,000,000) shares of $0.001 par value
common stock and 10,000,000 shares of preferred stock.
During the period of June 1, 1999 through July 1, 1999, the Company or
converted 19,999,800 shares of this new value of common stock. To date, no
shares of the preferred stock have been issued.
On March 10, 2000, at a duly called stockholders meeting, a 1,000,000 to
one reverse stock split was approved with all certificates under 1,000,000
shares being canceled. The result of this reverse stock split resulted in
only one stockholder, Andrew DeVries III, remaining.
On March 31, 2000, a 1,000,000 to 1 forward split was declared by the board
of directors. This resulted in Andrew DeVries III, the only stockholder,
now holding 12,000,000 shares.
Subsequently, on May 22, 2000, debt being held for conversion was converted
and the appropriate shares were issued to the debtors. A corrective issue
took place on August 8, 2000.
On June 24, 2000, 1,443,400 shares of common stock were sold in a
Regulation D private offering. These shares were sold at $1 per share
pursuant to Rule 506 and were entirely private transactions.
On July 24, 2000, Andrew DeVries III canceled one of his 1,000,000 personal
certificates and distributed it as a personal gift to ten individuals.
On August 21, 2000, Form SB-2 Registration Statement was filed under the
Securities Act of 1933 was filed with the Securities and Exchange
Commission of the United States. On October 5, 2000, the SEC issued their
comments, and at this time, the Company attorney is in the process of
preparing a response.
-53-
UNAUDITED
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
three month periods ended December 31, 2000 and 1999
Note 13 - MANAGEMENT STATEMENT
These unaudited financial statements contain all of the adjustments and
notes considered necessary by management to make the statements not
misleading.
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES UNDERLYING
THE CLASS A WARRANTS OFFERED BY THIS PROSPECTUS OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES AND THE CLASS A WARRANTS IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION.
TABLE OF CONTENTS
Prospectus Summary 2
Risk Factors 3
Where You Can Get Additional Information 4
Management's Discussion and Analysis 5
of Financial Condition
Nannaco and its Business 9
Security Ownership of Management and
Principal Shareholders 15
Management 16
Executive Compensation 19
Transactions with Management 19
Market for Nannaco's Common Stock
and Related Stockholder Matters 20
Description of Securities 20
Selling Securities Holders 21
Selling Securities Holders Plan of Distribution 22
Transfer Agent 23
Legal Matters 23
Independent Public Accountant 23
Financial Statements F-1
UNTIL ______, 2001 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
NANNACO, INC.
LOGO
-------------------------
PROSPECTUS
-------------------------
24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Texas Business Corporations Act
Article 2.02-1 sections J and O of the Texas Business Corporations Act contains
provisions authorizing indemnification by the Company of its directors,
officers, employees or agents against certain liabilities and expenses which
they may incur as our directors, officers, employees or agents of certain other
entities. Section H also provides that such indemnification may include payment
by us of expenses incurred in defending a civil or criminal action or a
proceeding in advance of the final disposition of such action or proceeding upon
receipt of an undertaking by the indemnified person to repay such payment if he
shall be ultimately found not to be entitled to indemnification under the
Section. Indemnification may be provided even though the person to be
indemnified is no longer a director, officer, employee or agent of Nannaco,
Inc., or such other entities. Section R also contains provisions authorizing us
to obtain insurance on behalf of any such director, officer employee or agent
against liabilities, whether or not we would have the power to indemnify such
person against such liabilities under the provisions of the Section.
The indemnification and advancement of expenses provided pursuant to Article
2.02 are not exclusive, and subject to certain conditions, we may make other or
further indemnification or advancement of expenses of any of our directors,
officers, employees or agents. Because the Articles of Incorporation, as
amended, do not otherwise provide, notwithstanding our failure to provide
indemnification and despite a contrary determination by the Board of Directors
or our shareholders in a specific case, a director, officer, employee or agent
who is or was a party to a proceeding may apply to a court of competent
jurisdiction for indemnification or advancement of expenses or both, and the
court may order indemnification and advancement of expenses, including expenses
incurred in seeking court-ordered indemnification or advancement of expenses if
it determines that the petitioner is entitled to mandatory indemnification
pursuant to Section H, J, O or R because he has been successful on the merits,
or because we have the power to indemnify on a discretionary basis pursuant to
the statute or because the court determines that the petitioner is fairly and
reasonably entitled indemnification or advancement of expenses or both in view
of all the relevant circumstances.
Articles of Incorporation and By-Laws
Our Articles of Incorporation and By-Laws, as amended, empower us to
indemnify current or former directors, officers, employees or agents serving at
our request in such capacities in any other enterprise or persons who have
served at our request in such capacities in any other enterprise to the full
extent permitted by the laws of the State of Texas.
II-1
Limitation on Liability
Our Articles of Incorporation eliminate directors' and officers' liabilities to
the maximum extent permitted under Texas Law. Thus, even if an officer or
director loses a lawsuit, it is possible, unless such officer or director was
guilty of gross negligence or willful misconduct in the performance of his/her
duties, that we or our insurance carrier will pay the amount of such judgement
or settlement and reasonable legal fees.
Article 2.02 of the Texas Business Corporation Act provides that a director is
not liable for damages to any person for any statement, vote, decision, or
failure to act, regarding corporate management or policy, unless the director
breached or failed to perform his duties as a director and director's breach or
failure to perform constitutes (i) a violation of criminal law (ii) a
transaction from which the director received an improper benefit, (iii) an
unlawful distribution, conscious disregard for the best interest of the
corporation or willful misconduct in connection with a suit by or in the right
of the corporation or by or in the right of a shareholder, or (iv) recklessness
or an act of omission in bad faith or with malicious purpose or in a manner
exhibiting wanton and willful disregard of human rights, safety, or property in
connection with a proceeding by or in the right of someone other than the
corporation or a shareholder.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by the
Registrant, are as follows:
SEC Filing Fee $ 440
NASD Filing Fee NA
Printing Expenses 10,000
Accounting Fees and Expenses 35,000
Legal Fees and Expenses 50,000
Blue Sky Fees and Expenses 5,000
Total Estimated Expenses $110,440
II-2
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Registrant sold securities, which were not
registered under the Securities Act of 1933, as amended, as follows:
Shares issued pursuant to Section 4(2)
Date Name # of Shares Consideration
- -------------------------------------------------------------------------------
10/04/99 Mark Triesch 1,015,050 $ 1,015
10/04/99 Andrew DeVries II 8,000 $ 8
10/04/99 Ian Wellborn 3,050 $ 3
10/04/99 Mark Sarlo 3,050 $ 3
10/04/99 Andrew DeVries III 12,297,800 $12,298
10/04/99 Linda Morton 8,000 $ 8
10/04/99 Albert Limon 3,015 $ 3
10/04/99 Clifford Munson 27,035 $ 27
10/04/99 W.M. Jackson 35,000 $ 35
10/04/99 Petty International, Inc. 300,000 $ 300
10/04/99 WAPI 700,000 $ 700
10/04/99 Ley Industries, Inc. 600,000 $ 600
10/04/99 Millennium Business
Associates, Inc. 300,000 $ 300
10/04/99 CPR Holdings, Inc. 500,000 $ 500
10/04/99 DPA Holdings 600,000 $ 600
10/04/99 R. Jay Casell 600,000 $ 600
-------
Total 17,000,000 $17,000
These shares were issued without consideration pursuant to the Nannaco's
organizational plans in anticipation of future fund raising. The value of the
transactions is shown at par value of $.001 per share. The shareholders are
officers and directors of Nannaco, their family members or consultants of the
Nannaco. The shareholders were provided and had unlimited access to all material
information regarding Nannaco as a result of their relationship with the Nannaco
or its officers and directors. On March 10, 2000, holders of 97% of these
outstanding shares of common stock voted to reverse split the outstanding shares
of common stock on the basis of one new share for every 1,000,000 shares held.
Fractional shares were redeemed at the rate of .00185. After the reverse split
Andrew DeVries III was the sole remaining shareholder with 12 shares. On March
31, 2000, Mr. DeVries as the sole shareholder voted to forward split his 12
shares on a million shares for one basis.
Nannaco relied on Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities. The
securities were offered for investment only and not for the purpose of resale or
distribution, and the transfer thereof was appropriately restricted by the
Nannaco. Each shareholder was a sophisticated investor at the time.
II-3
Shares Exchanged for Promissory Notes
Promissory
Note Consideration
Date Name # of Shares Prom. Note Prin.
- -------------------------------------------------------------------------------
08/98 Mark Sarlo 50,000 $5,000
10/98 Mark Triesch 29,000 $14,500
04/99 James Letsos, III 70,000 $35,000
05/99 Dave Lennox 60,000 $30,000
06/99 Vinh Bao-Phong 2,000 $2,000
06/99 Eugenio Aguilar 5,000 $5,000
06/99 Linda Conley 3,000 $3,000
06/99 Edward Canahuati 10,000 $10,000
07/99 Cameron Cappleman 1,000 $1,000
07/99 Kenneth Davidson 416,000 $208,000
09/99 Joseph Shunta 80,000 $40,000
10/99 Kenneth Triesch 40,000 $20,000
11/99 The Joy Foundation 500,000 $250,000
12/99 W.M Jackson 70,000 $35,000
12/99 Robert Welch 5,000 $5,000
12/99 Robert Martin 1,200 $1,200
12/99 Richard Beymer 200 $200
01/00 John Starnes 15,000 $5,000
01/00 Joseph Butler 15,000 $5,000
01/00 Ralph Polito 15,000 $5,000
01/00 Arthur W. Hughes 2,000 $2,000
01/00 Dwayne Muzny 1,000 $1,000
01/00 Michael Mason 3,000 3,000
02/00 Jeff Sergent 2,300 $2,300
02/00 Hector Moreno 5,000 $5,000
02/00 Brad Stapp 1,000 $1,000
02/00 Brett Vallery 1,000 $1,000
02/00 Johnny Alexander 2,000 $2,000
03/00 Long H Nguyen 5,000 $5,000
03/00 Roger N. Schmidt 50,000 $25,000
06/99 Lavon Dan Baker 4,500 $4,500
Total: 1,464,200
Except for the five shareholders described in the next sentence, the above
shareholders lent the principal amounts to Nannaco on the dates listed. Engenio
Aguilar, Linda Conley, Edward Canahauti and Kenneth Davidson surrendered
promissory notes in these principal amounts which were given in consideration of
the shareholders' agreement to hold Nannaco harmless for any liability to the
shareholder resulting from the shareholders' payments to a Harold Crum of
Houston, Texas which the shareholder had believed to be for an investment in
Nannaco. The debt was converted into common stock of the Company in April, 2000.
The shareholders were provided and had unlimited access to all material
information regarding Nannaco.
II-4
Nannaco relied on Section 4(2) of the Securities Act of 1933, as amended for the
issuance of the original promissory notes and the conversion into equity
securities. No advertising or general solicitation was employed in offering the
securities. The securities were offered for investment only and not for the
purpose of resale or distribution, and the transfer thereof was appropriately
restricted by the Nannaco. Each shareholder was a sophisticated investor at the
time.
Shares Issued in Regulation D Offering
Date Name # of Shares Consideration
- --------------------------------------------------------------------------------
06/00 The Joy Foundation 943,400 $943,400
06/00 Carlivegen Enterprises 500,000 $500,000
------- --------
Total 1,443,400 $1,443,400
Shares issued in Regulation D Offering
The Shares were sold at $1.00 per Share in June, 2000 pursuant to the Rule 506
safe harbor. These sales were entirely private transactions pursuant to which
all material information as specified in Rule 502(b)(2) was made available to
the purchasers who were all accredited investors. No advertising or general
solicitation was employed in offering the securities. The securities were
offered for investment only and not for the purpose of resale or distribution,
and the transfer thereof was appropriately restricted by Nannaco.
Shares Issued for Services
Date of
Grant Name # of Shares Consideration
- -------------------------------------------------------------------------------
05/00 Stephen P. Payne 50,000 Services
Shares Issued for Services
The shares issued for services are for compensation to a Nannaco consultant,
pursuant to the exemption contained in Section 4(2) of the Securities Act. The
shareholder was provided and had unlimited access to all material information
regarding Nannaco as a result of his employment. With respect to the sale,
Nannaco relied on Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities. The
securities were offered for investment only and not for the purpose of resale or
distribution, and the transfer thereof was appropriately restricted by Nannaco.
II-5
Nannaco has recorded $50,000 of expense for the issuance of these shares.
Convertible Promissory Notes
Date Name Note Principal
- -------------------------------------------------------------------
12/07/00 West Face Investments, Inc. $140,000
12/11/00 Professional Trust Management $105,500
12/11/00 Uncle John's Other Band $100,000
Nannaco relied on Section 4(2) of the Securities Act of 1933, as amended for
the issuance of the convertible promissory notes. The promissory notes mature on
September 25, 2001, accrue interest at the rate of ten percent per annum and may
be converted at the option of the holder at any time for the average closing bid
price for Nannaco common stock for the five days prior to the date of
conversion. No advertising or general solicitation was employed in offering the
securities. The securities were offered for investment only and not for the
purpose of resale or distribution, and the transfer thereof was appropriately
restricted by Nannaco. Each shareholder was a sophisticated investor at the
time.
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement pursuant
to Item 601 of Regulation S-B:
3.1 -- Articles of Incorporation*
3.2 -- Bylaws*
4.1 -- Form of Common Stock Certificate*
5.1 -- Opinion of Dennis Brovarone, Attorney at Law
23.1 -- Consent of Dennis Brovarone, Attorney at Law (see opinion)
23.2 -- Consent of James J. Taylor, Certified Public Accountant
99.1 -- Imbiber Agreement
*Previously filed
II-6
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
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 Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
II-7
SIGNATURES
In accordance with the requirements of the Securities Act of 1933 as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of San Antonio, Texas, on February 15, 2001
NANNACO, INC.
BY: /s/ Andrew DeVries III
-----------------------
Andrew DeVries III, President
/s/ Linda Morton
------------------
Linda Morton, Chief Financial Officer
In accordance with the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
/s/ Andrew DeVries III President, Chief Executive February 15, 2001
------------------ Officer and Director
Andrew DeVries III
/s/ Linda Morton
------------
Linda Morton Secretary, Treasurer, Director February 15, 2001
/s/ Mark A. Triesch
---------------
Mark A. Triesch Director February 15, 2001
/s/ Barry Hagendorf
---------------
Barry Hagendorf Director February 15, 2001
/s/ W.M. Jackson
------------
W.M. Jackson Director February 15, 2001
II-8