UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
PURSUANT TO SECTION 14(C)of the SECURITIES EXCHANGE ACT OF 1934
Date: December 1, 2004
Nannaco, Inc.
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(Exact name of registrant as specified in its charter)
Texas
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(State or other jurisdiction of incorporation or organization)
000-50672 74-2891747
(SEC File Number) (IRS Employer Identification Number)
4906 Point Fosdick Dr., Suite 102
Gig Harbor, WA 98335
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(Address of principal executive offices)
(253) 853-3632
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(Registrant's telephone number, including area code)
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[X] Preliminary Information Statement
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14c-5(d)(2)
[ ] Definitive Information Statement
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Nannaco, Inc.
4906 Point Fosdick Dr., Suite 102
Gig Harbor, WA 98335
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
To the Stockholders of Nannaco, Inc.:
This Information Statement is furnished to the stockholders of Nannaco,
Inc., a Texas corporation ("Nannaco"), in connection with the following
corporate action:
-- To authorize the board of directors to effect a forty-for-one (40:1)
reverse stock split of the common stock.
Stockholders of record as of November 4, 2004 shall be given a copy of
this Information Statement.
By Order of the Board of Directors
/s/ Steve Careaga
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Steve Careaga, President
THIS INFORMATION STATEMENT IS BEING FURNISHED TO ALL HOLDERS OF THE VOTING
CAPITAL STOCK OF NANNACO IN CONNECTION WITH THE PROPOSED ACTION BY WRITTEN
CONSENT TO AUTHORIZE THE BOARD OF DIRECTORS TO CARRY OUT A REVERSE SPLIT OF THE
COMMON STOCK ON A FORTY-FOR-ONE (40:1) BASIS.
INFORMATION STATEMENT
This information statement is furnished to all holders of the voting
capital stock of Nannaco, Inc., a Texas company ("Nannaco" or the "Company"), in
connection with resolutions of the Board of Directors and the written consent of
the holders of in excess of 67% of the voting capital stock of Nannaco providing
for a reverse-split of the common stock of Nannaco on the basis of 40 shares for
each 1 share of common stock held. The reverse split will be conducted at a time
to be determined by the board of directors.
The Board of Directors, and persons owning greater than two-thirds (67%)
of the outstanding voting securities of Nannaco, have adopted, ratified and
approved the proposed reverse stock split. No additional votes are required or
necessary. See the caption "Vote Required for Approval" below. Any reverse split
adopted by the board of directors will become effective upon final approval by
the board and the filing of required notices.
The Form 10-QSB for the quarterly period ended June 30, 2004 and the form
10-KSB for the year ended September 30, 2003, filed by Nannaco with the
Securities and Exchange Commission may be viewed on the Securities and Exchange
Commission's web site at www.sec.gov in the Edgar Archives. Nannaco is current
in filing all reports that it is required to file. See the caption "Additional
Information" below.
GRANT AUTHORITY TO THE BOARD OF DIRECTORS TO CONDUCT UP TO A FORTY-for-ONE SHARE
(40:1)REVERSE STOCK SPLIT
Nannaco's board has determined that it would be in the Company's best
interest in the near future to conduct a reverse split of its common stock on up
to a 40-for-1 basis and has received the consent of holders in excess of
two-thirds majority of the voting capital stock to authorize the board to
conduct such a reverse split in the Board's discretion.
A reverse split would reduce the amount of presently issued and
outstanding shares of common stock into a smaller number of shares of identical
common stock. This process that is known as a reverse-split would take up to
forty shares of the presently issued and outstanding common stock on the
effective date of the reverse-split and convert those shares into one share of
the post-reverse stock split common stock.
The board has indicated that fractional shares will not be issued.
Instead, Nannaco will issue one full share of the post-reverse stock split
common stock to any shareholder who would have been entitled to receive a
fractional share as a result of the process. Each shareholder will hold the same
percentage of the outstanding common stock immediately following the reverse
stock split as that shareholder did immediately prior to the stock split, except
for minor adjustment as a result of the additional shares that will need to be
issued as a result of the treatment of fractional shares.
Reasons for the reverse stock split
The primary purposes of the reverse stock split are to accomplish the following:
a) reduce the number of outstanding shares of common stock to a level more
consistent with other public companies with a similar anticipated market
capitalization; and
b) and increase the per share price of the common stock to help maintain
the interest of the markets;
c) provide the Company with additional flexibility to issue shares to
facilitate the closing of the proposed merger of Nazz Productions, Inc., into
the Company, which the Company announced on October 28, 2004.
For the above reasons, the board believes that the reverse-split is in the
best interest of the Company and its shareholders. There can be no assurance,
however, that the reverse stock split will have the desired benefits.
Effects of the reverse stock split.
The reverse stock split will be effected by notice to the appropriate
regulatory authorities and will become effective upon such filing and final
approval of the board of directors of the Company. The actual timing of any such
filing will be made by the board of directors based upon its evaluation as to
when the filing will be most advantageous to the Company and its shareholders.
Nannaco is currently authorized to issue 500,000,000 shares of its common
stock of which 63,742,534 shares are currently issued and outstanding as of
November 4, 2004. Currently, shareholders holding 51,000,000 of the voting
capital stock having voting power of 1,000,000,000 shares of common stock have
consented in writing to the proposal, constituting approval in excess of 67% of
the shares entitled to vote. A reverse split on a 40 for one basis would reduce
the number of issued and outstanding shares to approximately 1,593,564, but will
not reduce the number of authorized shares of common stock. The reverse split
will not have any effect on the stated par value of the common stock.
The effect of the reverse split upon existing shareholders of the common
stock will be that the total number of shares of Nannaco's common stock held by
each shareholder will be automatically converted into the number of whole shares
of common stock equal to the number of shares of common stock owned immediately
prior to the reverse stock split divided by 40, with an adjustment for any
fractional shares. Fractional shares will be rounded up into a whole share.
If acted upon by the Company's board of directors, the consent by the
two-thirds majority of the voting capital stock shareholders reported herein,
would result in each shareholder's percentage ownership interest in the company
and proportional voting power remaining unchanged, except for minor changes and
adjustments that will result from rounding fractional shares into whole shares.
The rights and privileges of the holders of shares of common stock will be
substantially unaffected by the reverse stock split. All issued and outstanding
options, warrants, and convertible securities would be appropriately adjusted
for the reverse stock split automatically on the effective date of the reverse
stock split. All shares, options, warrants or convertible securities that the
Company has agreed to issue (or agrees to issue prior to the effective date of
the reverse stock split) also will be appropriately adjusted for the reverse
stock split.
The reverse stock split may also result in some shareholders holding "odd
lots" of less than 100 shares of common stock. Brokerage commissions and other
costs of transactions in odd lots may be higher, particularly on a per-share
basis, than the cost of transactions in even multiples of 100 shares.
If in the future the Company issues additional equity or quasi-equity
securities combined with this reverse stock split, there is a significant risk
of shareholder value represented by the common stock being diluted. The
availability of authorized but unissued shares of common stock creates a risk
that current shareholders of the common stock will see the value of those shares
diluted through the issuance of the additional authorized shares if such shares
are issued at less than the book value per share of common stock of Nannaco. If
all additional shares of authorized common stock were issued, without any
increase in the book value of the assets of the Company, the net book value per
share would decrease by 87%, assuming the company had a positive book value per
share at the time of such issuance. If all authorized shares of common stock
were issued each share would drop from representing 1/63,742,534 to 1/1,593,564
of the shares of common stock issued and outstanding.
After the reverse stock split is effected there is no requirement that
shareholders obtain new or replacement share certificates. Each holder of record
of shares of the Company's common stock that is outstanding on the effective
date of the reverse stock split may contact the Company's transfer agent to
exchange the certificates for new certificates representing the number of whole
shares of post-reverse stock split common shares into which the existing shares
have been converted as a result of the reverse stock split.
EXISTING CERTIFICATES SHOULD NOT BE SENT TO THE COMPANY OR THE TRANSFER AGENT
BEFORE THE EFFECTIVE DATE OF THE FILING OF THE PROPOSED AMENDMENTS TO THE
ARTICLES OF INCORPORATION.
Until the shareholder forwards a completed letter of transmittal, together
with certificates representing such shareholder's shares of pre-reverse stock
split common stock to the transfer agent and receives in return a new
certificate representing shares of post-reverse stock split common stock, such
shareholder's pre-reverse stock split common stock shall be deemed equal to the
number of whole shares of post-reverse stock split common shares to which such
shareholder is entitled as a result of the reverse stock split.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes certain material federal income tax
considerations relating to the proposed reverse stock split. This discussion is
based upon the Internal Revenue Code, existing and proposed regulations
thereunder, legislative history, judicial decisions, and current administrative
rulings and practices, all as amended and in effect on the date hereof. Any of
these authorities could be repealed, overruled, or modified at any time. Any
such change could be retroactive and, accordingly, could cause the tax
consequences to vary substantially from the consequences described herein. No
ruling from the Internal Revenue Service (the "IRS") with respect to the matters
discussed herein have been requested, and there is no assurance that the IRS
would agree with the conclusions set forth in this discussion.
This discussion may not address federal income tax consequences that may
be relevant to particular shareholders in light of their personal circumstances
or to shareholders who may be subject to special treatment under the federal
income tax laws. This discussion also does not address any tax consequences
under state, local or foreign laws.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCE OF THE REVERSE STOCK SPLIT FOR THEM, INCLUDING THE APPLICABILITY OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS AND ANY
PENDING OR PROPOSED LEGISLATION.
The reverse stock split is intended to be a tax-free recapitalization to
the Company and its shareholders, except for those shareholders who receive a
whole share of common stock in lieu of a fractional shares. Shareholders will
not recognize any gain or loss for federal income tax purposes as a result of
the reverse stock split, except for those shareholders receiving a whole share
of common stock in lieu of a fractional share (as described below). The holding
period for shares of common stock after the reverse split will include the
holding period of shares of common stock before the reverse stock split,
provided, that such shares of common stock are held as a capital asset at the
effective date of the amendment. The adjusted basis of the shares of common
stock after the reverse stock split will be the same as the adjusted basis of
the shares of common stock before the reverse stock split excluding the basis of
fractional shares.
A shareholder who receives a whole share of common stock in lieu of a
fractional share generally may recognize gain in an amount not to exceed the
excess of the fair market value of such whole share over the fair market value
of the fractional shares to which the shareholder was otherwise entitled.
QUESTIONS AND ANSWERS REGARDING THE PROPOSED REVERSE STOCK SPLIT OF THE COMMON
STOCK.
Q. WHY IS APPROVAL SOUGHT FOR THE PROPOSED REVERSE STOCK SPLIT OF THE COMMON
STOCK ON A 40 FOR 1 BASIS?
A. The Board seeks approval of a reverse stock split of the common stock 40 for
1 share of the currently issued common stock. It is the expectation of the Board
that such a reverse stock split would increase the market price of the resulting
common stock and thus maintain a higher level of market interest in the shares,
including shares issued pursuant to the Company's Employee Benefit Plans,
provide additional flexibility to management with regard to the issuance of
shares and maintaining the proper market capitalization of the Company. The
Board believes that the reverse stock split will enhance the Company's
flexibility with regard to the ability to issue common stock for proper
corporate purposes that may be identified from time to time, such as financing,
acquisitions, compensation of employees, the establishment of strategic business
relationships with other companies or the expansion of Nannaco's business or
product lines through the acquisition of other businesses or products.
Q. HAS THE BOARD OF DIRECTORS APPROVED THE REVERSE STOCK SPLIT?
A. The sole member of the Board of Directors has approved the reverse stock
split of the common stock in the best interest of Nannaco shareholders of
Nannaco.
Q. WILL I RECEIVE ANY ADDITIONAL SHARES OR A DIFFERENT CLASS OF SHARES AS A
RESULT OF THESE PROPOSALS?
A. As a current shareholder of Nannaco your class of stock and the number of
shares that you hold will be affected only as a result of the adoption of the
proposal to authorize a reverse stock split. For example, a current holder of
10,000 shares of common stock will remain a holder of 250 shares of common stock
in the event that the board approves a 40 for 1 reverse stock split.
Q. WILL THE REVERSE STOCK SPLIT IN ANY TAX LIABILITY TO ME?
A. The proposed changes are intended to be tax free for federal income tax
purposes, except in the case of the issuance of a whole share for a fractional
share, as noted above.
Q. WHAT VOTE OF THE SHAREHOLDERS WILL RESULT IN THE PROPOSALS BEING PASSED?
A. To approve the proposal, the affirmative vote of two-thirds of all capital
stock entitled to vote on the issue of a reverse stock split is required.
Consents in favor of the proposal have already been received from shareholders
holding a two-thirds majority of the voting securities of Nannaco.
Q. WHO IS PAYING FOR THIS INFORMATION STATEMENT?
A. The Company will pay for the delivery of this information statement.
Q. WHOM SHOULD I CONTACT IF I HAVE ADDITIONAL QUESTIONS?
A: Steve Careaga, President of Nannaco, Inc. 4906 Point Fosdick Dr., Suite 102,
Gig Harbor, WA 98335, telephone: (253) 853-3632
VOTE REQUIRED FOR APPROVAL
Under Texas Law, the reverse split must be approved by a two-thirds
majority of all outstanding voting securities.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Board of Directors fixed the close of business on November 4, 2004 as
the record date for the determination of the common shareholders entitled to
notice of the action by written consent.
At the record date, Nannaco had issued and outstanding 63,742,534 shares
of $0.001 par value common stock. Shareholders holding a controlling interest
equaling more than 67% of the total voting power of Nannaco representing more
than a two-thirds majority of Nannaco's outstanding voting capital stock
consented to the reverse stock split.
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND FIVE PERCENT
STOCKHOLDERS
The following table sets forth information about the beneficial ownership
of Nannaco's Capital Stock, as of November 4, 2004 by (i) each person who is
known by Nannaco to own beneficially more than five percent (5%) of the
outstanding shares of Capital Stock; (ii) each of Nannaco's named Executive
Officers and Directors; and (iii) all Directors and Executive Officers as a
group:
AMOUNT/NATURE/ % OWNERSHIP NAME/ADDRESS
TITLE OF CLASS OF CLASS BENEFICIAL OWNER
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31,000,000 48.6% Steve Careaga
(.001 par value) 4906 Point Fosdick Dr.,
Suite 102
Gig Harbor, WA 98335
Directors
(as above) 48.6% Steve Careaga
(.001 par value) 4906 Point Fosdick Dr.,
Suite 102
Gig Harbor, WA 98335
Shareholder Executives
(as above) 48.6% Steve Careaga
(.001 par value) 4906 Point Fosdick Dr.,
President Suite 102
Gig Harbor, WA 9833
As of November 4, 2004, Nannaco had 63,742,534 shares of its common voting stock
issued and outstanding.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director, executive officer, nominee for election as a director,
associate of any director, executive officer or nominee or any other person has
any substantial interest, direct or indirect, by security holdings or otherwise,
in the actions covered by the related resolutions adopted by the Board of
Directors, which is not shared by all other stockholders.
ADDITIONAL INFORMATION
Additional information concerning Nannaco, Inc. including its Form 10-KSB
annual report for the year ended September 30, 2004 and quarterly reports on
Form 10-QSB for the past quarters ended June 30, 2004 and March 31, 2004, which
have been filed with the Securities and Exchange Commission, may be accessed
through the EDGAR archives, at www.sec.gov.
Dated: December 1, 2004
By Order of the Board of Directors
/s/ Steve Careaga
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President and Director