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
-------------------------------------------------------
(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
<TABLE>
<CAPTION>
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
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock of
Selling Securities
Holders 1,495,000 $1.00 $1,495,000 $400.66
</TABLE>
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 73 PAGES.
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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 Use of Proceeds
5. Determination of Offering Price Risk Factors; Description of
Securities
6. Dilution Not Applicaable
7. Selling Security Holders Selling Securities Holders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors and Executive Officers Management
11. Security Ownership of Certain
Beneficial Owners and Management 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 Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters Market for Shares
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements With
Accountants Not Applicable
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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 underwriter has 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 ___________, 2000
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Prospectus Summary
The Business of Nannaco Inc.
We are Nannaco, Inc., and throughout this Prospectus we use the personal
pronouns "we", "us", "our" or "the Company" to refer to us. 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. Thereafter we can apply different colors and
textures to surfaces for a desired esthetic effect or apply appropriate sealers
and preservatives. We also provide specialized equipment cleaning services such
as the cleaning of restaurant kitchen vent hoods and fleet cleaning of trucks,
vans and heavy equipment. In June 2000, we applied for our state and federal
licenses to operate as a hazardous waste handler and are negotiating our first
contract to clean and remove contaminated salt water used to clean oil drilling
and production equipment. Our current market is south and central Texas
including the metropolitan areas surrounding San Antonio, Austin and Houston.
Our customers range from homeowners to commercial and industrial operations to
the Catholic Archdiocese of South Texas.
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. Nor have any Underwriters or brokers
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.
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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.
Risk Factors Relating To Nannaco's Business
-------------------------------------------
Possible Water Restrictions
Our primary market area is semi-arid with a rapidly growing population. As a
result, area water resources are limited and face increasing demands. In
addition Texas is experiencing an extended drought which is further depleting
area water resources. Most of our services require water. Local or regional
restrictions on uses of water could have a material adverse effect on our
business.
Insurance Risks
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.
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Need For Additional Specialized Personnel
The addition of specialized key personnel and sales persons to assist us in
expansion of our operations will be necessary. Such personnel will need
to be knowledgeable with respect to methods, chemistry and even historic
preservation. There can be no assurance that we will be able to locate and hire
such specialized personnel on acceptable terms.
Competition
There are several service providers in our present market of south and central
Texas that offer surface-cleaning services. However, as we believe that the
market for our services is growing, there is always the possibility that other
companies could develop similar services and technologies to ours. It is
possible that new competitors may have substantially greater resources than we
do and that we will not be able to successfully compete with such competitors.
In addition, it is possible that such competitors could develop new and better
products and services that we would not be able to successfully compete against.
Regulatory Standards
Our products are presently used and/or targeted for use by companies that 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. Any inability on our behalf to facilitate
compliance by customers with regulatory requirements would adversely impact
sales of our services into the market and our relationships with our customers,
and otherwise adversely affect us.
Risk Factors Relating To This Offering
Lack of a Public Market.
Our common stock is not presently listed for trading on any recognized exchange
or market. Investors may have to indefinitely hold their shares and may have
difficulty selling their shares. Risk of Investing in Penny Stocks.
We believe that it is likely that our common stock will be characterized as
penny stock. As such, broker-dealers dealing in our common stock will be subject
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to the disclosure rules for transactions involving penny stocks that require the
broker-dealer to determine if purchasing our common stock is suitable for a
particular investor. The broker-dealer must also obtain the written consent of
purchasers to purchase our common stock. The broker-dealer must also disclose
the best bid and offer prices available for our stock and the price at which the
broker-dealer last purchased or sold our common stock. These additional burdens
imposed upon broker-dealers may discourage them from effecting transactions in
our common stock, which could make it difficult for an investor to sell their
shares.
Dilution
At September 30, 1999 and June 30, 2000, the net tangible book value of our
common stock was ($19,415) or $0.00 per share and $978,097 or $0.06 per share
respectively. Assuming a public offering price of $1.00 per share by the Selling
Securities Holders, there would be an immediate dilution of $1.00 per share or
100% 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.
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.
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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.
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
--------
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, 1999
--------------------------------------------------------------
We had gross income from operations of $386,929 for the fiscal year ended
September 30, 1999, our first full year of operations. Cost of Sales was
$283,979 with administrative and general expenses of $205,430 resulting in a net
loss from operations of $111,187. Approximately 55% of income is derived from
residential services and 45% from commercial services.
Liquidity and Capital Resources for Fiscal Year Ended September 30, 1999
------------------------------------------------------------------------
For the fiscal year ended September 30, 1999, we had current assets of $259,022,
fixed assets of $153,609 and total assets of $430,883. We had current
liabilities of $79,171, long term liabilities of $85,693 with total liabilities
of $399,800. We had shareholder loans of $234,936.
We believe our revenue and liquidity can be effected by several factors.
Although we have not been affected to date, our market area is semi-arid with
relatively finite water resources and a rapidly growing population. In addition
the area is experiencing an extended drought. As a result state and local
government may impose restrictions on water use. As the majority of our services
require water, restrictions on the use of water could result in increased
expenses to acquire privately owned well water or recycle water or curtailment
of operations until restrictions are lifted.
Our sources of liquidity are internally generated revenue, equity investment in
our common stock and credit facilities.
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Result of Operations for the Nine Month Period ended June 30, 2000
------------------------------------------------------------------
We had gross income from operations of $240,662 for the nine month period ended
June 30, 2000 as compared to $269,706 for the nine month period ended June 30,
1999. For the nine month period ended June 30, 2000, Cost of Sales was $457,382
with administrative and general expenses of $272,949 resulting in a net loss
from operations of $489,669. For the nine month period ended June 30, 1999 Cost
of Sales was $159,004 with administrative and general expenses of $111,128
resulting in a net loss from operations of $426. Wages increased from $113,065
during the nine month period ended June 30, 1999 to $377,501, which reflects the
increase in the number of employees from less than ten employees to over twenty
employees.
Liquidity and Capital Resources for nine month period ended June 30, 2000
-------------------------------------------------------------------------
Our recent addition of the 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 has pits and ponds of used waste water and drilling sludge. During the
fourth quarter of the current fiscal year we have obtained the necessary
licenses to provide remediaton services and anticipate obtaining contracts for
specific sites prior to the end of the fiscal year. 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 the current fiscal year, 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 June 30, 2000, we had
$75,000 of unused line of credit.
During the nine month period ended June 30, 2000, we had pre-paid expenses and
deposits of $100,000. This represents prepaid legal fees for corporate and
securities matters for one year.
Plan of Operations
------------------
We intend to achieve profitability through increase revenue. During the current
fiscal year we have 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. We have applied to the U.S.
Department of Transportation for a Hazardous Materials Transportation Permit and
expect to receive the final permit prior to end of the fiscal year. The private
placement completed in July 2000 has provided the capital necessary to
facilitate this expansion through the acquisition of additional equipment
budgeted at $200,000 and $150,000 is budgeted for advertising and marketing.
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.
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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, Power
Washers of North America (PWNA) can certify the extensive nature of our pressure
cleaning resources. NANNACO is a certified member of PWNA.
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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 an
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
----------------------
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 clean-up 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
re-mediation 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.
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 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. 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
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Marketing Plan
--------------
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
-------
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 contract 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.
Employees
---------
As of August 15, 2000, the Company 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
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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.
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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 August
15, 2000 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 August 15, 2000, by individual directors and executive
officers and by all directors and executive officers as a group.
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 12,000,000 79.9%
President, CEO, Chairman
807 Arizona Ash
San Antonio, TX 78232
Linda Morton 20,000 (1) 0.1%
Director
1305 Woodbranch
San Antonio, TX 78232
W. M. Jackson 90,000 (1) 0.6%
Director
12024 Hart Path
San Antonio, TX 78249
Mark Triesch 49,000 (1) 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 12,159,000 81.0%
(5 persons)
(1) Includes currently exercisable Options to acquire 20,000 shares of common
stock at $1.00 per share expiring April 24, 2005.
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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 2000
Barry Hagendorf 48 Director 2000
W.M. Jackson 70 Director 2000
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, 34, is President of Nannaco, Inc. Mr. DeVries is also the
Principal Shareholder. He founded the company in 1998 and has served as
President since that time. Mr. DeVries develops the policies and objectives of
the company. 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. 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, 51, is our Corporate Secretary, Treasurer and a Director. She has
been 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.
MARK A. TRIESCH, Director, 41, is General Counsel to the corporation. Prior to
joining Nannaco, Inc. in September 1999, Mr. Triesch operated a general practice
that concentrated on business litigation, real
15
<PAGE>
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 the company.
BARRY HAGENDORF, Director, 48, is Vice President of Residential Services. 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, Director, 70, owns 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
-------------
Kevin Smyth, Director of Operations
Kevin Smyth has gained a reputation for successfully managing several large
equipment companies in Texas, Louisiana and Virginia. His business experience
includes positions in administration, planning, finance, accounting, management
and personnel. As Operations Manager with Enviroclean Systems in Louisiana for
more than five years, he managed a solid waste industry work force of more than
75 people, gaining experience in budgeting, financial and safety controls and
programs. As a financial analyst with Texas Disposal Systems, he planned and
analyzed a $3 million budget to include vendor negotiations, data and
information gathering, analysis, and trend forecasting. Kevin earned a
Bachelor's Degree in English from LSU.
Douglas J. Frey, Director of Public Relations
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
More than 11 years in sales and customer service. Owned and operated a
commercial grade tool business in South Texas.
Charles Nugent, Director of Industrial Cleaning and Maintenance
Charles Nugent earned a well-deserved reputation as "one of the best in the
Business." He has more than 25 years of experience managing industrial cleaning
and maintenance companies in various parts of the U. S.
16
<PAGE>
He is licensed in HVAC, steam engines, and boilers and has supervised large work
forces at multiple sites.
Ronald Ray Martin, Lead Technical Advisor and Environmental Specialist
Ronald Martin has been the Manager of Hazardous Material Handlers for Roy F.
Watson, Inc. in Houston since 1997. He manages the hazardous material inspection
and emergency response team, insuring compliance with state and federal
regulations regarding transportation, storage, and handling of hazardous
materials. Ron also coordinates Emergency First Response, supervises containment
efforts, and implements remediation plans for all hazardous material incidents.
Previously, he had served as Environmental Compliance Officer for Enviroclean
Systems. Ron brings his Hazardous Material Emergency Responder credentials and
knowledge to NANNACO, Inc., advising the NANNACO Environmental Services team in
this critical growth area.
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. Rick is considered the leading authority on high pressure pumping
equipment in the United States.
Family Relationships
--------------------
Andrew DeVries III is the son of Linda Morton. There are no other family
relationship between any Director, executive or person nominated or chosen by
the Company to become a Director or executive officer.
17
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows for the fiscal years ending September 30, 1999 and
1998, 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 $100,000 US during such year (The "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------
Long Term Compensation
-------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION | AWARDS | PAYOUTS |
-------------------------------------------------------------------------------------------------------
| | | | Other | Restricted | Securities | LTIP | All Other
Name and | Year | Salary | Bonus | Annual | Stock | Underlying | Payouts | Comp. ($)
Principle | | ($) | | Comp. | Award(s) | Options/SARs | |
Position | | | | ($) | ($) | (#) | ($) |
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A. DeVries 1999 $52,000 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------
</TABLE>
No other executive officer earned more than $100,000 US during the most recent
fiscal year.
Employment Agreements and Executive Compensation
------------------------------------------------
The Company does not have written employment agreements with its executive
officers . Andrew DeVries is paid a salary of $52,000 per annum effective
October 1, 1999. 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.
18
<PAGE>
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
August 15, 2000, the following options have been granted by Executive Officers
and Directors under the plan:
Name # of Shares Optioned Ex. Price Expiration Date
--------------------------------------------------------------------------------
Mark Triesch 20,000 shares $1.00 April 24, 2005
Ian Wellborn 20,000 shares $1.00 April 24, 2005
Mark Sarlo 20,000 shares $1.00 April 24, 2005
Linda Morton 20,000 shares $1.00 April 24, 2005
Clifford Munson 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
----------------------------
Nannaco has not entered into any contracts or transactions in which any of its
officers or directors had a direct or an indirect beneficial interest.
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
<PAGE>
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION: The Company's common stock is not listed for trading on any
recognized market.
SECURITY HOLDERS: As of August 15, 2000, the Company had 36 holders of record of
its common stock of which 12,099,000 are restricted securities held by three
members of Management which have held the shares for less than one year.
DIVIDEND PLANS: The Company has paid no common stock cash dividends and has no
current plans to do so.
There are presently 14,957,600 shares of common stock outstanding as of August
15, 2000.
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
<PAGE>
SELLING SECURITY HOLDERS
The following Selling Security 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 (1) 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 (2) 250,000 500,000 / 5.2% 250,000 / *
------
Total 1,495,000
(1) The Joy Foundation is an unincorporated business trust organization. Jack
Malone is the managing director.
(2) Carlivegan Interprises is an unincorporated business trust organization.
Genevieve Schiffmann is the managing director.
21
<PAGE>
Except for Mr. Mark Triesch and W.M. Jackson who are directors of Nannaco, 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 the Company.
SELLING SECURITY 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 Security Holders.
The distribution of the Selling Security 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 of 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 Security 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 Security 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.
Selling Security 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 Security Holders may pledge their shares from time to time in connection
with such Selling Security 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 Security Holders.
22
<PAGE>
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 Security Holders will be subject
to applicable provisions of the Exchange Act and the rules and regulations,
including Rules 10b-6 and 10b-7, which provisions may limit the timing of
purchases and sales of any of the shares by the Selling Security Holders.
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 will be passed on for the
Company by Dennis Brovarone, Attorney at Law, Littleton, Colorado.
INDEPENDENT PUBLIC ACCOUNTANT
The balance sheet as of September 30, 1999 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
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
Financial Statements
For the year ended September 30, 1999
TABLE OF CONTENTS
Audited Financial Statements for fiscal year ended September 30, 1999:
PAGE
Independent Auditors' Report F-2
Balance Sheet F-3
Statements of Income and Retained Earnings F-6
Statement of Cash Flows F-7
Independent Auditors' Notes to Financial Statements F-8
Unaudited Financial Statements for the nine month period ended June 30, 2000:
Balance Sheet F-13
Statements of Income and Retained Earnings F-15
Statement of Cash Flows F-17
Independent Auditors' Notes to Financial Statements F-18
James J. Taylor
Certified Public Accountant
F-1
<PAGE>
JAMES J TAYLOR
Certified Public Accountant
The Board of Directors
NANNACO, INC.
2935 Thousand Oaks #6-261
San Antonio, Texas 78247
I have audited the balance sheet of NANNACO, INC. (a Texas corporation) as of
September 30,1999, and the related statements of operation, retained earnings,
and cash flows for the year then ended. 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.
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,
1999, and the results of its operations, changes in retained earnings, and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
New Braunfels, Texas
March 18, 2000
/s/ 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: [email protected]
F-2
<PAGE>
NANNACO, INC
d.b.a. Surface Pro
Balance Sheet
September 30, 1999
ASSETS
------
<TABLE>
<CAPTION>
<S> <C> <C>
Current Assets:
Cash on hand 2403
Certificate of deposit 5,000
Accounts receivable
Trade 174364
Reserve 2,634
Other 27,087
-----------
Total accounts receivable 204,085
Deferred tax asset 15,288
Other Current Assets:
Prepaids and deposits 32,246
-------------
Total current assets 259,022
Fixed Assets:
Equipment and fixtures 132,489
Vehicles 48,045
Less: accumulated depreciation (26,925)
-----------
Net property and equipment 153,609
Other Assets:
Organizational expenses 20,315
Less: accumulated amortization (2,063)
------------
Net other assets 18,252
-------------
TOTAL ASSETS $ 430,883
=============
</TABLE>
See Accountants' Report and Note to Financial Statements
F-3
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC
d.b.a. Surface Pro
Balance Sheet
September 30, 1999
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Current Liabilities:
<S> <C> <C>
Bank overdraft $8,623
Accounts payable - trade 4,212
Accounts payable - other 8,675
Current portion of note payable 16,838
Sales taxes payable 29,832
Payroll taxes accured and/or withheld 10,991
------------
Total current liabilities $79,171
Long-Term Liabilities:
Installment note payable 29,581
Notes payable - banks (lines of credit) 40,000
Notes payable to individuals 32,950
Less: current portion (16,838)
------------
Net long-term debt 85,693
Other Liabilities:
Loans from shareholders 234,936
----------------
Total liabilities 399,800
Stockholders' Equity:
Common stock (1,000 shares $1 par value authorized
200 shares issued and outstanding) 200
(50,000,000 shares $0.001 authorized,
19,999,800 issued and outstanding) 19,999
Additional paid in capital in excess of par value 800
Paid in surplus 108,039
Retained earnings (97,955)
----------------
Total stockholder's equity 31,083
----------------
TOTAL LIABLITIES AND STOCKHOLDER'S EQUITY $ 430,883
================
</TABLE>
See Accountants' Report and Note to Financial Statements
F-4
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
Statements of Income and Retained Earnings
For the year ended September 30, 1999
<TABLE>
<CAPTION>
Income: Amount PerCent Revenue
---------------- --------------
<S> <C> <C>
Services income 386929 102.30
Less: refunds and adjustments (8,707) (2.30)
---------------- --------------
Total 378,222 100.00
Cost of Sales:
Wages 206,906 54.70
Supplies 60,229 15.92
Contract labor 16,844 4.45
---------------- --------------
Total cost of sales 283,979 75.08
---------------- --------------
Gross Profit 94,243 24.92
Administrative and General:
Advertising and public relations 7,719 2.04
Bank charges 4,014 1.06
Business promotion 977 0.26
Automobile expense 4,404 1.16
Alarm and security 619 0.16
Gas, fuel and oil 17,937 4.74
Bonus expense 3,860 1.02
Depreciation and amortization 28,988 7.66
Dues and subscripitions 2,908 0.77
Employee medical expense 20 0.01
Equipment rental 2,340 0.62
Factoring fees 12,238 3.24
Insurance 10,099 2.67
Legal and professional 7,827 2.07
Meals and entertainment 1,067 0.28
Miscellaneous 818 0.22
Office supplies 6,384 1.69
Payroll tax expense 18,711 4.95
---------------- --------------
Subtotal administrative and general expenses 130,930 34.62
</TABLE>
(Continued)
See Accountants' Report and Notes to Financial Statements
F-5
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
Statements of Income and Retained Earnings
For the year ended September 30, 1999
<TABLE>
<CAPTION>
Amount PerCent Revenue
---------------- --------------
Subtotal administrative and general expenses -
<S> <C> <C>
(Brought forward): 130,930 34.62
Postage and delivery 739 0.20
Rent 23,013 6.08
Repairs and maintenance 23,854 6.31
Supplies and tools 1,170 0.31
Taxes and licenses 640 0.17
Telephone 9,471 2.50
Travel 1,125 0.30
Utilities 408 0.11
Officer salary 14,080 3.72
---------------- --------------
Total administrative and general expenses 205,430 54.32
---------------- --------------
Net Income (Loss) from Operations (111,187) (29.40)
Other Income (Expense)
Interest Income 87 0.02
Interest Expense (2,143) (0.57)
---------------- --------------
Total other income (expense) (2,056) (0.54)
---------------- --------------
Net Income (Loss) before Federal Income Tax Benefit (113,243) (29.94)
Income tax benefit 15,288 4.04
---------------- --------------
Net Income (Loss) to Retained Earnings (97,955) (25.90)
==============
Retained earnings, beginning of period 0
----------------
Retained Earnings, End of Period ($97,955)
================
</TABLE>
See Accountants' Report and Notes to Financial Statements
F-6
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
Statement of Cash Flows
For the year ended September 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) (97,955)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortiztion $ 28,988
(Increase) decrease in accounts receivable (204,085)
Increase (decrease) in bank overdraft 8,623
Increase (decrease) in accounts payable 12,887
Increase (decrease) in taxes payable 40,823
(Increase) decrease in provision for Federal
Income Taxes (15,288)
----------
Total adjustments (128,052)
-----------
Net cash provided (used) by operating activities (226,007)
Cash Flows from investing activities:
(Purchase) of equipment (178,124)
(Increase) in prepaids and deposits (32,246)
(Increase) in investments (5,000)
(Increase) in organization cost (20,315)
-----------
Net cash provided (used) by investing activities (235,685)
Cash Flows from financing activities:
Proceeds from stockholders loans 234,936
Proceeds from loans 100,121
Proceeds from sale of stock 20,199
Paid in capital surplus 108,839
-----------
Net cash provided (used) by investing activities 464,095
------------
Net increase (decrease) in cash and equivalents 2,403
Cash and equivalents, beginning of period 0
------------
Cash and equivalents, end of period $2,403
============
</TABLE>
See Accountants' report and Notes to Financial Statements
F-7
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 1999
(See Accountants' Report)
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.
The Company's offices are located in San Antonio, Texas.
The Company employs approximately eight employees.
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
F-8
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 1999
(See Accountants' Report)
Note 1 (Continued):
D. CONCENTRATION OF SALES
Sales percentages by customer at September 30, 1999, are as follows:
Percent
Of Total
Sales
---------
Today's Auto Sales 26.3
Texas Disposal Systems 22.2
HEB Grocery Company 6.7
All Other Sales 44.8
-----
Total 100.0
-----
E. 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.
F. 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.
G. 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.
F-9
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 1999
(See Accountants' Report)
Note 2 - EQUIPMENT AND FIXTURES AND VEHICLES
Fixed assets are recorded at cost and are summarized as follows:
Equipment and Fixtures:
Pressure Washers $ 54,000
Pressure Washers 10,000
Washer Accessories 20,000
Hotsy 7,469
Hotsy Cleaning System 11,902
Other Cleaning Equipment 29,118
---------
Total Equipment and Fixtures $ 132,489
Less - Accumulated Depreciation 17,501
---------
Net Equipment and Fixtures $ 114,988
=========
Vehicles:
1988 Mazda $ 1,679
1991 Chevrolet Truck 12,000
1989 Mazda B220 2,500
1994 GMC Truck 14,000
1994 Mitsubishi 8,000
1995 Ford Truck 6,000
GMC Truck 3,866
--------
Total Vehicles $ 45,045
Less - Accumulated Depreciation 9,424
--------
Net Vehicles $ 38,621
=========
Depreciation expense charged against operations for the year ending
September 30, 1999 totaled $26,925.
Note 3 - CERTIFICATE 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.
Note 4 - LONG-TERM DEBT
A. INSTALLMENT NOTES PAYABLE
Installment obligations consist of two note 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
(Continued)
F-10
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 1999
(See Accountants' Report)
Note 4 - LONG-TERM DEBT(Continued):
A. INSTALLMENT NOTE PAYABLE (Continued):
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, 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.
Original Amount $ 23,400
Long-Term Portion at 09/30/99 $ 10,900
Portion due in twelve months $ 4,680
Unamortized interest at 09/30/99 $ 5,646
The second note payable is 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.
Original Amount $14,000
Long-Term Portion at 09/30/99 $ 6,042
Portion due in twelve months $ 7,958
Due Date Monthly
B. NOTES PAYABLE - LINES OF CREDIT
The Company has established a line of credit with two banks. One is secured
by a certificate of deposit (Note 3) and the other is unsecured. The
Company has made various draws on these credit lines and the details are as
follows:
Frost National Bank:
Total Amount $5,000
Long-Term Portion at 09/30/99 -0-
Portion due in twelve months $5,000
Interest Rate 11.8%
Date Paid 11/04/99
Bank One:
Total Amount $35,000
Long-Term Portion $30,800
Portion due in twelve months $ 4,200
Interest Rate Prime plus 1.25%
Due date Monthly
F-11
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 1999
(See Accountants' Report)
Note 4 - LONG-TERM DEBT(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. The note is as follows:
Mark A. Tresch $ 32,950
========
Note 5 - 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 advances are due in five
years in cash or stock and carry no provision for interest.
Note 6 - LEASE COMMITMENTS
The Company leases its 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.
Note 7 - STOCK
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 sold or
converted 19,999,800 shares of this new value of stock common stock. To
date, no shares of the preferred stock have been issued.
Note 8 - SUBSEQUENT EVENTS
On March 10, 2000, at a duly called stockholders meeting, a 1,000,000 to
one reverse stock split was approved.
The Company is currently in the process of making a public offering of its
common stock.
F-12
James J. Taylor
Certified Public Accountant
<PAGE>
NANNACO, INC
d.b.a. Surface Pro
Balance Sheets
June 30, 2000 and 1999
ASSETS
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
----------- ----------
Current Assets:
<S> <C> <C>
Cash on hand and in banks $649,973 $8,174
Certificates of deposit 45,000 5,000
Accounts receivable
Trade 194,350 168,166
Other 268,895 30,381
------------ -----------
Total accounts receivable 463,245 198,547
------------ -----------
Supples inventory 43,534
Deferred tax asset 106,464
Other Current Assets:
Prepaids and deposits 106,652 32,785
------------ -----------
Total current assets 1,414,868 244,506
Fixed Assets:
Equipment and fixtures 141,027 119,067
Vehicles 60,645 42,067
Less: accumulated depreciation (50,105) (20,194)
------------ -----------
Net property and equipment 151,567 140,940
------------ -----------
Other Assets:
Organizational expenses 20,315 580
Less: accumulated amortization (5,111) (52)
------------ -----------
Net other assets 15,204 528
------------ -----------
TOTAL ASSETS $1,581,639 $385,974
============ ===========
</TABLE>
F-13
<PAGE>
NANNACO, INC
d.b.a. Surface Pro
Balance Sheets
June 30, 2000 and 1999
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
---- ----
Current Liabilities:
<S> <C> <C>
Accounts payable - trade $7,633 $9,298
Current portion of note payable 22,880 9,680
Sales taxes payable 34,685 20,497
Payroll taxes accured and/or withheld 83,354 4,424
----------------- ------------
Total current liabilities 148,552 43,899
Long-Term Liabilities:
Installment notes payable 28,020 16,436
Notes payable - banks (lines of credit) 51,576 5,000
Notes payable - individuals 32,950
Less: current portion (22,880) (9,680)
----------------- ------------
Net long-term debt 56,716 44,706
----------------- ------------
Other Liabilities:
Loans from shareholders 69,278 189,936
----------------- ------------
Total liabilities 274,546 278,541
Stockholders' Equity:
Common stock (1,000 shares $1 par value authorized
0 shares issued and outstanding at 06/30/00.
200 shares issued and outstanding at 06/30/99) 0 200
(50,000,000 shares $0.001 par value authorized,
14,947,900 shares issued and outstanding at
06/30/00, 265,000 shares issued and outstanding
at 06/30/99) 14,948 265
Paid in surplus 2,043,091 108,840
Retained earnings (750,946) (1,872)
----------------- ------------
Total stockholder's equity 1,307,093 107,433
----------------- ------------
TOTAL LIABLITIES AND STOCKHOLDER'S EQUITY $1,581,639 $385,974
================= ============
</TABLE>
F-14
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
Statements of Operations and Retained Deficits
For the nine month periods ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
---- ----
Income:
<S> <C> <C>
Services income $243,562 $298,018
Less: refunds and adjustments (2,900) (28,312)
---------------- --------------
Total 240,662 269,706
Cost of Sales:
Wages 377,501 113,065
Supplies 74,320 29,602
Contract labor 5,561 16,337
---------------- --------------
Total cost of sales 457,382 159,004
---------------- --------------
Gross Profit (Loss) (216,720) 110,702
Administrative and General:
Advertising and public relations 25,745 4,105
Bank charges 3,402 2,651
Commissions 37,682
Credit card discount 409
Gas, fuel and oil 24,951 13,955
Bonus expense 3,000 3,860
Depreciation and amortization 26,227 20,246
Dues and subscripitions 1,177 1,473
Factoring fees 4,716
Insurance 20,252 5,468
Legal and professional 12,229 1,573
License and registration 707
Meals and entertainment 762 1,413
Miscellaneous 55 1,289
Office supplies 6,260 2,814
Payroll tax expense 34,204 10,052
Postage and delivery 79 60
Rent 38,708 15,547
---------------- --------------
Subtotal administrative and general expenses 235,849 89,222
</TABLE>
(Continued)
F-15
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
Statements of Operations and Retained Deficits
For the nine month periods ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
---- ----
Subtotal administrative and general expenses -
<S> <C> <C>
(Brought forward): $235,849 $89,222
Repairs and maintenance 11,295 16,315
Other taxes 339
Telephone 24,203 4,913
Trade show expense 800
Uniform expense 124
Utilities 678 339
------------ --------------
Total administrative and general expenses 272,949 111,128
------------ --------------
Net Income (Loss) from Operations (489,669) (426)
Other Income (Expense)
Interest Income 283 39
Interest Expense (10,247) (1,485)
Stock sales, registration and transfer expenses (244,534)
------------ --------------
Total other income (expense) (254,498) (1,446)
------------ --------------
Net Income (Loss) before Federal Income Tax Benefit (744,167) (1,872)
Income tax benefit 91,176 0
------------ --------------
Net Income (Loss) to Retained Earnings (652,991) (1,872)
Retained earnings, beginning of period (97,955) 0
------------ --------------
Retained Earnings, End of Period ($750,946) ($1,872)
============ ==============
</TABLE>
F-16
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
Statements of Cash Flows
For the nine month periods ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) ($652,991) ($1,872)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortiztion 26,228 20,246
(Increase) decrease in accounts receivable (259,160) (198,547)
(Increase) in inventories (43,534)
(Increase) decrease in organization expense (580)
Increase (decrease) in accounts payable (5,254) 9,298
Increase (decrease) in bank overdraft (8,623)
Increase (decrease) in taxes payable 77,216 24,921
(Increase) decrease in provision for Federal
Income Taxes (91,176)
------------ ------------
Total adjustments (304,303) (144,662)
------------ ------------
Net cash provided (used) by operating
activities (957,294) (146,534)
Cash Flows from investing activities:
(Purchase) of equipment (21,138) (161,134)
(Increase) in prepaids and deposits (74,406) (32,785)
(Increase) in investments (40,000) (5,000)
------------ ------------
Net cash provided (used) by investing
activities (135,544) (198,919)
Cash Flows from financing activities:
(Decrease) in individual and stockholder loans (198,608) 189,936
Proceeds from loans 10,015 54,386
Common stock exchanged for services (50,000)
Proceeds from sale of stock 1,979,001 109,305
------------ ------------
Net cash provided (used) by investing
activities 1,740,408 353,627
------------ ------------
Net increase (decrease) in cash and equivalents 647,570 8,174
Cash and equivalents, beginning of period 2,403 0
------------ ------------
Cash and equivalents, end of period $649,973 $8,174
============ ============
</TABLE>
F-17
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
nine month periods ended June 30, 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.
The Company's offices are located in San Antonio, Texas.
The Company employs approximately twenty-five employees at June 30, 2000,
and approximately eleven employees at June 30, 1999.
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
F-18
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
nine month periods ended June 30, 2000 and 1999
Note 1 (Continued):
------
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.
Note 2 - EQUIPMENT AND FIXTURES AND VEHICLES
------
Fixed assets are recorded at cost and are summarized as follows:
Equipment and Fixtures: 06/30/00 06/30/99
----------------------- -------- --------
Pressure Washers $ 54,000 $54,000
Pressure Washers 10,000 10,000
Washer Accessories 20,000 20,000
Hotsy 7,469 7,469
Hotsy Cleaning System 11,902 10,902
Other Cleaning Equipment 29,118 15,696
Office Furniture and Equipment 6,238
Trade Show Booth 2,300
Total Equipment and Fixtures $141,027 $119,067
Less - Accumulated Depreciation 32,364 13,126
--------- ---------
Net Equipment and Fixtures $108,663 $105,941
========= =========
Vehicles: 06/30/00 06/30/99
--------- -------- --------
1988 Mazda $ 1,679 $ 1,679
1991 Chevrolet Truck 12,000 12,000
1989 Mazda B220 2,500 2,500
1994 GMC Truck 14,000 14,000
1994 Mitsubishi 8,000 8,000
1995 Ford Truck 6,000
GMC Truck 3,866 3,866
1991 Dodge Ram 4,100
1992 Ford Ranger 4,450
1994 Ford Ranger 7,050
-------- ---------
Total Vehicles $ 60,645 $42,067
Less - Accumulated Depreciation 17,741 7,068
-------- ---------
Net Vehicles $ 42,904 $34,999
========= =========
F-19
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
nine month periods ended June 30, 2000 and 1999
Note 2 - EQUIPMENT AND FIXTURES AND VEHICLES (Continued):
------
Depreciation expense charged against operations for the period ended
June 30, 2000 totaled $23,180 and for June 30, 1999 totaled $20,194.
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 is
fully use by the Company. This certificate was renewed on April 16, 2000, at
the rate of 5.5% interest annually.
Additionally, on June 14, 2000, the Company invested in two certificates of
deposit in the amount of $20,000 each. These certificates earn interest at the
rate of 5.75% annually, with maturity in one year from date of purchase.
Note 4 - LONG-TERM DEBT
------
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 June 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.
06/30/00 06/30/99
----------------------
Original Amount $ 23,400 $ 23,400
Long-Term Portion at 06/30/00 $ 9,340 $ 11,756
Portion due in twelve months $ 4,680 $ 4,680
Unamortized interest at 06/30/00 $ 5,052 $ 6,185
The second note payable is 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. Details at June 30, 2000 are as follows:
Original Amount $ 14,000
Long-Term Portion at 09/30/99 $ 6,042
Portion due in twelve months $ 9,000
Due Date Monthly
(Continued)
F-20
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
nine months periods ended June 30, 2000 and 1999
Note 4 - LONG-TERM DEBT (Continued):
------
B. NOTES PAYABLE - LINES OF CREDIT
The Company has established a line of credit with two banks. One is secured
by a certificate of deposit (Note 3) and the other is unsecured. The
Company has made various draws on these credit lines and the details are as
follows:
Frost National Bank: 06/30/00 06/30/99
------------------------
Total Amount $5,000 $5,000
Long-Term Portion at 06/30/00 -0- -0-
Portion due in twelve months $5,000 $5,000
Interest Rate 11.8% 11.25%
Bank One: 06/30/00
----------
Total Amount $50,000
Long-Term Portion $42,576
Portion due in twelve months $ 4,200
Interest Rate Prime plus 1.25%
Due date Monthly
3. NOTE PAYABLE - INDIVIDUAL
The company obtained statrup loan from an individual. This loan is due within
five years of incorporation, payable in cash or stock in the corporation. There
is no provision for interest during the term of the loan. This loan was retired
in 2000. Details of the loan at June 30, 1999 were as follows:
Mark A. Tresch $32,950
Note 5 - LOANS FROM SHAREHOLDERS
------
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. The stockholders,
have made these necessary advances in the amount of $57,478 at June 30, 2000
and $189,936 at June 30, 1999. These advances are due in five years in cash or
stock and carry no provision for interest.
Note 6 - LEASE COMMITMENTS
------
The Company leases its warehouse location on an annual basis. This lease for
twelve months is in the amount of $19,200, payable in monthly installments of
$1,600 per month following an initial deposit of $1,600.
F-21
<PAGE>
NANNACO, INC.
d.b.a. Surface Pro
NOTES TO FINANCIAL STATEMENTS For the
nine month periods ended June 30, 2000 and 1999
Note 7 - STOCK
------
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 sold or
converted 19,999,800 shares of this new value of stock common stock. On
March 10, 2000, the board of directors declared a 1,000,000 to 1 reverse stock
split, and canceled all fractional shares. On March 31, 2000, a 1,000,000
to 1 forward stock split was declared by the board of directors for all shares
of common stock outstanding as of that date.
On June 27, 2000, a Form D was filed with the Securities and Exchange
Commission giving notice of a private placement of 1,443,400 shares of the
Company's common stock.
To date, no shares of the preferred stock have been issued.
Note 8 - SUBSEQUENT EVENTS
------
The Company is currently in the process of making a public offering of its
common stock.
F-22
<PAGE>
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 5
Management's Discussion and Analysis 6
of Financial Condition
Nannaco and its Business 8
Security Ownership of Management and
Principal Shareholders 14
Management 15
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 ______, 2000 (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
<PAGE>
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 of, as amended, empower us to
indemnify current our 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
<PAGE>
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 iable 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
<PAGE>
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 nil
10/04/99 Andrew DeVries II 8,000 nil
10/04/99 Ian Wellborn 3,050 nil
10/04/99 Mark Sarlo 3,050 nil
10/04/99 Andrew DeVries III 12,297,800 nil
10/04/99 Linda Morton 8,000 nil
10/04/99 Albert Limon 3,015 nil
10/04/99 Clifford Munson 27,035 nil
10/04/99 W.M. Jackson 35,000 nil
10/04/99 Petty International, Inc. 300,000 nil
10/04/99 WAPI 700,000 nil
10/04/99 Ley Industries, Inc. 600,000 nil
10/04/99 Millennium Business
Associates, Inc. 300,000 nil
10/04/99 CPR Holdings, Inc. 500,000 nil
10/04/99 DPA Holdings 600,000 nil
10/04/99 R. Jay Casell 600,000 nil
-------
Total 17,000,000
These shares were issued without consideration pursuant to the Company's
organizational plans in anticipation of future fund raising. The shareholders
are officers and directors of the Company, their family members or consultants
of the Company. The shareholders were provided and had unlimited access to all
material information regarding the Company as a result of their relationship
with the Company 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.
The Company 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
Company. The Company believes that each shareholder was a sophisticated investor
at the time.
II-3
<PAGE>
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 $500,000
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 $15,000
01/00 Joseph Butler 15,000 $15,000
01/00 Ralph Polito 15,000 $15,000
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
The above shareholders lent the principal amounts to the Company on the dates
listed. 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 the Company.
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<PAGE>
The Company 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 Company. The Company believes that 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 the Company.
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 Company 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 the Company as a result of his employment with the Company. With
respect to the sale, the Company 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 Company.
The Company has recorded $50,000 of expense for the issuance of these shares.
II-5
<PAGE>
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
27.1 -- Financial Data Schedule
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;
II-6
<PAGE>
(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
<PAGE>
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 August 21, 2000
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 August 21, 2000
------------------ Officer and Director
Andrew DeVries III
/s/ Linda Morton
------------
Linda Morton Secretary, Treasurer, Director August 21, 2000
/s/ Mark A. Triesch
---------------
Mark A. Triesch Director August 21, 2000
/s/ Barry Hagendorf
---------------
Barry Hagendorf Director August 21, 2000
/s/ W.M. Jackson
------------
W.M. Jackson Director August 21, 2000
II-8
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