U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549


                                   FORM 10-KSB
(Mark One)

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 2004

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________to________________________

                        Commission File Number #000-50672


                                  Nannaco, Inc.
                 (Name of small business issuer in its charter)


            Texas                                          74-2891747
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)


                   7235 North Creek Loop, Gig Harbor, WA 98335
               (Address of principal executive offices) (Zip Code)


                                 (253) 853-3632
                           (Issuer's telephone number)

      Securities registered pursuant to Section 12(b) of the Exchange Act:

      Title of each class                   Name of exchange on which registered
             None                                           None

         Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 Par Value
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |_|  No |X|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB |_|
<PAGE>

State issuer's revenues for its most recent fiscal year................$ 15,577

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act).

As of the date of this report, the aggregate market value of our common stock,
$0.001 par value, held by non-affiliates was approximately $39,839.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date:

As of January 25, 2005, there were approximately 1,543,563 shares of common
stock, $0.001 par value, issued and outstanding.

Transitional Small Business Disclosure Format (check one)

Yes |_|                  No |X|
<PAGE>

                                TABLE OF CONTENTS

                                     PART I

Item 1.         Description of Business
Item 2.         Description of Property
Item 3.         Legal Proceedings
Item 4.         Submission of Matters to a Vote of Security Holders

                                     PART II

Item 5.         Market for Common Equity, Related Stockholder Matters, and
                Small Business Issuer Purchases of Equity Securities

Item 6.         Management's Discussion and Analysis or Plan of Operation
Item 7.         Financial Statements
Item 8.         Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure
Item 8.A.       Controls and Procedures
Item 8.B        Other Information

                                    PART III

Item 9.         Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act
Item 10.        Executive Compensation
Item 11.        Security Ownership of Certain Beneficial Owners and Management
                and Related Stockholder Matters
Item 12.        Certain Relationships and Related Transactions
Item 13.        Exhibits
Item 14.        Principal Accounting Fees and Services


                                      (i)
<PAGE>

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain of the statements contained herein,
which are not historical facts, are forward-looking statements with respect to
events, the occurrence of which involve risks and uncertainties. These
forward-looking statements may be impacted, either positively or negatively, by
various factors. Information concerning potential factors that could affect our
company is detailed from time to time in our company's reports filed with the
Commission. This report contains "forward looking statements" relating to our
company's current expectations and beliefs. These include statements concerning
operations, performance, financial condition, anticipated acquisitions and
anticipated growth. For this purpose, any statements contained in this report or
Forms 10-QSB, Forms 8-K, and any information statement referred to herein that
are not statements of historical fact are forward-looking statements. Without
limiting the generality of the foregoing, words such as "may", "will", "would",
"expect", "believe", "anticipate", "intend", "could", "estimate", or "continue",
or the negative or other variation thereof or comparable terminology are
intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, which are beyond our
company's control. Should one or more of these risks or uncertainties
materialize or should our company's underlying assumptions prove incorrect,
actual outcomes and results could differ materially from those indicated in the
forward-looking statements.

The information in this report is qualified in its entirety by reference to the
entire report; consequently, this report must be read in its entirety.
Information may not be considered or quoted out of context or without
referencing other information contained in this report necessary to make the
information considered, not misleading.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General Information

Nannaco, Inc. ("Nannaco" or the "Company") was incorporated under the laws of
the State of Texas on October 20, 1998, and immediately thereafter began
operations. The Company provided surface cleaning, surface protection, surface
restoration, and other services to commercial businesses, as well as to the
owners of historical buildings. The Company operated in the past under the trade
name of Surface Pro in order to align the name of the company with its principal
business activity.

Until September of 2003, Nannaco focused on surface cleaning, surface protection
and restoration. However, sales from these products were not sufficient to
enable the company to continue operations. In September of 2003, the Company
changed its strategy due to poor operating conditions and operating results
coupled with difficulties in raising capital through debt and equity sources.
The Company adopted a new strategy during the fiscal fourth quarter of 2003 that
committed to the disposal of its current business and to seek a merger or
acquisition transaction with a Company having better financial resources. As of
September of 2003, the Company ceased all operating activities and has disposed
of most of its assets. The Company has entered a new development phase, while
formulating a plan to improve its financial position.


                                      -1-
<PAGE>

RISK FACTORS

An investment in the securities of the Company involves extreme risks and the
possibility of the loss of a shareholder's entire investment. A prospective
investor should evaluate all information discussed in this report and the risk
factors discussed below in relation to his financial circumstances before
investing in any securities of the Company.

1.    Going Concern Risk

We have had and could have losses, deficits and deficiencies in liquidity, which
could impair our ability to continue as a going concern. Our independent
auditors have indicated that certain factors raise substantial doubt about our
ability to continue as a going concern and these factors are discussed in note 2
to our audited financial statements for the years ended September 30, 2004 and
2003. Since its inception, the Company has suffered recurring losses from
operations and has been dependent on existing stockholders and new investors to
provide the cash resources to sustain its operations.

We have incurred net losses in prior years and this has resulted in a
significant accumulated deficit and stockholders' deficiency at September 30,
2004. In addition, we are in default under our convertible debenture agreements.
We had net losses of $6,400,107 for the year ended September 30, 2004 and
$977,156 for the year ended September 30, 2003. At September 30, 2004, our
current liabilities exceeded our current assets by $840,706, our stockholders'
deficiency was $840,706, and we had an accumulated deficit from prior business
operations of $5,048,764 and a deficit accumulated during the development stage
of $6,400,107 at September 30, 2004.

The time required for us to become profitable is highly uncertain, and we cannot
assure you that we will achieve or sustain profitability or generate sufficient
cash flow from operations to meet our planned capital expenditures, working
capital and debt service requirements. If required, our ability to obtain
additional financing from other sources also depends on many factors beyond our
control, including the state of the capital markets and the prospects for our
business. The necessary additional financing may not be available to us or may
be available only on terms that would result in further dilution to the current
owners of our common stock.

We have substantial current obligations. As of September 30, 2004, we had
$840,706 of liabilities as compared to $726,763 as of September 30, 2003. Of the
$840,706 outstanding at September 30, 2004, $258,608 is for unpaid federal
payroll taxes, interest and penalties. The Company has received correspondence
from the Internal Revenue Service ("IRS") detailing the obligation and remedies
that the IRS may pursue if not paid and is in discussions with the IRS
concerning resolution of the matter. The remaining current obligations (which
are all past due) include accounts payable of $137,497, judgment payable of
$53,110, bank loans of $59,335, loan payable-related party of $42,700, accrued
compensation-related party of $25,092, due to consultants of $36,196 and
convertible debentures of $107,500. The Company does not have sufficient cash
resources to pay these obligations.


                                      -2-
<PAGE>

Or substantial debt obligations and lack of cash flow pose risks to our business
and stockholders by:

      o     making it difficult for us to satisfy our obligations;

      o     requiring us to dedicate a substantial portion of our cash flow
            in the future, if any, to principal and interest payments on our
            debt and other obligations, thereby reducing the availability of
            our cash flow in the future to fund working capital, capital
            expenditures and other corporate requirements;

      o     impeding us from obtaining additional financing for working
            capital, capital expenditures and general corporate purposes.

We cannot assure you that in the future we will generate sufficient cash flow
from operations or obtain additional financing to meet scheduled debt payments,
financial covenants and other obligations. We have failed to make required
payments under certain agreements and related documents governing our
indebtedness and failed to comply with the financial and operating covenants
contained in them. We are in default on certain indebtedness and significantly
behind in making payments on other financial obligations.

2. No Current Relevant Operating History.

The Company has no current relevant operating history, no revenues from
operations and minimal assets. The Company faces all of the risks of a new
business and those risks specifically inherent in the investigation,
acquisition, or involvement in a new business opportunity. Purchase of any
securities of the Company must be regarded as placing funds at a high risk in a
new or "start-up" venture with all of the unforeseen costs, expenses, problems,
and difficulties to which such ventures are subject.

3. No Assurance of Success or Profitability.

There is no assurance that the Company will acquire a favorable business
opportunity. In addition, even if the Company becomes involved in a business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's Common Stock will be increased thereby.

4. Type of Business Acquired.

The type of business to be acquired (if any) may be one that desires to avoid
effecting a public offering and the accompanying expense, delays, and federal
and state requirements which protect investors. Because of the Company's limited
capital, it is more likely than not that any acquisition by the Company will
involve other parties whose primary interest is the acquisition of a publicly
traded company. Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.


                                      -3-
<PAGE>

5. Lack of Diversification.

Because of the limited financial resources of the Company, it is unlikely that
the Company will be able to diversify its acquisitions or operations. The
Company's probable inability to diversify its activities into more than one area
will subject the Company to economic fluctuations within a particular business
or industry and therefore increase the risks associated with the Company's
operations.

6. Regulations.

An acquisition made by the Company may be of a business that is subject to
regulation or licensing by federal, state, or local authorities. Compliance with
such regulations and licensing can be expected to be a time-consuming, expensive
process and may limit other investment opportunities of the Company.

7. Conflicts of Interest.

Certain conflicts of interest exist between the Company and its executive
officer and director. He has other business interests to which he devotes his
primary attention, and he may be expected to continue to do so although
management time should be devoted to the business of the Company. As a result,
conflicts of interest may arise that can be resolved only through his exercise
of such judgment as is consistent with his fiduciary duties to the Company.

8. Indemnification of Officers and Directors.

The Company's Articles of Incorporation provide for the indemnification of its
directors, officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to which
they become a party arising from their association with or activities on behalf
of the Company. The Company may also bear the expenses of such litigation for
any of its directors, officers, employees, or agents, upon such person's promise
to repay the Company therefore if it is ultimately determined that any such
person shall not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by the Company, which it will be
unable to recoup.

9. Dependence upon Outside Advisors.

To supplement the business experience of management, the Company may be required
to employ accountants, technical experts, appraisers, attorneys, or other
consultants or advisors. The selection of any such advisors will be made by
management without any input from shareholders. Furthermore, it is anticipated
that such persons may be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to the Company.

10. Need for Additional Financing.

The Company has no funds to take advantage of any available business
opportunities. Even if the Company were to obtain sufficient funds to acquire an
interest in a business opportunity, it may not have sufficient capital to
exploit the opportunity. The ultimate success of the Company will depend upon
its ability to raise additional capital. The Company has not investigated the


                                      -4-
<PAGE>

availability, source, or terms that might govern the acquisition of additional
capital and will not do so until it evaluates its needs for additional
financing. When additional capital is needed, there is no assurance that funds
will be available from any source or, if available, that they can be obtained on
terms acceptable to the Company. If not available, the Company's operations will
be limited to those that can be financed with its modest capital.

11. Competition.

The search for potentially profitable business opportunities is intensely
competitive. The Company expects to be at a disadvantage when competing with
many firms that have substantially greater financial and management resources
and capabilities than the Company. These competitive conditions will exist in
any industry in which the Company may become interested.

12. No Foreseeable Dividends.

The Company has not paid dividends on its Common Stock and does not anticipate
paying dividends in the foreseeable future.

13. Loss of Control by Present Management and Shareholders.

The Company may consider an acquisition in which the Company would issue as
consideration for the business opportunity to be acquired an amount of the
Company's authorized but unissued Common Stock that could, upon issuance,
constitute as much as 95% of the voting power and equity of the Company. The
result of such an acquisition would be that the acquired company's stockholders
and management would control the Company, and the Company's management could be
replaced by persons unknown at this time. Such a merger could leave investors in
the securities of the Company with a greatly reduced percentage of ownership of
the Company. Management could sell its control block of stock at a premium price
to the acquired company's stockholders, although management has no plans to do
so.

14. Dilutive Effects of Issuing Additional Common Stock.

The majority of the Company's authorized but unissued Common Stock remains
unissued. The board of directors of the Company has authority to issue such
unissued shares without the consent or vote of the shareholders of the Company.
The issuance of these shares may further dilute the interests of investors in
the securities of the Company and will reduce their proportionate ownership and
voting power in the Company.

15. Thinly-traded Public Market.

There currently is only a thinly traded or virtually inactive public market for
the securities of the Company, and no assurance can be given that a more active
market will develop or that an investor will be able to liquidate his investment
without considerable delay, if at all. If a more active market should develop,
the price may be highly volatile. Factors such as those discussed in this "Risk
Factors" section may have a significant impact upon the market price of the
securities of the Company. Owing to what may be expected to be the low price of
the securities, many brokerage firms may not be willing to effect transactions


                                      -5-
<PAGE>

in the securities. Even if an investor finds a broker willing to effect a
transaction in these securities, the combination of brokerage commissions, state
transfer taxes, if any, and any other selling costs may exceed the selling
price. Further, many lending institutions will not permit the use of such
securities as collateral for any loans.

EMPLOYEES

As of September 30, 2004, Nannaco had no employees who worked for the Company
full time and a chief executive officer who devotes only so much time as is
required to fulfill his duties under his employment agreement dated March 15,
2004 as amended. The chief executive officer is also the sole director and in
that capacity works on a contract basis for consulting services as more fully
set forth as Exhibit 4.7 to the Form S-8 the Company filed in November, 2004.

ITEM 2. DESCRIPTION OF PROPERTY

As of September 30, 2004, the Company had no property and shared the corporate
offices of another business for no rent. The Company's address is 7235 North
Creek Loop, Gig Harbor, WA 98335 .

ITEM 3. LEGAL PROCEEDINGS

From time to time we may become subject to proceedings, lawsuits and other
claims in the ordinary course of business including proceedings related to
environmental and other matters. Such matters are subject to many uncertainties,
and outcomes are not predictable with assurance.

The Company is not presently engaged in any legal proceedings not previously
reported.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

In February 2004, the Company received a sufficient number of written consents
to amend the articles of incorporation to increase the capitalization of the
company and to provide for blank check preferred capital stock.

In September 2004, the Company received a sufficient number of written consents
to authorize and effect a 1-for-100 reverse stock split. The reverse stock split
reduced the total number of shares of common stock issued and outstanding as of
the record date from 474,253,389 to 4,742,534. Votes representing more than two
thirds of all shares of common stock entitled to vote on the matter voted to
approve these changes.

In December 2004, the Company received a sufficient number of written consents
to authorize and effect a 1-for-40 reverse stock split. The reverse stock split
reduced the total number of shares of common stock issued and outstanding as of
the record date from 63,742,534 to 1,543,563. Votes representing more than two
thirds of all shares of common stock entitled to vote on the matter voted to
approve these changes.


                                      -6-
<PAGE>

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of September 30, 2004, Nannaco had 118,563 shares of common stock issued and
outstanding adjusted for a 1 for 100 and a 1 for 40 stock split and had
approximately 60 stockholders of record.

The following table sets forth certain information as to the high and low bid
quotations quoted on the OTCBB since our common stock began trading in the
fourth quarter of 2002 through 2004. Information with respect to
over-the-counter bid quotations represents prices between dealers, does not
include retail mark-ups, markdowns or commissions, and may not necessarily
represent actual transactions.

The Company's common stock, par value $0.001 per share (the "Common Stock"), is
traded on the Over the Counter Bulletin Board ("OTCBB") under the symbol
"NNNC.OB".

The Company's Common Stock commenced trading on September 5, 2002. The bid price
of our common stock was $0.05 cents per share on January 25, 2005.


Period                                               High (1)       Low (1)

Fourth Quarter           2002                        0.47              0.25

First Quarter            2003                        0.40              0.055
Second Quarter                                       0.12              0.020
Third Quarter                                        0.035             0.125
Fourth Quarter                                       0.065             0.012

First Quarter            2004                        0.04              0.007
Second Quarter                                       0.028             0.028
Third Quarter                                        0.037             0.028
Fourth Quarter                                       0.032             0.028

1) Prices presented for the last day of each period noted. Prices have in
certain periods been adjusted to reflect a 1 for 100 and 1 for 40 reverse stock
split and have been based on historical prices as reported, which may or not be
reliable.

RECENT FINANCING AND SALE OF UNREGISTERED SECURITIES

The following sets forth unregistered sales of securities by us pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
during the proceeding fiscal year:

          On August 23, 2004, the Company sold 10,000,000 shares of newly
designated Series A Convertible Preferred Stock to one purchaser in a
transaction exempt from registration under section 4 (2) of the Securities Act.


                                      -7-
<PAGE>

         On October 29, 2004, the Company issued shares of common stock to Steve
Careaga in the amount of 750,000 shares. The common stock is issued to Mr.
Careaga in his capacity as Chief Financial Officer and director as consideration
of services past and continuing and subject to substantial conditions
constituting events of forfeiture. Under conditions of the issuance, Mr. Careaga
must raise capital in excess of $5,000,000 within 90 days following this
issuance or forfeit the shares. The shares were issued in reliance on section 4
(2) of the Securities Act.


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS AS OF
SEPTEMBER 30, 2004

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                                               Number of Securities
                                                                                               remaining available for
                                  Number of  Securities to be                                  future issuance under
                                  issued upon exercise of           Weighted-average price     equity compensation
                                  outstanding options, warrants     of outstanding options,    plans (excluding
                                  and rights                        warrants and rights        securities reflected in
                                                                                               column (a)
-------------------------------------------------------------------------------------------------------------------------
                                  (a)                               (b)                        (c)
-------------------------------------------------------------------------------------------------------------------------
<S>                               <C>                               <C>                        <C>
Equity compensation plans         -0-                               -0-                        -0-
approved by security holders
-------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not     5,000,000                         -0-                        -0-
approved by security holders
-------------------------------------------------------------------------------------------------------------------------
TOTAL                             5,000,000                         -0-                        -0-
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

OUR TRANSFER AGENT IS:

            Computershare Trust Company, Inc.
            PO Box 1596
            Denver, CO 80201
            Telephone: (303) 262-0600
            Fax: (303) 262-0603

DIVIDENDS

We presently intend to retain future earnings to support our growth. The Company
has not paid cash dividends on its common stock and does not intend to pay any
cash dividend in the foreseeable future. Any payment of cash dividends in the
future will be dependent upon: the amount of funds legally available, our
earnings; financial condition; capital requirements; and other factors which our
Board of Directors deems relevant.


                                      -8-
<PAGE>

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The following is a discussion of our financial condition, results of operations,
liquidity and capital resources. This discussion should be read in conjunction
with our audited financial statements and the notes thereto included elsewhere
in this Form 10-KSB.

Some of the statements under "Description of Business," "Risk Factors,"
"Management's Discussion and Analysis or Plan of Operation," and elsewhere in
this report and in the Company's periodic filings with the Securities and
Exchange Commission constitute forward-looking statements. These statements
involve known and unknown risks, significant uncertainties and other factors
what may cause actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward- looking
statements. Such factors include, among other things, those listed under "Risk
Factors" and elsewhere in this report.

In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "could," "intends," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of such terms or other comparable terminology.

The forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties. Such forward-looking statements are
based on assumptions that the Company will obtain or have access to adequate
financing for each successive phase of its growth, that there will be no
material adverse competitive or technological change in condition of the
Company's business, that the Company's President and other significant employees
will remain employed as such by the Company, and that there will be no material
adverse change in the Company's operations, business or governmental regulation
affecting the Company. The foregoing assumptions are based on judgments with
respect to, among other things, further economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control.

Although management believes that the expectations reflected in the
forward-looking statements are reasonable, management cannot guarantee future
results, levels of activity, performance or achievements. Moreover, neither
management nor any other persons assumes responsibility for the accuracy and
completeness of such statements.

GENERAL

History

Nannaco, Inc. ("Nannaco", "the Company", "we", "us") was incorporated under the
laws of the State of Texas on October 20, 1998, and immediately thereafter began
operations. The Company previously provided surface cleaning, surface
protection, surface restoration, and other services to commercial businesses, as
well to the owners of historical buildings. The Company previously operated
under the trade name of Surface Pro.


                                      -9-
<PAGE>

Until September of 2003, Nannaco focused on surface cleaning, surface protection
and restoration. However, sales from these products were not sufficient to
enable the company to continue operations. In September of 2003, the Company
changed its strategy due to poor operating conditions and operating results
coupled with difficulties in raising capital through debt and equity sources.
The Company adopted a new strategy during the fourth quarter of 2003 that
committed to the disposal of its current business and to seek a
merger/acquisition transaction with a Company having better financial resources.
As of September 2003, the Company ceased all operating activities and has
disposed of most of its assets. The Company has entered a new development phase,
while formulating a plan to improve it financial position.

OVERVIEW OF COMPANY

Since its inception, the Company has suffered recurring losses from operations
and has been dependent on existing stockholders and new investors to provide the
cash resources to sustain its operations. During the year ended September 30,
2004 and 2003, the Company reported net losses of $6,400,107 and $977,156
respectively.

The Company's long-term viability as a going concern is dependent on certain key
factors, as follows:

      -     The Company's ability to continue to obtain sources of
            outside financing to support near term operations and to
            allow the Company to continue to make investments
      -     The Company's ability to achieve profitability and sustain a cash
            flow level that will ensure support for continuing operations.

RECENT DEVELOPMENTS

In March 2004, the Company announced they had signed a letter of intent to
acquire Red Alert Group, Inc. ("Red Alert"), a company specializing in homeland
and global security. The Company anticipated that upon the successful completion
of the announced acquisition, the name of the Company would be changed to Red
Alert Group, Inc.

In November 2004, the Company announced that the merger previously announced
with Red Alert was terminated. The Board of Directors of both Nannaco and Red
Alert approved the termination, without cause, of the Agreement and Plan of
Merger. As a result of the termination of the agreement, both companies will
bear their own expenses in connection with the merger and neither company will
owe to the other either break-up fees or other costs and expenses.

On August 23, 2004, the Company sold 10,000,000 shares of newly designated
Series A Convertible Preferred Stock. The obligation to buy the Series A
Convertible Preferred Stock created by the Subscription Agreement was, on the
same date, exchanged for a promissory note executed by the buyer as maker and
the Company as holder. The promissory note is in the principal amount of
$100,000, bears interest at the rate of 2% per annum and will be paid in
installments. The first installment is due on October 15, 2004 in the amount of
$10,000 and thereafter installments of $7,500 plus accrued interest are due each
month with all principal and interest due to be paid on or before October 15,
2005.

The first installment under a promissory note receivable held by the Company was
due on October 15, 2004 in the amount of $10,000 (See History and Nature of
Business - Note 1). The Company did not receive this payment. Additionally,
installments of $7,500 plus accrued interest are due each month with all
principal and interest due to be paid on or before October 15, 2005. The second,
third and fourth installments due on November 15, December 15, 2004 and January
15, 2005 in the amount of $7,500 each plus accrued interest were not received by
the Company either. As of the date of our Financial Statements, the Company has
not notified the nonperforming party that an event of default has occurred.


                                      -10-
<PAGE>

However, the Company believes that the promissory note is fully collectible and
that it will obtain the required proceeds in the foreseeable future.

On October 6, 2004, a reverse split was completed and the number of issued and
outstanding shares was reduced from 474,253,389 to 4,742,534 after the reverse
split.

On October 28, 2004 the Company and NAZZ Productions, Inc. entered into an
agreement to merge a subsidiary of Nannaco into NAZZ Productions, Inc. ("NAZZ")
and to rename the Company NAZZ Productions, Inc. (the "reverse merger"). The
agreement provides that all of the shares of common stock of NAZZ issued and
outstanding at the time the merger becomes effective under applicable state law
(the "Effective Time"), will be converted into common stock of Nannaco such that
the current holder of NAZZ common stock will hold 95% of all shares of Nannaco's
common stock outstanding immediately after the closing of this merger
transaction, on a fully diluted basis. The obligation of NAZZ to close is
conditioned on, among other things, the satisfactory completion of due diligence
review by NAZZ and the reduction of Nannaco's liabilities to $50,000 or less.
The agreement may be terminated at any time prior to the Effective Time by
written agreement; by NAZZ for breach of any of the representations and
warranties or covenants of Nannaco if such breach is not cured within thirty
days of written notice; by Nannaco for breach of any NAZZ representations and
warranties or covenants if the breach is not cured within thirty days of written
notice; by either party in the event the merger is not closed by December 30,
2004. In the event Nannaco breaches the agreement with NAZZ by engaging in
efforts leading to the acquisition of Nannaco by a corporation other than NAZZ
then, NAZZ shall be entitled to a $200,000 break-up fee".

On October 29, 2004, the Company issued shares of common stock to Steve Careaga
in the amount of 750,000 shares. The common stock is issued to Mr. Careaga in
his capacity as Chief Financial Officer and director as consideration of
services past and continuing and subject to substantial conditions constituting
events of forfeiture. Under conditions of the issuance, Mr. Careaga must raise
capital in excess of $5,000,000 within 90 days following this issuance or
forfeit the shares.

In November 2004, the Company issued 675,000 shares of its $0.001 par value
common stock to four groups for legal and consulting services. The issuance of
the shares was pursuant to a registration statement filed on Form S-8.

In December 2004, the Company provided an Information Statement to its
stockholders indicating consents had been obtained in sufficient number to
authorize the board of directors to effect a 1 for 40 reverse stock split of the
common stock. Nannaco is currently authorized to issue 500,000,000 shares of its
common stock of which 63,742,534 shares are issued and outstanding as of
November 4, 2004. Shareholders holding 51,000,000 of the voting capital stock
have consented in writing to the proposal, constituting approval in excess of
67% of the shares entitled to vote. A reverse split on a 1 for 40 basis would
reduce the number of issued and outstanding shares to approximately 1,543,563,
but will not reduce the number of authorized shares of common stock. The reverse
split will not have any effect on the stated par value of the common stock.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The methods, estimates and judgment we use in applying our most critical
accounting policies have a significant impact on the results we report in our
financial statements. The Securities and Exchange Commission has defined the
most critical accounting policies as the ones that are most important to the
portrayal of our financial condition and results, and require us to make our
most difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Based upon this definition,
our most critical estimates include going concern, the realizability of a note


                                      -11-
<PAGE>

receivable, provision for investor loans, impairment of property and equipment,
evaluation of a beneficial conversion feature in convertible debentures and
convertible preferred stock, valuation of the fair value of financial
instruments, valuation of non-cash issuances of common stock and the valuation
allowance for deferred tax assets. We also have other key accounting estimates
and policies, but we believe that these other policies either do not generally
require us to make estimates and judgments that are as difficult or as
subjective, or it is less likely that they would have a material impact on our
reported results of operations for a given period. For additional information
see Note 3 "Summary of Significant Accounting Policies" in the notes to our
audited financial statements contained in our annual report on Form 10-KSB for
the fiscal year ended September 30, 2004. Although we believe that our estimates
and assumptions are reasonable, they are based upon information presently
available. Actual results may differ significantly from these estimates.

GOING CONCERN

The Company has no revenues but continues to incur liabilities. The independent
auditors' reports to our financial statements for the years ended September 30,
2004 and 2003, include an emphasis paragraph in addition to their audit opinion
stating that the Company's recurring losses from operations including a net loss
in 2004 of $6,400,107, working capital deficit of $840,706 at September 30,
2004, accumulated deficit from prior business operations and deficit accumulated
during the development stage at September 30, 2004 of $5,048,764 and $6,400,107,
respectively, substantial obligations with no current resources to satisfy the
obligations and the Company's default on convertible debentures raise
substantial doubt about our ability to continue as a going concern. Our
financial statements do not include any adjustments to reflect the possible
effects on recoverability and classification of assets or the amounts and
classification of liabilities that may result from our inability to continue as
a going concern.

NOTE RECEIVABLE

Note receivable resulted from the sale of 10,000,000 shares of newly designated
Series A Convertible Preferred Stock and is reported at anticipated realizable
value. Management reviews the customer account for the note on a routine basis
to determine if the account should be charged off or written down. At September
30, 2004, the note receivable is deemed to be collectible in full.

PROVISION FOR UNCOLLECTIBLE INVESTOR LOANS

At September 30, 2002, loans receivable was $109,000 and related accrued
interest was $21,700. For 2003, the Company has treated the loans receivable
from investors as non-accrual loans with regard to interest. During 2003,
$50,000 of the total $109,000 in loans was repaid and the remaining $59,000
loans receivable and accrued interest of $21,760 was charged to operations as a
bad debt on uncollectible loans. Any future recovery of these loans and interest
will be recognized as other income. As a result of these entries, the Company
has no investor loans at September 30, 2004.

IMPAIRMENT OF PROPERTY AND EQUIPMENT

The Company has ceased all operating activities and has disposed of its assets
while formulating a plan to improve its financial position. As a result, the
Company disposed of the majority of its property and equipment for zero proceeds
and recorded a loss from disposition of assets in the amount of $94,072 during
the year ended September 30, 2003. Additionally, the remaining assets were
deemed impaired and we recorded a $15,382 impairment charge for the year ended
September 30, 2003. As a result of these activities, the Company has no property
and equipment at September 30, 2004.


                                      -12-
<PAGE>

BENEFICIAL CONVERSION FEATURE IN CONVERTIBLE DEBENTURES AND CONVERTIBLE
PREFERRED STOCK

In accordance with EITF Issue 98-5, as amended by EITF 00-27, we must evaluate
the potential effect of any beneficial conversion terms related to convertible
instruments such as convertible debt or convertible preferred stock. The Company
has issued convertible debentures and convertible preferred stock. A beneficial
conversion may exist if the holder, upon conversion, may receive instruments
that exceed the value of the convertible instrument. Valuation of the benefit is
determined based upon various factors including the valuation of equity
instruments, such as warrants, that may have been issued with the convertible
instruments, conversion terms, value of the instruments to which the convertible
instrument is convertible, etc. Accordingly, the ultimate value of the
beneficial feature is considered an estimate due to the partially subjective
nature of valuation techniques.

FAIR VALUE OF FINANCIAL INSTRUMENTS

We define the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
The carrying value of accounts receivable, accounts payable and accrued
liabilities approximates fair value because of the short maturity of those
instruments. The estimated fair value of our other obligations is estimated
based on the current rates offered to us for similar maturities. Based on
prevailing interest rates and the short-term maturity of all of our
indebtedness, management believes that the fair value of our obligations
approximates book value at September 30, 2004.

VALUATION OF NON-CASH ISSUANCES OF COMMON STOCK

The Company issued common stock to several parties in non-cash transactions
during 2004. For the majority of these issuances, valuation was determined based
upon the stock closing price on the date of issuance.

VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS

In assessing the recoverability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The valuation allowance has been increased by $96,126
during fiscal year 2004 as a result of increased net operating losses. Net
operating loss carry-forwards aggregate approximately $2,819,000 and expire in
the years through 2023.

As of October 1, 2003, the Company has changed its strategy and moved into a new
line of business. As a result of this change, under IRS rules, approximately
$2,537,000 of the net operating loss carry-forwards through September 30, 2003
discussed above will not be allowable.


                                      -13-
<PAGE>

RESULTS OF OPERATIONS

Fiscal year ended September 30, 2004 compared to fiscal year ended September 30,
2003

                                                YEAR ENDED SEPTEMBER 30,

                                              2004                 2003
                                         ---------------------------------------

REVENUES FROM DISCONTINUED OPERATIONS    $    15,577           $    67,773
COST OF REVENUES                              16,848                67,408
                                         ---------------------------------------
GROSS LOSS                                    (1,271)               (365)

OPERATING EXPENSES:
Selling, general and administrative           16,186                62,025
Compensation and payroll taxes             2,040,578               441,588
Consulting                                 2,957,996                33,682
Penalties                                          -                 4,493
Legal and professional                     1,328,986                48,025
Debenture liquidated damages                  26,740                     -
Rent                                           1,495                 5,918
Travel and entertainment                       3,726                   323
Loss on disposition of assets                      -                94,072
Provision for uncollectible loans                  -                80,760
Amortization of debt issue costs                   -                65,400
Debenture liquidated damages                       -                17,500
Impairment of assets                               -                15,382
Termination of merger fee                          -                30,000
Bad debt expense                               1,171                     -
                                         ---------------------------------------
TOTAL OPERATING EXPENSES                   6,376,878               899,168
                                         ---------------------------------------

LOSS FROM OPERATIONS                      (6,378,149)             (898,804)

OTHER INCOME (EXPENSE):
Other income                                       -                     -
Settlement gain                                    -                 1,750
Interest expense, net                        (21,959)              (80,102)
                                         ---------------------------------------
TOTAL OTHER INCOME (EXPENSE)                 (21,959)              (78,352)
                                         ---------------------------------------

NET LOSS                                 $(6,400,107)          $  (977,156)
                                         =======================================

Revenue:

Revenue on discontinued operations decreased $52,196, or 77%, to $15,577 for
2004 from $67,773 for 2003. The decrease was primarily the result of the Company
making the decision to exit the current line of business and to focus on being a
consultant and advisor to customers.



                                      -14-
<PAGE>

Cost of Sales:

Cost of sales relating to revenue from discontinued operations decreased
$50,560, or 75%, to $16,848 for 2004 from $67,408 for 2003. The decrease was
primarily the result of making the decision to exit the current line of business
and to focus on being a consultant and advisor to customers.

Operating Expenses:

Operating expense increased to $6,376,878 for 2004 from $899,168 for 2003. The
increase was primarily the result of a $1,598,989 increase in compensation, a
2,924,314 increase in consulting and a $1,280,961 increase in legal and
professional. The increase in compensation, consulting and legal and
professional was primarily the result of the issuance of stock for services and
amortization of deferred services.

Other Income (Expense):

Other income (expense) increased $56,373 of income, or 72% to $21,959 of expense
for 2004 from $78,352 of expense for 2003. The increase in income was primarily
due to a $58,143 decrease in interest expense. The decrease in interest expense
was related to a 58,333 charge in 2003 for a beneficial conversion feature
inherent in convertible debentures we issued in 2003.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $0 at September 30, 2004 as compared to $0 at
September 30, 2003, and working capital deficit was $840,706 at September 30,
2004 as compared to $726,140 at September 30, 2003. The increase in the working
capital deficit was primarily due to a $36,196 increase in due to consultants
and a $77,190 increase in payroll taxes payable.

Operating Activities: Cash used in operating activities was $0 for fiscal year
ended September 30, 2004 while cash that was provided by operating activities
was $100,991 for the fiscal year ended September 30, 2003. The decrease in cash
used resulted primarily from a $5,422,952 increase in net loss offset primarily
by increases of $1,202,800 of stock issued for legal and professional,
$1,769,001 of stock issued for consulting, $1,963,387 for amortization of
deferred compensation and $1,182,175 for amortization of deferred consulting.

Investing Activities: There were no investing activities for fiscal year ended
September 30, 2004 while cash that was used in investing activities was $15,382
for the fiscal year ended September 30, 2003. In 2003, cash used in investing
activities resulted from cash advances to stockholders.

Financing Activities: There were no financing activities for the fiscal year
ended September 30, 2004 while cash that was used in financing activities was
$116,373 for the fiscal year ended September 30, 2003. In 2003, the cash used in
financing activities resulted primarily from $122,100 of proceeds from a
convertible debenture offering, net of $52,900 in costs.

Our principal uses of cash to date have been for operating activities and we
have funded our operations during fiscal year 2004 and 2003 primarily by
incurring indebtedness and issuing stock for services. During the fiscal year
ended September 30, 2003, we had proceeds of $122,100 from the issuance of
convertible debentures, net of $52,900 of costs. In addition, we made principal
payments of $5,727 on existing debt during the fiscal year ended September 30,
2003.


                                      -15-
<PAGE>

SHORT-TERM DEBT

Our short-term debt at September 30, 2004 consisted of the following:

BANK LOANS
$35,000 bank installment loan, dated Feb. 19, 2000,
  bearing interest at 10% per annum, 60 monthly
  payments of principal and interest..............................     $  25,350
$35,000 bank line of credit, bearing interest at
  prime plus 1.25% per annum, interest payable monthly
  and line of credit due July 15, 2002............................        33,986
                                                                       ---------
                                                                       $  59,336
                                                                       =========

     On February 19, 2000, we obtained a bank installment loan in the amount of
$35,000, of which $25,350 is outstanding at September 30, 2004. The interest
rate is 10% per annum and sixty monthly payments of principal and interest in
the amount of $745 are required. This note is secured by the personal guaranty
of the Company's former President.

     At September 30, 2004, we had a bank line of credit, which provides for
borrowings of up to $35,000, of which $33,986 was outstanding. The interest rate
is Prime plus 1.25% per annum and monthly interest payments were required. The
line of credit matured on July 15, 2002 but the bank has not exercised its
rights of default and the facility was on a month to month basis. The line of
credit is secured by a personal guaranty of the Company's former President.

LOAN PAYABLE - RELATED PARTY

Loan payable, dated January through July of 2001,
  bearing interest at 10% per annum and due in July of 2002.......     $  42,700
                                                                          ======

     Beginning in January of 2001 and through July of 2001, Mark Triesch, a
director of the Company at that time, loaned $43,700 to the Company in the form
of a promissory note. The note bears interest at ten percent (10%) per annum and
the principal and accrued interest was due one year from each of the
investments. As of July 2002, the entire amount was due and payable. In April
2003, the Company repaid $1,000 of principal resulting in the current balance
due of $42,700.

CONVERTIBLE DEBENTURES
$175,000 Convertible Debentures, dated March and April
  of 2003, bearing interest at 6% per annum and due in
  March and April of 2006.........................................     $ 107,500
                                                                         =======

         Pursuant to Securities Purchase Agreements, Convertible Debentures and
related contracts, in March of 2003, the Company issued $155,000 of six percent
(6%) convertible debentures due in March of 2006 and in April issued another
$20,000 of the debentures due in April 2006. The Company received $122,100 of
cash proceeds, net of $52,900 of cash offering costs. The debenture holder has
the option of converting the principal and accrued interest into the Company's
common stock at a conversion price equal to seventy-five percent (75%) of the
lowest closing bid price per share for the twenty (20) trading days immediately
preceding the conversion. The Company has the option to redeem all or part of
the debentures prior to the maturity date at a price equal to one hundred thirty
percent (130%) of the principal amount plus accrued interest.


                                      -16-
<PAGE>

         The Company recognized an immediate $58,333 interest expense and
paid-in capital relating to a beneficial conversion feature inherent in the
debentures since the debentures were immediately convertible and the debentures
became due on demand due to a default (see below.) In connection with the
offering, in addition to cash offering costs of $52,900, the Company issued
500,000 of its common shares to the investment bankers. The shares were valued
on the grant date at the trading price of $0.03 per share or $12,500. The total
offering costs of $65,400 were initially deferred to be amortized over the term
of the debentures, however due to a default provision which changed the
debentures maturity to due on demand (see below), the $65,400 was fully expensed
as of September 30, 2003.

         Under a related Registration Rights Agreement, the Company is subject
to a 2% monthly liquidated damages penalty for not filing a registration
statement with the Securities and Exchange Commission, within a stipulated
timeframe, to register the common shares underlying the convertible debentures
and another 2% monthly liquidated damages penalty relating to that registration
statement not becoming effective within a stipulated timeframe. The liquidated
damages penalty started accruing at 2% or $3,500 per month at June 1, 2003 and
at another 2% or $3,500 per month starting September 1, 2003. The penalties for
June and July 2003 were satisfied with the issuance of 350,000 of the Company's
common shares to the debenture investors and remaining accrued liquidated
damages were $10,500 at September 30, 2003. The Company recognized a gain on
settlement of $7,000 of accrued liquidated damages in June and July 2003 based
on the $0.015 trading price of the common stock on the settlement date. For the
three month period ended December 31, 2003, the Company recorded an additional
$24,500 of liquidated damages expense resulting in an accrued balance of
$35,000. Effective March 31, 2004, the Company reached an agreement with the
debenture investors and all outstanding penalties in the amount of $35,000 were
satisfied with the issuance of 438 of the Company's common shares based on a
$0.02 trading price of the common stock on the settlement date. For the period
from April 1, 2004 through September 30, 2004, the Company recorded an
additional $2,240 of liquidated damages resulting in an accrued balance of
$2,240 as of September 30, 2004.

         Due to the default under the Registration Rights Agreement, the
debentures went into default as of June 1, 2003. Accordingly, the debentures
became due on demand at that date and are presented as current liabilities at
September 30, 2004.

         In April and May of 2004, $67,500 principal amount of the debentures
was converted into 12,668,047 shares of our common stock. $60,000 of the
debentures was converted in April 2004 into 10,943,910 shares at $0.0054825 per
share and $7,500 of the debentures was converted in May 2004 into 1,724,137
shares at $0.00435 per share.

         As a result of the above conversions, $107,500 principal amount of the
convertible debentures is outstanding at September 30, 2004.

EQUITY FINANCING

None

LIQUIDITY

To continue with our business plan, we will require additional short-term
working capital and we have not had generating sufficient cash from operations
to fund our operating activities through the end of fiscal 2005. Presently, we
have no source of revenues and have moved into a new business concept as a
consultant and advisor to customers. We cannot assure you that the new business
concept will provide sufficient proceeds, if any, and borrowings under any
interim financing we are able to secure will be sufficient to meet our projected
cash flow needs.


                                      -17-
<PAGE>

Our ability to obtain additional financing depends on many factors beyond our
control, including the state of the capital markets, the market price of our
common stock, the prospects for our business and the approval by our
stockholders of an amendment to our certificate of incorporation increasing the
number of shares of common stock we are authorized to issue. The necessary
additional financing may not be available to us or may be available only on
terms that would result in further dilution to the current owners of our common
stock. Failure to obtain commitments for interim financing and subsequent
project financing, would have a material adverse effect on our business, results
of operations and financial condition. If the financing we require to sustain
our working capital needs is unavailable or insufficient or we do not receive
the necessary financing, we may be unable to continue as a going concern.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table highlights, as of September 30, 2004, our contractual
obligations and commitments by type and period:

<TABLE>
<CAPTION>
                                                                    PAYMENTS DUE BY PERIOD
                                                           LESS THAN 1
CONTRACTUAL OBLIGATIONS                      TOTAL             YEAR         1-3 YEARS      4-5 YEARS   AFTER 5 YEARS
-----------------------                      -----             ----         ---------      ---------   -------------
<S>                                      <C>                <C>             <C>              <C>          <C>
Short-Term Debt:

Bank Loans                                    59,336           59,336               -              -               -
Loan Payable-Related Party                    42,700           42,700               -              -               -
Convertible Debentures                       107,500          107,500               -              -               -
                                         -----------        ---------       ---------      ---------   ---------------
Total Short-Term Debt                    $   209,536        $ 209,536       $       -              -               -
                                         ===========        =========       =========      =========   ===============
</TABLE>

RECENT ACCOUNTING DEVELOPMENTS

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations, for a disposal of a
segment of a business. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001, with earlier application encouraged. The adoption of
SFAS No. 144 as of January 1, 2002 did not have a significant impact on our
financial position and results of operations.

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145
(SFAS 145), Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections, related to accounting for debt
extinguishments, leases, and intangible assets of motor carriers. The provisions
of SFAS 145 are effective for fiscal years beginning after May 15, 2002 with
earlier adoption encouraged. The adoption of SFAS No. 145 did not have a
significant impact on our financial position and results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," which established additional
accounting and disclosure requirements when an enterprise guarantees the
indebtedness of others. The enterprise providing the guarantee is required to
recognize a liability for the fair value of the guarantee and disclose the
information in its interim and annual financial statements. The adoption of FIN
45 did not have a significant impact on our financial position and results of
operations.


                                      -18-
<PAGE>

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,"
which as an interpretation defines when and who consolidates a "variable
interest entity," or "VIE." This new consolidation model applies to entities (i)
where the equity investors (if any) do not have a controlling financial
interest, or (ii) whose equity investment at risk is insufficient to finance
that entity's activities without receiving additional subordinated financial
support from other parties and requires additional disclosures for all
enterprises involved with the VIE. FIN 46 is effective during 2003 depending on
when the VIE is created. We do not believe that the adoption of FIN 46 will have
a significant impact on our financial position and results of operations.

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150 (SFAS
150), "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity." It establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both
liabilities and equity. This standard is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of FAS 150 did not have a significant impact on our financial position
and results of operations.

In December 2002, the FASB issued Statement No. 148 (FAS 148), "Accounting for
Stock-Based Compensation-Transition and Disclosure" which amends FASB No. 123
(FAS 123), "Accounting for Stock-Based Compensation." FAS 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation and amends the
disclosure requirements of FAS 123 to require disclosures in both the annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
transition guidance and disclosure provisions of FAS 148 were effective for the
Company's financial statements issued for the first quarter of 2003. The
adoption of FAS 148 did not have a material impact on our financial position and
results of operations 2004 OUTLOOK The ability to continue in existence is
heavily dependent on securing additional capital from investors or debt. There
is no assurance that additional equity or debt financing will be available on
terms acceptable to Management.

ITEM 7. FINANCIAL STATEMENTS

The Company's Financial Statements and Notes thereto are filed together with
this report starting at Page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

James J. Taylor, C.P.A., audited our balance sheets as of September 30, 2002 and
2001 and the related statements of operations, stockholders' deficit and cash
flows for the years then ended. Such financial statements accompanied our Form
10-KSB for the year ended September 30, 2002 and were filed with the Securities
and Exchange Commission on January 22, 2003. The report of James J. Taylor,
C.P.A. on such financial statements, dated January 6, 2003, did not contain an
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles except that the report
contained an explanatory paragraph expressing concern as to the Company's
ability to continue as a going concern.


                                      -19-
<PAGE>

Our client-auditor relationship with James J. Taylor, C.P.A. ceased on January
5, 2004. The Company engaged Salberg & Company, P.A. ("Salberg"). On January
5, 2004 as its principal accountant to audit the Company's financial
statements for the year ended September 30, 2003.

During each of the two (2) years ended September 30, 2002 and 2001, and all
subsequent interim periods, the Company did not consult Salberg on any
matters described in Item 304(a)(2)(i) of Regulation S-K. During each of the two
(2) years ended September 30, 2002 and 2001, and all subsequent interim periods,
the Company did not consult Salberg on any matters described in Item
304(a)(2)(ii) of Regulation S-K.

During each of the two (2) years ended September 30, 2002 and 2001, and all
subsequent interim periods, there were no disagreements on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements, if not resolved to Taylor's
satisfaction would have caused them to make reference in connection with their
opinion to the subject matter of the disagreement. During each of the two (2)
years ended September 30, 2002 and 2001, and all subsequent interim periods,
Taylor did not advise the Company of any "reportable events" as described in
Item 304(a)(1)(v) of Regulation S-K. The Company requested Taylor to furnish
a letter addressed to the Commission, stating whether he agrees with the
statements made by the Company, and, if not, stating the respects in which
it does not agree.

ITEM 8A. CONTROLS AND PROCEDURES.

As of the date this report is filed, an evaluation was performed under the
supervision and with the participation of the Company's principal executive
officers and financial officers of the effectiveness of the design and operation
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
period covered by this report. During that period, our Company experienced
significant capital constraints, and in September 30, 2003, the Company changed
its strategy due to poor operating conditions, coupled with difficulties in
raising capital through debt and equity sources. The Company adopted a new
strategy that committed to the disposal of its current business and to seek a
merger/acquisition transaction with a company having better financial resources
and/or act as a holding company for newly developed businesses. As of September
30, 2003, the Company ceased all operating activities under the surface
cleaning, surface protection and restoration business and disposed of most of
its assets while formulating a plan to improve it financial position. The
Company had moved to a new line of business as a consultant and advisor to
customers, however, they ceased this activity in March 2004. The Company
continues to seek a merger/acquisition candidate and is treated as a development
stage company, effective October 1, 2003.

As of the date this report is filed, our Company's principal executive officers
and financial officers are evaluating the Company's internal controls and other
factors that could significantly affect internal controls subsequent to the date
of the above-described evaluation period. This evaluation is anticipated to
enable our Company's principal executive officers and financial officers to
maintain our Company as current pursuant to its Exchange Act reporting
obligations and provide our Company with an effective design and operation of
disclosure controls and procedures.


                                      -20-
<PAGE>

ITEM 8B. OTHER INFORMATION.

      On October 28, 2004 the Company and NAZZ Productions, Inc. entered into an
agreement to merge a subsidiary of Nannaco into NAZZ Productions, Inc. ("NAZZ")
and to rename the Company NAZZ Productions, Inc. (the "reverse merger"). The
agreement provides that all of the shares of common stock of NAZZ issued and
outstanding at the time the merger becomes effective under applicable state law
(the "Effective Time"), will be converted into common stock of Nannaco such that
the current holder of NAZZ common stock will hold 95% of all shares of
Nannaco's common stock outstanding immediately after the closing of this
merger transaction, on a fully diluted basis. The obligation of NAZZ to close is
conditioned on, among other things, the satisfactory completion of due diligence
review by NAZZ and the reduction of Nannaco's liabilities to $50,000 or less.
The agreement may be terminated at any time prior to the Effective Time by
written agreement; by NAZZ for breach of any of the representations and
warranties or covenants of Nannaco if such breach is not cured within thirty
days of written notice; by Nannaco for breach of any NAZZ representations and
warranties or covenants if the breach is not cured within thirty days of written
notice; by either party in the event the merger is not closed by December 30,
2004. In the event Nannaco breaches the agreement with NAZZ by engaging in
efforts leading to the acquisition of Nannaco by a corporation other than
NAZZ then, NAZZ shall be entitled to a $200,000 "break-up fee".

                                    PART III

      The information called for by Items 9 - 12 of Form 10KSB are contained in
the definitive information statement (the "Definitive Information Statement") to
be filed with the Securities and Exchange Commission relative to the Company's
2004 merger agreement as previously disclosed or Annual Meeting of Stockholders,
and is hereby incorporated by reference to the Definitive Information Statement,
as filed.


                                      -21-
<PAGE>

ITEM 13. EXHIBITS

(a) The following documents are filed as part of this report:

<TABLE>
<CAPTION>
Exhibit                           Title                                            Location
-------                           -----                                            --------
<S>                       <C>                                                 <C>
2                         Plan and Agreement of Merger with NAZZ              Incorporated by Reference to Form
                          Productions, Inc.                                   8-K dated August 23, 2004

3.1                       Articles of Incorporation                           Incorporated by Reference to the
                                                                              SB-2 Registration Statement filed
                                                                              August 21, 2000

3.2                       Bylaws                                              Incorporated by Reference to the
                                                                              SB-2 Registration Statement filed
                                                                              on August 21, 2000

3.2a                      Certificate of Amendment to Articles                Incorporated by Reference to the
                          of Incorporation                                    SB-2 Registration Statement filed
                                                                              on August 21, 2000

3.3                       Certificate of Amendment to Articles                Incorporated by Reference to the
                          of Incorporation                                    Preliminary Schedule 14C filed
                                                                              February 10, 2004

3.4                       Certificate of Designation of Series A              Incorporated by Reference to Form
                          Convertible Preferred Stock                         8-K dated August 23, 2004

4.01                      2003 Stock Option And Grant Plan                    Incorporated by Reference to Form
                                                                              S-8 Registration Statement filed
                                                                              September 30, 2003

4.1                       Form of Common Stock Certificate                    Incorporated by Reference to the
                                                                              SB-2 Registration Statement filed
                                                                              on August 21, 2000

4.1a                      Engagement Agreement with The Otto Law              Incorporated by Reference to the
                          Group, PLLC                                         Form S-8 Registration Statement
                                                                              filed November 21, 2003

4.1b                      Consulting Services Agreement with James            Incorporated by Reference to Form
                          J. Taylor                                           S-8 filed April 21, 2004

4.1c                      Amendment No. 5 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Bartholomew                       S-8 filed May 11, 2004
                          International Investments Limited, Inc.
                          and NANNACO, Inc.
</TABLE>


                                      -22-
<PAGE>

<TABLE>
<CAPTION>
Exhibit                           Title                                            Location
-------                           -----                                            --------
<S>                       <C>                                                 <C>
4.2                       Consulting Services Agreement between               Incorporated by reference to the
                          Aequitas Company and NANNACO, Inc.                  Form S-8 Registration Statement
                                                                              filed November 21, 2003

4.2a                      Amendment No. 1 to Consulting Services              Incorporated by Reference to Form
                          Agreement with Nicole Van Coller                    S-8 filed May 11, 2004

4.3                       Consulting Services Agreement with                  Incorporated by reference to the
                          T.T. Byrne Capital Investments, Inc.                Form S-8 Registration Statement
                          dated 11-17-2003                                    filed November 21, 2003

4.3b                      Consulting Services Agreement                       Incorporated by reference to the
                          between Michael Nerone and NANNACO, Inc.            Form S-8 Registration Statement
                                                                              filed January 13, 2004

4.4                       Consulting Services Agreement between               Incorporated  by  reference  to
                          Bartholomew International Investments               the Form S-8 filed November 21,
                          Limited, Inc. and NANNACO, Inc. (1                  2003

4.4a                                                                          Incorporated by Reference to Form
                          Consulting Services Agreement between               S-8 Registration Statement filed
                          Kenneth Davidson and NANNACO, Inc.                  January 13, 2004

4.4b                      Amendment No. 1 to Consulting Services              Incorporated by Reference to the
                          Agreement with Michael Nerone                       Form S-8 Registration Statement
                                                                              filed March 2, 2004

4.4c                      Amendment No. 1 to Agreement with Vintage           Incorporated by Reference to Form
                          Filings, LLC dated May 6, 2004                      S-8 filed May 11, 2004

4.5                       Consulting Services Agreement between               Form S-8 Registration Statement
                          Mark Triesch and NANNACO, Inc.                      filed January 13, 2004

4.5a                      Amendment No.1 to Consulting Services               Form S-8 Registration Statement
                          Agreement between Kenneth Davidson and              filed March 2, 2004
                          NANNACO, Inc.

4.5b                      Consulting Services Agreement with Chris            Incorporated by Reference to Form
                          Ebersole dated May 6, 2004                          S-8 filed May 11, 2004

4.6                       Consulting Services Agreement with                  Incorporated by reference to the
                          Vintage Filings, LLC                                Form S-8 Registration Statement
                                                                              filed November 21, 2003

4.6a                      Amendment No. 1 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Mark Triesch and                  S-8 Registration Statement filed
                          NANNACO, Inc.                                       March 2, 2004
</TABLE>


                                      -23-
<PAGE>

<TABLE>
<CAPTION>
Exhibit                           Title                                            Location
-------                           -----                                            --------
<S>                       <C>                                                 <C>

4.6b                      Amendment No. 4 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Bartholomew                       S-8 Registration Statement filed
                          International Investments Limited, Inc.             April 15, 2004
                          and NANNACO, Inc.

4.7                       Amendment No. 1 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Aequitas Company and              S-8 Registration Statement filed
                          NANNACO, Inc.                                       January 13, 2004

4.7a                      Amendment No. 1 to Employment Agreement             Incorporated by reference to the
                          with Andrew Devries III                             Form S-8 Registration Statement
                                                                              filed November 21, 2003

4.8                       Amendment No. 1 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Bartholomew                       S-8 Registration Statement filed
                          International Investments Limited, Inc.             January 13, 2004
                          and NANNACO, Inc.

4.8c                      Consulting Services Agreement with                  Incorporated by Reference to Form
                          Vintage Filings, LLC dated April6, 2004             S-8 filed April 15, 2004

4.3(e)                    Amendment No. 6 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Bartholomew                       S-8 filed November 4, 2004
                          International Investments Limited, Inc.,
                          and Nannaco, Inc.

4.4e                      Consulting Services Agreement between               Incorporated by Reference to Form
                          Bruce Arthur Hall and Nannaco, Inc.                 S-8 filed November 4, 2004

4.5e                      Consulting Services Agreement between Lou           Incorporated by Reference to Form
                          Digiaimo, Jr. and Nannaco, Inc.                     S-8 filed November 4, 2004

4.6e                      Amendment No.1 to Consulting Services               Incorporated by Reference to Form
                          Agreement between Lou Digiaimo, Jr.                 S-8 filed November 4, 2004
                          and Nannaco, Inc

4.7a                      Consulting Services Agreement between               Incorporated by Reference to Form
                          Steve Careaga and Nannaco,                          S-8 filed November 4, 2004
                          Inc.

4.9                       Amendment No. 1 to Consulting Services              Incorporated by Reference to Form
                          Agreement with Caopital Group                       S-8 filed April 15, 2004
                          International dated April 14, 2004
</TABLE>


                                      -24-
<PAGE>

<TABLE>
<CAPTION>
Exhibit                           Title                                            Location
-------                           -----                                            --------
<S>                       <C>                                                 <C>
4.10                      Consulting Services Agreement with                  Incorporated by Reference to Form
                          Michael Park dated April 14, 2004                   S-8 filed April 15, 2004

4.12                      Amendment No. 2 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Bartholomew                       S-8 filed March 2, 2004
                          International Investments Limited, Inc.
                          and NANNACO, Inc.

4.13                      Amendment No. 2 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Aequitas Company and              S-8 filed March 2, 2004
                          NANNACO, Inc.

4.14                      Consulting Services Agreement with                  Incorporated by Reference to Form
                          Bagswell Capital LLC dated February 23,             S-8 filed March 2, 2004
                          2004

4.15                      Consulting Services Agreement with Seth             Incorporated by Reference to Form
                          Elliott dated February 23, 2004                     S-8 filed March 2, 2004

10.1                      Settlement Agreement and Release with               Incorporated by Reference to Form
                          and by  James J. Taylor                             10 QSB filed May 24, 2004

10.1a                     Employment Agreement with Andrew                    Incorporated by Reference to
                          Devries III dated June 1, 2002                      Form8-K filed November 18, 2004

10.1b                     Amendment No. 1 to Employment Agreement             Incorporated by Reference to
                          with Andrew Devries III dated June 1,               Form8-K/A filed February 10,2004
                          2003

10.2                      Employment Agreement with Steve Careaga             Incorporated by Reference to the
                                                                              Form S-8 registration statement
                                                                              filed on March 16, 2004

10.3                      $375,000 Promissory Note executed by                Incorporated by Reference to Form
                          Andre DeVries, III payable to the                   10QSB/A filed June 21, 2004
                          Nannaco

10.4                      Agreement and Plan of Merger dated July             Incorporated by Reference to Form
                          8, 2004 between Nannaco and Red Alert               10QSB filed August 25, 2004

10.5                      Termination Agreement dated August 16               Incorporated by Reference to Form
                          terminating Nannaco/Red Alert merger                10QSB filed August 25, 2004

10.6                      Nelana Holdings, Ltd. Subscription for              Incorporated by Reference to Form
                          Series A Convertible Preferred Stock                8-K dated August 23, 2004

10.7                      Promissory Note dated August 23, 2004:              Incorporated by Reference to Form
                          Nelana Holdings, Ltd. Maker                         8-K dated August 23, 2004
</TABLE>


                                      -25-
<PAGE>

<TABLE>
<CAPTION>
Exhibit                           Title                                            Location
-------                           -----                                            --------
<S>                       <C>                                                 <C>
10.8                      Consulting Agreement with Steve Careaga,            Incorporated by Reference to Form
                          dated October 29, 2004                              8-K filed October 29, 2004

41                        Amendment No. 3 to Consulting Services              Incorporated by Reference to Form
                          Agreement with Bartholomew International            S-8 filed March 16, 2004
                          Investments Limited dated February 23,
                          2004

42                        Amendment No.2 to Consulting Services               Incorporated by Reference to Form
                          Agreement between Kenneth Davidson and              S-8 filed March 16, 2004
                          NANNACO, Inc. dated March 15, 2004

43                        Amendment No. 2 to Consulting Services              Incorporated by Reference to Form
                          Agreement between Mark Triesch and                  S-8 filed March 16, 2004
                          NANNACO, Inc.

44                        Consulting Services Agreement with                  Incorporated by Reference to Form
                          Daedalus Ventures, Inc. dated March 15,             S-8 filed March 16, 2004
                          2004

45                        Consulting Services Agreement with Nicole           Incorporated by Reference to Form
                          Leigh Van Coller dated March 15, 2004               S-8 filed March 16, 2004

46                        Amendment No. 1 to Consulting Services              Incorporated by Reference to Form
                          Agreement with Bagswell Capital LLC                 S-8 filed March 16, 2004

47                        Consulting Services Agreement with                  Incorporated by Reference to Form
                          Saratoga Capital Partner, Inc. dated                S-8 filed March 16, 2004
                          February 23, 2004

48                        Employment Agreement with Steve Careaga             Incorporated by Reference to Form
                          dated March 15, 2004                                S-8 filed March 16, 2004

418                       Cobnsulting Services Agreement with                 Incorporated by Reference to Form
                          Capital Group International LLLP -                  S-8 filed March 16, 2004
                          Western Series dated March 15, 2004
                          Certificate of Principal Executive
                          Officer

31.1                      Certificate of Principal Financial                  Filed Herewith
                          Officer

31.2                      Certifications of Principal                         Filed Herewith
                          Executive and Financial Officer

32                        Pursuant to 906                                     Filed Herewith
</TABLE>

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for the year ended September 30, 2004 for professional
services rendered by Salberg & Company, P.A. ("Salberg") for the audit of the
Company's annual financial statements and review of financial statements
included in the Company's Form 10-QSB or services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for the year ended September 30, 2004 was $16,000.


                                      -26-
<PAGE>

Audit-Related Fees

Fees billed for the year ended September 30, 2004 for assurance and related
services by Salberg that are reasonably related to the performance of the audit
or review of the Company's financial statements and are not reported under the
category Audit Fees described above include $4,500 related to the Form S-8
registration statements that were filed.

Tax Fees

No fees were billed for the year ended September 30, 2004 for tax compliance,
tax advice, or tax planning services by Salberg that are reasonably related to
the performance of the audit or review of the Company's financial statements and
are not reported under the category Audit Fees described above.

All Other Fees

No fees were billed for the year ended September 30, 2004 for products and
services provided by Salberg, other than the services reported in the Audit
Fees, Audit-Related Fees, and Tax Fees categories above.

Audit Committee Pre-Approval Policies

The Company's standing audit committee currently does not have any pre-approval
policies or procedures concerning services performed by Salberg. All the
services performed by Salberg that are described above were pre-approved by the
Company's standing audit committee. None of the hours expended on Salberg's
engagement to audit the Company's financial statements for the year ended
September 30, 2004 were attributed to work performed by persons other than
Salberg's full-time, permanent employees.


                                      -27-
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of NANNACO, Inc.,
in the capacities and on the dates indicated.


                                  NANNACO, INC.
                                   REGISTRANT


Date:   January 27, 2005


                                                    /s/ STEVE CAREAGA
                                                    -----------------

                                                    Principal Financial Officer,
                                                    Sole Director


                                      S-1
<PAGE>

Filed herewith are our following audited financial statements:          Page No.

Report of Independent Registered Public Accounting Firm                   F-2
Balance Sheet at September 30, 2004                                       F-3
Statements of Operations for the years ended
  September 30, 2004 and 2003 and from
  October 1, 2003 (inception of development stage)
  to September 30, 2004                                                   F-5
Statements of Changes in Stockholders' Deficiency for
  the years ended September 30, 2004 and 2003                             F-6
Statements of Cash Flows for the years ended September 30, 2004
  and 2003 and from October 1, 2003 (inception of development stage)
  to September 30, 2004                                                   F-8
Notes to Financial Statements                                             F-10


                                      F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of:
Nannaco, Inc. (a development stage company)

We have audited the accompanying balance sheet of Nannaco, Inc. (a development
stage company) as of September 30, 2004, and the related statements of
operations, changes in stockholders' deficiency, and cash flows for the years
ended September 30, 2004 and 2003 and for the period from October 1, 2003
(inception of development stage) to September 30, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nannaco, Inc. (a development
stage company) at September 30, 2004, and the results of its operations and its
cash flows for the years ended September 30, 2004 and 2003 and for the period
from October 1, 2003 (inception of development stage) to September 30, 2004 in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company's recurring losses from operations and net loss in 2004
of $6,400,107, working capital deficit of $840,706 at September 30, 2004,
accumulated deficit from prior business operations and deficit accumulated
during the development stage at September 30, 2004 of $5,048,764 and $6,400,107,
respectively, substantial obligations with no current resources to satisfy the
obligations and default on convertible debentures raise substantial doubt about
its ability to continue as a going concern. Management's plans as to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


/s/ SALBERG & COMPANY, P.A.
Boca Raton, Florida
January 20, 2005


                                      F-2
<PAGE>

                                  NANNACO, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                               SEPTEMBER 30, 2004

                                    ASSETS


CURRENT ASSETS
Cash and cash equivalents                                         $          -
                                                               ----------------
TOTAL CURRENT ASSETS                                              $          -
                                                               ================

                                 LIABILITIES

CURRENT LIABILITIES
Convertible debentures                                            $    107,500
Bank loans                                                              59,336
Accounts payable - trade                                               137,497
Accrued compensation, related party                                     25,092
Accrued interest                                                        44,091
Due to consultants                                                      36,196
Other current liabilities                                               35,735
Payroll taxes payable                                                  258,608
Sales tax payable                                                       40,801
Judgment payable                                                        53,110
Loan payable - related party                                            42,700
                                                               ----------------
TOTAL CURRENT LIABILITIES                                         $    840,706
                                                               ================

    The accompanying notes are an integral part of the financial statements.


                                      F-3
<PAGE>

                                  NANNACO, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            BALANCE SHEET (CONTINUED)
                               SEPTEMBER 30, 2004

                            STOCKHOLDERS' DEFICIENCY

COMMITMENTS AND CONTINGENCIES (NOTE 9)

STOCKHOLDERS' DEFICIENCY

Preferred stock, $0.001 par value, 100,000,000 shares
      authorized 10,000,000 Series A issued and
      outstanding                                                        10,000
Common stock, $0.001 par value, 500,000,000
      shares authorized 118,563 issued and outstanding                      119


Additional paid in capital                                           11,048,976

Accumulated deficit through September 30, 2003                       (5,048,764)

Deficit accumulated during development stage                         (6,400,107)
                                                                  --------------
                                                                       (389,776)

Less: Subscription receivable promissory note and interest             (100,208)
Less: Deferred compensation                                             (44,917)
Less: Deferred consulting                                              (305,805)
                                                                  --------------
TOTAL STOCKHOLDERS' DEFICIENCY                                         (840,706)
                                                                  --------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICENCY                     $            -
                                                                  ==============

    The accompanying notes are an integral part of the financial statements.


                                      F-4
<PAGE>

                                  NANNACO, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                     PERIOD FROM
                                                                                   OCTOBER 1, 2003
                                                                                    (INCEPTION OF
                                                          YEAR ENDED              DEVELOPMENT STAGE)
                                                         SEPTEMBER  30,            TO SEPTEMBER 30,
                                                2004                   2003             2004
                                         ---------------------------------------   -------------------
<S>                                      <C>                   <C>                    <C>
REVENUES FROM DISCONTINUED OPERATIONS    $     15,577          $    67,773            $      15,577
COST OF REVENUES                               16,848               67,408                   16,848
                                         ---------------------------------------   -------------------
GROSS LOSS                                     (1,271)                (365)                  (1,271)

OPERATING EXPENSES:
Selling, general and administrative            16,186               62,025                   16,186
Compensation and payroll taxes              2,040,578              441,588                2,040,578
Consulting                                  2,957,996               33,682                2,957,996
Penalties                                           -                4,493                        -
Legal and professional                      1,328,986               48,025                1,328,986
Rent                                            1,495                5,918                    1,495
Travel and entertainment                        3,726                  323                    3,726
Loss on disposition of assets                       -               94,072                        -
Provision for uncollectible loans                   -               80,760                        -
Amortization of debt issue costs                    -               65,400                        -
Debenture liquidated damages                   26,740               17,500                   26,740
Impairment of assets                                -               15,382                        -
Termination of merger fee                           -               30,000                        -
Bad debt expense                                1,171                   -                     1,171
                                         -------------------------------------------------------------
TOTAL OPERATING EXPENSES                    6,376,878              899,168                6,376,878
                                         -------------------------------------------------------------
LOSS FROM OPERATIONS                       (6,378,149)            (898,804)              (6,378,149)

OTHER INCOME (EXPENSE):
Settlement gain                                     -                1,750                        -
Interest expense, net                         (21,959)             (80,102)                 (21,959)
                                         -------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE)                  (21,959)             (78,352)                 (21,959)
                                         -------------------------------------------------------------

NET LOSS                                 $ (6,400,107)         $  (977,156)            $ (6,400,107)
                                         =============================================================
NET LOSS PER SHARE -
BASIC AND DILUTED                        $     (77.71)         $   (201.89)            $     (77.71)
                                         =============================================================

WEIGHTED AVERAGE SHARES                        82,360                4,840                   82,360
                                         =============================================================
</TABLE>

     The accompanying notes are an integral part of the financial statements


                                      F-5
<PAGE>

                                  NANNACO, INC.
                STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                     YEARS ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>
                                               ---------------------------------------------------------------------------------
                                                                                  Common Stock                Additional
                                                     Common Stock                   Issuable             Paid-In       Deferred
                                                  Shares        Amount        Shares        Amount       Capital     Compensation
                                               -----------   -----------   -----------   -----------   -----------   -----------
<S>                                            <C>           <C>           <C>           <C>           <C>           <C>
BALANCE AT SEPTEMBER 30, 2002                        3,739   $         4            --   $        --   $ 3,394,783   $        --

     Shares issued for commission -
       4/15/03                                         125             0            --            --        12,500            --

     Shares issued for legal services -
       6/30/03                                          63             0            --            --         7,500            --

     Shares issued for accrued comp -
       6/30/03                                       1,085             1            --            --        66,758            --

     Shares issued for compensation -
       6/30/03                                       2,665             3            --            --       319,750            --

     Shares issued for liquidated damages -
       8/18/03                                          88             0            --            --         5,250            --

     Shares issued for termination fee -
       8/18/03                                         500             1            --            --        30,000            --

     Shares issued for compensation -
       9/30/03                                          --            --        18,750            19     1,816,286    (1,766,304)

     Interest expense related to debentures             --            --            --            --        58,333            --

     Net loss, year ended September 30, 2003            --            --            --            --            --            --
                                               -----------   -----------   -----------   -----------   -----------   -----------

BALANCE AT SEPTEMBER 30, 2003                        8,264   $         8        18,750   $        19   $ 5,711,159   $(1,766,304)
                                               ===========   ===========   ===========   ===========   ===========   ===========

<CAPTION>
                                               --------------------------
                                                                 Total
                                               Accumulated    Stockholders'
                                                 Deficit       Deficiency
                                               -----------    -----------
<S>                                            <C>            <C>
BALANCE AT SEPTEMBER 30, 2002                  $(4,071,608)   $  (676,821)


     Shares issued for commission -
       4/15/03                                          --         12,500

     Shares issued for legal services -
       6/30/03                                          --          7,500

     Shares issued for accrued comp -
       6/30/03                                          --         66,759

     Shares issued for compensation -
       6/30/03                                          --        319,753

     Shares issued for liquidated damages -
       8/18/03                                          --          5,250

     Shares issued for termination fee -
       8/18/03                                          --         30,000

     Shares issued for compensation -
       9/30/03                                          --         50,000

     Interest expense related to debentures             --         58,333

     Net loss, year ended September 30, 2003      (977,156)      (977,156)
                                               -----------    -----------

BALANCE AT SEPTEMBER 30, 2003                  $(5,048,764)   $(1,103,882)
                                               ===========    ===========
</TABLE>

     The accompanying notes are an integral part of the financial statements


                                      F-6
<PAGE>

                                  NANNACO, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
               YEARS ENDED SEPTEMBER 30, 2004 AND 2003 (CONTINUED)

<TABLE>
<CAPTION>
                                             ----------------------------------------------------------------------------------
                                                                       COMMON STOCK
                                                 COMMON STOCK             ISSUABLE          PREFERRED STOCK
                                             ---------------------   -----------------  -------------------------   ADDITIONAL
                                                                                                                      PAID-IN
                                              SHARES      AMOUNT     SHARES    AMOUNT     SHARES        AMOUNT        CAPITAL
                                             --------    ---------   -------   -------  -----------   -----------   -----------
<S>                                          <C>         <C>         <C>       <C>      <C>           <C>           <C>
Issuable at 9/30/03                            18,750           19   (18,750)      (19)          --            --            --

Issued for compensation-11/9/03-
  $40.00 per share                              3,750            4        --        --           --            --       149,996

Issued for legal/consulting-11/9/03-
  $40.00 per share                             12,625           13        --        --           --            --       504,987

Issued for legal/consulting-12/10/03-
  $48.00 per share                              2,850            3        --        --           --            --       136,797

Reclassed from redeemable stock-12/11/03           94            0        --        --           --            --       377,742

Issued for legal/consulting-1/12/04-
  $104.00 per share                            11,250           11        --        --           --            --     1,169,989

Issued for legal/consulting-2/25/04-
  $80.00 per share                             12,500           12        --        --           --            --       999,988

Issued for debenture damages-3/4/04-
  $79.91 per share                                438            0        --        --           --            --        35,000

Issued for legal/consulting-3/15/04-
  $40.00 per share                             15,000           15        --        --           --            --       599,985

Issuable for consulting-3/15/04-
  $40.00 per share                              1,250            1        --        --           --            --        49,999

Issued for compensation-3/15/04-
  $40.00 per share                              1,250            1        --        --           --            --        49,999

Issued for conversion of conv. debentures
  -4/12/04 $24.7449 per share                   3,167            3        --        --           --            --        78,364

Issued for consulting services-4/12/04-
  $40.00 per share                              2,750            3        --        --           --            --       109,997

Issued for legal/consulting-4/19/04-
  $40.00 per share                             10,625           11        --        --           --            --       424,989

Issued for legal/consulting-5/7/04-
  $40.00 per share                             12,950           13        --        --           --            --       517,987

Issued for compensation-5/7/04-
  $40.00 per share                              1,050            1        --        --           --            --        41,999

Amortization of deferred compensation              --           --        --        --           --            --            --

Amortization of deferred consulting                --           --        --        --           --            --            --

Issued for subscription receivable-8/23/04-
  $0.01 per share                                  --           --        --        --   10,000,000        10,000        90,000

Net loss, year ended September 30, 2004            --           --        --        --           --            --            --
                                             --------    ---------   -------   -------  -----------   -----------   -----------

BALANCE AT SEPTEMBER 30, 2004                 118,563    $     119        --   $    --   10,000,000   $    10,000   $11,048,976
                                             ========    =========   =======   =======  ===========   ===========   ===========

<CAPTION>
                                             --------------------------------------------------------------------------------------
                                                                                                           DEFICIT
                                                                                                         ACCUMULATED
                                                                                                            DURING        TOTAL
                                             SUBSCRIPTION    DEFERRED       DEFERRED      ACCUMULATED    DEVELOPMENT    STOCKHOLDERS
                                             RECEIVABLE        COMP        CONSULTING       DEFICIT         STAGE       DEFICIENCY
                                             -----------    -----------    -----------    -----------    -----------    -----------
<S>                                                   <C>      <C>             <C>           <C>           <C>           <C>
Issuable at 9/30/03                                   --             --             --             --             --             --

Issued for compensation-11/9/03-
  $40.00 per share                                    --       (150,000)            --             --             --             --

Issued for legal/consulting-11/9/03-
  $40.00 per share                                    --             --       (405,000)            --             --        100,000

Issued for legal/consulting-12/10/03-
  $48.00 per share                                    --             --             --             --             --        136,800

Reclassed from redeemable stock-12/11/03              --             --             --             --             --        377,742

Issued for legal/consulting-1/12/04-
  $104.00 per share                                   --             --             --             --             --      1,170,000

Issued for legal/consulting-2/25/04-
  $80.00 per share                                    --             --       (100,000)            --             --        900,000

Issued for debenture damages-3/4/04-
  $79.91 per share                                    --             --             --             --             --         35,000

Issued for legal/consulting-3/15/04-
  $40.00 per share                                    --             --       (450,000)            --             --        150,000

Issuable for consulting-3/15/04-
  $40.00 per share                                    --             --        (50,000)            --             --             --

Issued for compensation-3/15/04-
  $40.00 per share                                    --        (50,000)            --             --             --             --

Issued for conversion of conv. debentures
  -4/12/04 $24.7449 per share                         --             --             --             --             --         78,367

Issued for consulting services-4/12/04-
  $40.00 per share                                    --             --             --             --             --        110,000

Issued for legal/consulting-4/19/04-
  $40.00 per share                                    --             --        (65,000)            --             --        360,000

Issued for legal/consulting-5/7/04-
  $40.00 per share                                    --             --       (418,000)            --             --        100,000

Issued for compensation-5/7/04-
  $40.00 per share                                    --        (42,000)            --             --             --             (0)

Amortization of deferred compensation                 --      1,963,387             --             --             --      1,963,387

Amortization of deferred consulting                   --             --      1,182,195             --             --      1,182,195

Issued for subscription receivable-8/23/04-
  $0.01 per share                               (100,208)            --             --             --             --           (208)

Net loss, year ended September 30, 2004               --             --             --             --     (6,400,107)    (6,400,107)

                                             -----------    -----------    -----------    -----------    -----------    -----------
BALANCE AT SEPTEMBER 30, 2004                $  (100,208)   $   (44,917)   $  (305,805)   $(5,048,764)   $(6,400,107)   $  (840,706)
                                             ===========    ===========    ===========    ===========    ===========    ===========
</TABLE>

     The accompanying notes are an integral part of the financial statements


                                      F-7
<PAGE>

                                  NANNACO, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                  PERIOD FROM
                                                                                                                OCTOBER 1, 2003
                                                                                                                 (INCEPTION OF
                                                                                 YEAR  ENDED                   DEVELOPMENT STAGE)
                                                                                SEPTEMBER  30,                  TO SEPTEMBER 30,
                                                                        2004                      2003                2004
                                                                  ------------------------------------------------------------------
<S>                                                               <C>                      <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                          $    (6,400,107)       $       (201,799)         $  (6,400,107)
Adjustments to reconcile net loss to net cash used in
operating activities:
   Bad debt expense                                                         1,171                       -                  1,171
   Accrued interest on subscription promissory note                          (208)                                          (208)
   Loss on disposition of assets                                                -                  94,072                      -
   Provision for uncollectible loans                                            -                  80,760                      -
   Amortization of debt issue costs                                             -                  65,400                      -
   Accrued debenture penalty                                                    -                  10,500                      -
   Impairment of assets                                                         -                  15,382                      -
   Amortization of cash based deferred debt issue costs                         -                  52,900                      -
   Amortization of stock based deferred debt issue costs                        -                  12,500                      -
   Settlement gain                                                              -                 (1,750)                      -
   Stock issued for compensation                                                -                 411,420                      -
   Stock issued for legal services                                      1,202,800                   7,500              1,202,800
   Stock issued for consulting services                                 1,769,001                       -              1,769,001
   Stock issued for debenture liquidated damages                                -                   7,000                      -
   Stock issue for merger termination fee                                       -                  30,000                      -
   Debenture liquidated damages                                            26,740                       -                 26,740
   Amortization of deferred compensation                                1,963,387                       -              1,963,387
   Amortization of deferred consulting                                  1,182,195                       -              1,182,195
   Interest expense related to beneficial conversion feature                    -                  58,333                      -
   Changes in operating assets and liabilities:
      Increase in accounts receivable - trade                                (548)                   (623)                  (548)
      Increase in other assets                                                  -                 (15,400)                     -
      Decrease in bank overdrafts                                          (1,976)                 (1,311)                (1,976)
      Increase in accounts payable                                         88,873                  39,625                 88,873
      Increase in accrued interest payable                                 17,520                  17,325                 17,520
      Increase in due to consultants                                       36,196                       -                 36,196
      Increase in other current liabilities                                33,535                       -                 33,535
      Increase (decrease) in payroll taxes payable                         77,190                 (11,912)                77,190
      Increase in judgment payable                                          4,231                   4,443                  4,231
                                                                  ------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                             $             -        $       (100,991)         $           -
                                                                  ==================================================================
</TABLE>

     The accompanying notes are an integral part of the financial statements


                                      F-8
<PAGE>

                                  NANNACO, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                               PERIOD FROM
                                                                                                             OCTOBER 1, 2003
                                                                                                              (INCEPTION OF
                                                                              YEAR  ENDED                   DEVELOPMENT STAGE)
                                                                             SEPTEMBER  30,                  TO SEPTEMBER 30,
                                                                     2004                    2003                  2004
                                                                ----------------------------------------------------------------
<S>                                                               <C>                    <C>                    <C>
CASH FLOW FROM INVESTING ACTIVITIES
Cash advances from (to) stockholders
                                                                  $           -          $    (15,382)          $        -
                                                                ----------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                         -               (15,382)                   -

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment on note payable - related party                             -                (5,727)                   -
Proceeds from issuance of convertible debentures                              -               122,100                    -
                                                                ----------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                     -               116,373                    -

NET INCREASE  IN CASH                                                         -                     -                    -
CASH AT BEGINNING OF PERIOD                                                   -                     -                    -
                                                                ----------------------------------------------------------------
CASH AT END OF PERIOD                                             $           -          $          -           $        -
                                                                ================================================================
CASH INTEREST PAID                                                $           -          $          -           $        -
                                                                ================================================================

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Stock issued for debenture liquidated damages                    $        35,000         $         -           $        35,000
Stock issued for conversion of Convertible debentures
and accrued interest                                                      78,367                   -                    78,367
Stock issued for conversion of accounts payable                           54,999                   -                    54,999
</TABLE>

     The accompanying notes are an integral part of the financial statements


                                      F-9
<PAGE>

1.   HISTORY AND NATURE OF BUSINESS

     Nannaco, Inc. ("Nannaco", "the Company", "we", "us") is a publicly traded
company that previously provided surface cleaning, surface protection, surface
restoration, and other services to commercial and industrial businesses, as well
as to owners of historical buildings. The Company had operated under the trade
name Surface Pro in order to relate to its previous principal business activity,
since the Nannaco name did not indicate the type of business. The Company was
incorporated under the laws of the State of Texas on October 20, 1998, and
immediately began operations.

     Until September 30, 2003, Nannaco focused on surface cleaning, surface
protection and restoration. However, sales from these products were not
sufficient to enable the Company to continue operations. and the Company changed
its strategy due to poor operating conditions and their operating results
coupled with difficulties in raising capital through debt and equity sources,
the Company was forced to change its strategy. The Company adopted a new
strategy that called for committed to the disposing al of its current business
and to seeking a merger/ or acquisition transaction with a company having better
financial resources so that the Company and/or might act as a holding company
for newly developed businesses. As of September 30, 2003, the Company ceased all
operating activities under the surface cleaning, surface protection and
restoration business and disposed of most of its assets while formulating a plan
to improve it financial position.

     In December 2003 and January 2004, the Company issued several announcements
relating to its the change of business. The Company had moved to a new line of
business as a consultant and advisor to customers, however, they ceased this
activity in March 2004. The Company continues to seek a merger/acquisition
candidate. The Company will be treated as a development stage company, effective
October 1, 2003. Activities during the new development stage include
restructuring the Company and entering into contracts to provide consulting
services to customers. Additionally, in March 2004, the Company's CEO resigned
and was replaced by a new CEO.

     In March 2004, the Company announced it had signed a letter of intent to
acquire Red Alert Group, Inc. ("Red Alert"), a company specializing in homeland
and global security. The Company anticipated that upon the successful completion
of the announced acquisition, the name of the Company would be changed to Red
Alert Group, Inc. and would apply to obtain a new stock ticker symbol. In July
2004, the Company filed a Schedule 14A with the Securities and Exchange
Commission ("SEC") giving notice that the Company and Red Alert had adopted an
Agreement and Plan of Merger ("Merger Agreement") that would result in Red Alert
becoming a wholly owned subsidiary of Nannaco. Further, in addition to approving
the Merger Agreement, the board of directors of Nannaco (i) approved a 1 for 100
reverse-split of the issued and outstanding shares of the common stock of the
Company while maintaining the amount of common stock shares we are authorized to
issue at 500,000,000 (the "Reverse-Split"), (ii) approved an amendment to our
articles of incorporation, as amended, to change our name from "Nannaco, Inc."
to "Red Alert Group Holding Corp.", and (iii) made a recommendation to the
shareholders to elect certain new directors to the board of directors of Nannaco
which individuals have been nominated by the board of directors of Nannaco. The
merger agreement was cancelled. (See Note 12 - Subsequent Events.)

         In October 2004, a 1 for 100 reverse-split discussed above was
completed and the number of issued and outstanding shares was reduced from
474,253,389 to 4,742,534 as a result thereof. Also, in December 2004 the Board
approved a 1 for 40 reverse stock split. The accompanying financial statements
have been retroactively restated to reflect these stock splits.


                                      F-10
<PAGE>

         On October 28, 2004 the Company and NAZZ Productions, Inc. entered into
an agreement to merge a subsidiary of Nannaco into NAZZ Productions, Inc.
("NAZZ") and to rename the Company NAZZ Productions, Inc. (the "reverse
merger"). The agreement provides that all of the shares of common stock of NAZZ
issued and outstanding at the time the merger becomes effective under applicable
state law (the "Effective Time"), will be converted into common stock of Nannaco
such that the current holder of NAZZ common stock will hold 95% of all shares of
Nannaco's common stock outstanding immediately after the closing of this
merger transaction, on a fully diluted basis. The obligation of NAZZ to close is
conditioned on, among other things, the satisfactory completion of due diligence
review by NAZZ and the reduction of Nannaco's liabilities to $50,000 or less.
The agreement may be terminated at any time prior to the Effective Time by
written agreement; by NAZZ for breach of any of the representations and
warranties or covenants of Nannaco if such breach is not cured within thirty
days of written notice; by Nannaco for breach of any NAZZ representations and
warranties or covenants if the breach is not cured within thirty days of written
notice; by either party in the event the merger is not closed by December 30,
2004. In the event Nannaco breaches the agreement with NAZZ by engaging in
efforts leading to the acquisition of Nannaco by a corporation other than
NAZZ then, NAZZ shall be entitled to a $200,000 "break-up fee".

2.  GOING CONCERN

     We have incurred net losses in prior years and this has resulted in a
significant accumulated deficit and stockholders' deficiency at September 30,
2004. In addition, we are in default under our convertible debenture agreements.
We had net losses of $6,400,107 for the year ended September 30, 2004 and
$977,156 for the year ended September 30, 2003. At September 30, 2004, our
current liabilities exceeded our current assets by $840,706, our stockholders'
deficiency was $840,706, and we had an accumulated deficit from prior business
operations of $5,048,764 and a deficit accumulated during the development stage
of $6,400,107 as September 30, 2004.

     The time required for us to become profitable is highly uncertain, and we
cannot assure you that we will achieve or sustain profitability or generate
sufficient cash flow from operations to meet our planned capital expenditures,
working capital and debt service requirements. If required, our ability to
obtain additional financing from other sources also depends on many factors
beyond our control, including the state of the capital markets and the prospects
for our business. The necessary additional financing may not be available to us
or may be available only on terms that would result in further dilution to the
current owners of our common stock.

     We have substantial current obligations. As of September 30, 2004, we had
$840,706 of liabilities as compared to $726,763 as of September 30, 2003. Of the
$840,706 outstanding at September 30, 2004, $258,608 is for unpaid federal
payroll taxes, interest and penalties. The Company has received correspondence
from the Internal Revenue Service ("IRS") detailing the obligation and remedies
that the IRS may pursue if not paid and is in discussions with the IRS
concerning resolution of the matter. The remaining current obligations (which
are all past due) include sales tax payable of $40,801, accounts payable of
$137,497, judgment payable of $53,110, bank loans of $59,335, loan
payable-related party of $42,700, accrued compensation-related party of $25,092,
due to consultants of $36,196, convertible debentures of $107,500 and accrued
debenture liquidated damages of $2,240. The Company does not have sufficient
cash resources to pay these obligations.

Our substantial debt obligations pose risks to our business and stockholders by:

     o   making it more difficult for us to satisfy our obligations and therefor
         making it more difficult to acquired by or to acquire any other
         business;

     o   requiring us to dedicate a substantial portion of our future cash flow,
         if any, to principal and interest payments on our debt obligations,
         thereby reducing the availability of our future cash flow, if any, to
         fund working capital, capital expenditures and other corporate
         requirements;


                                      F-11
<PAGE>

     o   impeding us from obtaining additional financing in the future for
         working capital, capital expenditures and general corporate purposes;
         and

     o   making us more vulnerable to a downturn in our business and limit our
         flexibility to plan for, or react to, changes in our business.  We
         cannot assure you that, in the future,  we will generate sufficient
         cash flow from operations or obtain additional financing to meet
         scheduled debt payments and financial covenants. If we fail to make
         any required payment under the agreements and related documents
         governing our indebtedness or fail to comply with the financial and
         operating covenants contained in them, we would be in default.  The
         financial statements do not include any adjustments to reflect the
         possible effects on recoverability and classification of assets or the
         amounts and classification of liabilities which may result from the
         inability of the Company to continue as a going concern.

     The Company has taken steps to curtail the operating losses for future
periods. These steps include the reduction of employees and all categories of
operating expenses, where possible. Additionally, as mentioned previously, the
Company has adopted a new strategy during the fourth quarter of 2003 that
committed to the disposal of its current business and to seek a
merger/acquisition transaction with a Company having better financial resources
(See History and Nature of Business above and Note 12 - Subsequent Events). As
of September of 2003, the Company ceased all operating activities and has
disposed of most of its assets while formulating a plan to improve its financial
position.

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING ESTIMATES

     When preparing financial statements in conformity with U.S. GAAP, our
management must make estimates based on future events which affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities as of the date of the financial statements, and revenues and
expenses during the reporting period. Actual results could differ from these
estimates. Significant estimates in the accompanying financial statements
includes the realizability of a subscription note receivable, provision for
uncollectible investor loans, impairment of property and equipment, evaluation
of a beneficial conversion feature in convertible debentures and convertible
preferred stock, valuation of the fair value of financial instruments, valuation
of non-cash issuances of common stock and the valuation allowance for deferred
tax assets.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include all highly liquid investments with a
maturity date of three months or less when purchased.

ACCOUNTS RECEIVABLE

     Accounts receivable result from the sale of the Company's products and is
reported at anticipated realizable value. The Company estimates its allowance
for doubtful accounts based on a specific identification basis and additional
allowances as needed based upon historical collections experience. Payment is
due upon completion of the work, unless other arrangements are made. Management
reviews the customer accounts on a routine basis to determine if an account
should be charged off. At September 30, 2004, the Company determined that the
accounts receivable was uncollectible and the remaining $1,171 balance was
written off as bad debt expense.


                                      F-12
<PAGE>

PROVISION FOR UNCOLLECTIBLE INVESTOR LOANS

     At September 30, 2002, loans receivable was $109,000 and related accrued
interest was $21,700. For 2003, the Company treated the loans receivable from
investors as non-accrual loans with regard to interest. During 2003, $50,000 of
the total $109,000 in loans was repaid and the remaining $59,000 loans
receivable and accrued interest of $21,760 was charged to operations as a bad
debt on uncollectible loans. Any future recovery of these loans and interest
will be recognized as other income. As a result of these entries, the Company
has no investor loans at September 30, 2004.

PROPERTY AND EQUIPMENT

     Property and equipment is recorded at cost and depreciated over its
estimated useful life, which range, from five to seven years, using the straight
line method. As discussed previously under Note 1, the Company has ceased all
operating activities and has disposed of its assets while formulating a plan to
improve its financial position. As a result, the Company disposed of the
majority of its property and equipment for zero proceeds and recorded a loss
from disposition of assets in the amount of $94,072 during the year ended
September 30, 2003. Additionally, the remaining assets were deemed impaired (as
discussed further below) and we recorded a $15,382 impairment charge for the
year ended September 30, 2003. As a result of these entries, the Company has no
property and equipment at September 30, 2004.

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

     We account for the impairment of long-lived assets in accordance with
Financial Accounting Standards, SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
book value of the asset may not be recoverable. Recoverability of the asset is
measured by comparison of its carrying amount to the undiscounted cash flow that
the asset or asset group is expected to generate. If such assets or asset groups
are considered to be impaired, the loss recognized is the amount by which the
carrying amount of the property if any, exceeds its fair market value. Based on
our impairment analysis of property and equipment, we recorded a $15,382
impairment charge for the year ended September 30, 2003. Based upon our
evaluation, no impairment was determined for the year ended September 30, 2004.

BENEFICIAL CONVERSION FEATURE IN CONVERTIBLE DEBENTURES AND CONVERTIBLE
PREFERRED STOCK

     In accordance with EITF Issue 98-5, as amended by EITF 00-27, we must
evaluate the potential effect of any beneficial conversion terms related to
convertible instruments such as convertible debt or convertible preferred stock.
The Company has issued convertible debentures and convertible preferred stock. A
beneficial conversion may exist if the holder, upon conversion, may receive
instruments that exceed the value of the convertible instrument. Valuation of
the benefit is determined based upon various factors including the valuation of
equity instruments, such as warrants, that may have been issued with the
convertible instruments, conversion terms, value of the instruments to which the
convertible instrument is convertible, etc. Accordingly, the ultimate value of
the beneficial feature is considered an estimate due to the partially subjective
nature of valuation techniques.


                                      F-13
<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

     We define the fair value of a financial instrument as the amount at which
the instrument could be exchanged in a current transaction between willing
parties. The carrying value of all current liabilities in the accompanying
balance sheet approximates fair value because of the short maturity of those
instruments. The estimated fair value of our other obligations is estimated
based on the current rates offered to us for similar maturities. Based on
prevailing interest rates and the short-term maturity of all of our
indebtedness, management believes that the fair value of our obligations
approximates book value at September 30, 2004.

STOCK-BASED COMPENSATION

     The Company accounts for stock options issued to employees in accordance
with the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation cost is measured on the date of grant as the excess of the
current market price of the underlying stock over the exercise price. Such
compensation amounts are amortized over the respective vesting periods of the
option grant. The Company adopted the disclosure provisions of SFAS No. 123
"Accounting for Stock-Based Compensation," and SFAS No. 148 "Accounting for
Stock Based Compensation - Transition and Disclosure," which permits entities to
provide pro forma net income (loss) and pro forma earnings (loss) per share
disclosures for employee stock option grants as if the fair-valued based method
defined in SFAS No. 123 had been applied.

     The Company accounts for stock options or warrants issued to non-employees
for goods or services in accordance with the fair value method of SFAS 123.
Under this method, the Company records an expense equal to the fair value of the
options or warrants issued. The fair value is computed using an options pricing
model.

REVENUE RECOGNITION

     The Company recognizes revenues in accordance with the guidance in the
Securities and Exchange Commission Staff Accounting Bulletin 104. Revenue is
recognized when services are completed and when collection of the fixed or
determinable selling price is reasonable assured.

INCOME TAXES

     Income taxes are accounted for under the asset and liability method of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes ("SFAS 109")." Under SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS 109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

NET LOSS PER COMMON SHARE

     Basic net loss per share is computed only on the weighted average number of
common shares outstanding during the respective periods. There were no common
stock equivalents outstanding to adjust the numerator or denominator in the EPS
computations and accordingly diluted net loss per share equals basic net loss
per share for all periods presented.


                                      F-14
<PAGE>

         In October 2004, we completed a 1 for 100 reverse-split of the issued
and outstanding shares of the common stock of the Company. As a result of the 1
for 100 reverse-split, the number of issued and outstanding shares was reduced
from 474,253,389 to 4,742,534 after the reverse-split. In December 2004, we
completed a 1 for 40 reverse-split of the issued and outstanding shares of the
common stock of the Company. As a result of the 1 for 40 reverse-split, the
number of issued and outstanding shares was reduced from 4,742,534 to 118,563
after the reverse-split. In accordance with SFAS 128, the Company has applied
the effect of both the 1 for 100 and the 1 for 40 reverse-splits from the
beginning of the year and the weighted average number of common shares
outstanding has been adjusted retroactively to reflect the reverse splits.

ACCUMULATED OTHER COMPREHENSIVE INCOME

     As of the date of these Consolidated Financial Statements, we had no
components of other comprehensive income as defined by Statement of Financial
Accounting Standards No. 130.

NEW ACCOUNTING STANDARDS

     In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," which established additional
accounting and disclosure requirements when an enterprise guarantees the
indebtedness of others. The enterprise providing the guarantee is required to
recognize a liability for the fair value of the guarantee and disclose the
information in its interim and annual financial statements.

     In December 2002, the FASB issued Statement No. 148 (FAS 148), "Accounting
for Stock-Based Compensation-Transition and Disclosure" which amends FASB No.
123 (FAS 123), "Accounting for Stock-Based Compensation." FAS 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation and amends the
disclosure requirements of FAS 123 to require disclosures in both the annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
transition guidance and disclosure provisions of FAS 148 were effective for the
Company's financial statements issued for the first quarter of 2003. The
adoption of SFAS 148 did not have a significant impact on our financial position
and results of operations.

     In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,"
which as an interpretation defines when and who consolidates a "variable
interest entity," or "VIE." This new consolidation model applies to entities (i)
where the equity investors (if any) do not have a controlling financial
interest, or (ii) whose equity investment at risk is insufficient to finance
that entity's activities without receiving additional subordinated financial
support from other parties and requires additional disclosures for all
enterprises involved with the VIE. FIN 46 is effective during 2003 depending on
when the VIE is created. The adoption of FIN 46 did not have a significant
impact on our financial position and results of operations.

     In May 2003, the Financial Accounting Standards Board issued SFAS No. 150
(SFAS 150), "Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity." It establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. This standard is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 150 did not have a significant impact on our
financial position and results of operations.


                                      F-15
<PAGE>

4.   SHORT-TERM DEBT

Our short-term debt at September 30, 2004 consisted of the following:

BANK LOANS
$35,000 bank installment loan, dated Feb. 19, 2000, bearing
  interest at 10% per annum, 60 monthly payments of principal
  and interest..................................                       $ 25,350
$35,000 bank line of credit, bearing interest at prime
  plus 1.25% per annum, interest payable monthly and line of
  credit due July 15, 2002......................                         33,986
                                                                         ------
                                                                       $ 59,336

     On February 19, 2000, we obtained a bank installment loan in the amount of
$35,000, of which $25,350 is outstanding at September 30, 2004. The interest
rate is 10% per annum and sixty monthly payments of principal and interest in
the amount of $745 are required. This note is secured by the personal guaranty
of the Company's former President. The Company is in default on this obligation
due to non-payment.

     At September 30, 2004, we had a bank line of credit, which provides for
borrowings of up to $35,000, of which $33,986 was outstanding. The interest rate
is Prime plus 1.25% per annum and monthly interest payments were required. The
line of credit matured on July 15, 2002 but the bank has not exercised its
rights of default and the facility was on a month to month basis. The line of
credit is secured by a personal guaranty of the Company's former President.

LOAN PAYABLE - RELATED PARTY
Loan payable, dated January through July of 2001, bearing
  interest at 10% per annum and due in July of 2002...............     $ 42,700
                                                                         ======

     Beginning in January of 2001 and through July of 2001, Mark Triesch, at
that time a director of the Company, loaned $43,700 to the Company in the form
of a promissory note. The note bears interest at ten percent (10%) per annum and
the principal and accrued interest was due one year from each of the
investments. As of July 2002, the entire amount was due and payable. In April
2003, the Company repaid $1,000 of principal resulting in the current balance
due of $42,700.

CONVERTIBLE DEBENTURES
$175,000 Convertible Debentures, dated March and April of
  2003, bearing interest at 6% per annum and due in March and
  April of 2006.........................                               $107,500
                                                                        =======

     Pursuant to Securities Purchase Agreements, Convertible Debentures and
related contracts, in March of 2003, the Company issued $155,000 of six percent
(6%) convertible debentures due in March of 2006 and in April issued another
$20,000 of the debentures due in April 2006. The Company received $122,100 of
cash proceeds, net of $52,900 of cash offering costs. The debenture holder has
the option of converting the principal and accrued interest into the Company's
common stock at a conversion price equal to seventy-five percent (75%) of the
lowest closing bid price per share for the twenty (20) trading days immediately
preceding the conversion. The Company has the option to redeem all or part of
the debentures prior to the maturity date at a price equal to one hundred thirty
percent (130%) of the principal amount plus accrued interest.


                                      F-16
<PAGE>

     The Company recognized an immediate $58,333 interest expense and paid-in
capital relating to a beneficial conversion feature inherent in the debentures
since the debentures were immediately convertible and the debentures became due
on demand due to a default ( see below.) In connection with the offering, in
addition to cash offering costs of $52,900, the Company issued 500,000 of its
common shares to the investment bankers. The shares were valued on the grant
date at the trading price of $0.03 per share or $12,500. The total offering
costs of $65,400 were initially deferred to be amortized over the term of the
debentures, however due to a default provision which changed the debentures
maturity to due on demand (see below), the $65,400 was fully expensed as of
September 30, 2003.

     Under a related Registration Rights Agreement, the Company is subject to a
2% monthly liquidated damages penalty for not filing a registration statement
with the Securities and Exchange Commission, within a stipulated timeframe, to
register the common shares underlying the convertible debentures and another 2%
monthly liquidated damages penalty relating to that registration statement not
becoming effective within a stipulated timeframe. The liquidated damages penalty
started accruing at 2% or $3,500 per month at June 1, 2003 and at another 2% or
$3,500 per month starting September 1, 2003. The penalties for June and July
2003 were satisfied with the issuance of 350,000 of the Company's common shares
to the debenture investors and remaining accrued liquidated damages were $10,500
at September 30, 2003. The Company recognized a $1,750 gain on the settlement of
$7,000 of accrued liquidated damages in June and July 2003 based on the $0.015
trading price of the common stock on the settlement date. For the three month
period ended December 31, 2003, the Company recorded an additional $24,500 of
liquidated damages expense resulting in an accrued balance of $35,000. Effective
March 31, 2004, the Company reached an agreement with the debenture investors
and all outstanding penalties in the amount of $35,000 were satisfied with the
issuance of 438 of the Company's common shares based on a $0.02 trading price of
the common stock on the settlement date. For the period from April 1, 2004
through September 30, 2004, the Company recorded an additional $2,240 of
liquidated damages resulting in an accrued balance of $2,240 as of September 30,
2004 included in other current liabilities.

     Due to the default under the Registration Rights Agreement, the debentures
went into default as of June 1, 2003. Accordingly, the debentures became due on
demand at that date and are presented as current liabilities at September 30,
2004.

     In April and May of 2004, $67,500 principal amount of the debentures was
converted into 3,167 shares of our common stock. $60,000 of the debentures was
converted in April 2004 into 2,736 shares at $0.0054825 per share and $7,500 of
the debentures was converted in May 2004 into 431 shares at $0.00435 per share.

     As a result of the above conversions, $107,500 principal amount of the
convertible debentures is outstanding at September 30, 2004.


                                      F-17
<PAGE>

5.   REDEEMABLE COMMON STOCK

     In December 2000, the Company received $345,500 of proceeds from the
issuance of ten percent (10%) convertible promissory notes to investors. The
note holders had the option of converting the principal and accrued interest
into the Company's common stock at a conversion price equal to the market price
on date of conversion and the promissory notes were due in September of 2001. On
November 15, 2001, the Company and the note holders agreed to the conversion of
the principal and accrued interest into the Company's common stock at a value of
$1 per share, resulting in the issuance of 94 shares of common stock after
giving effect for the 1 for 100 and 1 for 40 reverse-splits mentioned previously
under Loss Per Common Share (See Note 3 - Summary of Significant Accounting
Policies).

     The promissory notes were issued to non-qualified investors and as such,
the investors had a right to redeem the purchase price plus accrued interest for
a period of three years from the original promissory note date, or through
December of 2003. Therefore, the Company had classified the transaction as
Redeemable Common Stock.

     As of December 31, 2003, the note holders did not elect to redeem and the
Company has reclassified this amount to permanent equity as common stock and
additional paid in capital in the Stockholders' Equity section of the
accompanying Balance Sheet.

6.    STOCKHOLDERS' EQUITY

CAPITAL STRUCTURE

     We are authorized to issue up to 500,000,000 shares of our common stock,
$0.001 par value per share, of which 118,563 shares were issued and outstanding
at September 30, 2004. In September October 2004, we completed a 1 for 100
reverse-split of the issued and outstanding shares of the common stock of the
Company while maintaining the amount of common stock shares we are authorized to
issue at 500,000,000. As a result of the 1 for 100 reverse-split, the number of
issued and outstanding shares was reduced from 474,253,389 to 4,742,534 after
the reverse-split In December 2004, we completed a 1 for 40 reverse-split of the
issued and outstanding shares of the common stock of the Company. In accordance
with SFAS 128, the Company has applied the effect of the 1 for 40 reverse-split
from the beginning of the year and as a result of the 1 for 40 reverse-split,
the number of issued and outstanding shares was reduced from 4,742,534 to
118,563 after the reverse-split.

     We are authorized to issue up to 100,000,000 shares of Preferred Stock,
$0.001 par value per share, of which 10,000,000 shares designated as Series A
were issued and outstanding at September 30, 2004 (See Issuances of Preferred
Stock below).

ISSUANCES OF COMMON STOCK

     On April 15, 2003, we granted 500,000 shares, valued at $0.025 per share or
$12,500 to two consultants as a commission for services related to assistance
with our convertible debenture offering.

     On June 30, 2003, we granted 250,000 shares, valued at $0.03 per share or
$7,500 to a consultant for legal services.

     On August 18, 2003, we granted 15,000,000 shares to our President.
4,341,571 of the shares were granted to settle $66,759 of accrued and unpaid
salary. In accordance with an amended employment agreement for the President,
these shares were valued based upon a thirty percent (30%) discount to the
average stock price for the month of June 2003, or $0.015 per share. There was
no loss on settlement recorded since this was a related party transaction. The
remaining 10,658,429 shares were valued based upon the losing price on June 30,
2003, or $0.03 per share and the resulting $319,753 was expensed to operations
as compensation for the year ended September 30, 2003.


                                      F-18
<PAGE>

     On August 18, 2003, the Company granted 350,000 shares, valued at $0.015
per share for debenture liquidated damages as discussed further in footnote 4 -
Short-Term Debt.

     On August 18, 2003, the company granted 2,000,000 shares, valued at $0.015
per share or $30,000 for a termination fee related to a merger that did not
occur.

     The following issuances of Common Stock have been adjusted to reflect the 1
for 100 and 1 for 40 reverse-splits discussed previously.

     On September 30, 2003, the Company granted 18,750 shares to the President
as discussed below under deferred compensation. The shares were not issued by
the transfer agent until October of 2003 and were included as common stock
issuable at September 30, 2003. In October, 2004, the 18,750 shares were issued
by the transfer agent and reclassed from common stock issuable to common stock.

     In November 2003, the Company issued 16,325 shares of common stock. 3,750
of the shares were issued as an annual bonus for the President of the Company
and were valued at $40.00 per share, the closing price on the grant date of
November 9, 2003 and were being amortized over the remaining life of the
employment agreement from October 1, 2003 through June 1, 2005 but have been
expenses in full in 2004 due to early termination of that employment agreement.-
see Deferred Compensation below. 10,125 of the shares were issued for consulting
services provided to the Company and were valued at $40.00 per share, the
closing share price on the grant date of November 9, 2003 and are being
amortized over the one year term of the agreements - see Deferred Consulting
below. The remaining 2,500 shares were issued for legal services provided to the
Company and were valued at $40.00 per share, the closing price on the grant date
of November 9, 2003. The agreement for services did not specify a term and can
be terminated by either party on a monthly basis. Accordingly, the Company has
expensed the entire amount and recorded $100,000 of legal expense in the
accompanying Statements of Operations.

     In connection with 750 of the 10,125 common shares issued for consulting
services as discussed above, the Company on November 17, 2003 committed to issue
two year warrants to purchase 750 of the Company's common shares at an exercise
price of $0.02 per share and two year warrants to purchase 750 of the Company's
common shares at an exercise price of $0.03 per share. As of September 30, 2004,
the warrants have not been issued to the consultant. The agreement contains a
provision however that the holders of such warrants shall not individually own
more than 4.9% of the total shares of the Company's outstanding shares.

     In December 2003, the Company issued 2,850 shares of common stock. 2,350 of
the shares were issued for legal services provided to the Company and were
valued at $48.00 per share, the closing share price on the grant date of
December 10, 2003. The resulting $112,800 was expensed as legal and professional
in the accompanying Statement of Operations. The remaining 500 shares were
issued for consulting services provided to the Company and were valued at $48.00
per share, the closing price on the grant date of December 10, 2003. The
resulting $24,000 was expensed as consulting in the accompanying Statements of
Operations.


                                      F-19
<PAGE>

     In January 2004, the Company issued 11,250 shares of common stock. 7,500 of
the shares were issued for consulting services provided to the Company and were
valued at $0.026 per share, the closing share price on the grant date of January
12, 2004. These shares were issued as a modification of the terms related to the
November 9, 2003 issuance of 10,125 shares (see Deferred Consulting below) and
this issuance of shares was subsequently modified as discussed below.
Accordingly, the Company has expensed the entire amount of the 7,500 shares
issued and recorded $780,000 of consulting expense in the accompanying Statement
of Operations. The remaining 3,750 shares of the 11,250 shares issued were for
legal services provided to the Company and were valued at $0.026 per share, the
closing price on the grant date of January 12, 2004. The agreement for services
did not specify a term and can be terminated by either party on a monthly basis.
Accordingly, the Company has expensed the entire amount and recorded $390,000 of
legal expense in the accompanying Statements of Operations.

     In February 2004, the Company issued 12,500 shares of common stock. 8,750
of the shares were issued for consulting services provided to the Company and
were valued at $104.00 per share, the closing share price on the grant date of
February 25, 2004. These shares were issued as a modification of the terms
related to the November 9, 2003 issuance of 10,125 shares (see Deferred
Consulting below) and the January 2004 7,500 share issuance discussed above.
Accordingly, the Company has expensed the entire amount of the 8,750 shares
issued and recorded $700,000 of consulting expense in the accompanying Statement
of Operations. 2,500 shares of the 8,750 shares issued were for legal services
provided to the Company and were valued at $104.00 per share, the closing price
on the grant date of February 25, 2004. The agreement for services did not
specify a term and can be terminated by either party on a monthly basis.
Accordingly, the Company has expensed the entire amount and recorded $200,000 of
legal expense in the accompanying Statements of Operations. The remaining 1,250
shares of the 8,750 shares issued were for new consulting services and were
valued at $104.00 per share, the closing share price on the grant date of
February 25, 2004 and are being amortized over the one year term of the
agreement - see Deferred Consulting below.

     In March 2004, the Company issued 16,250 shares of common stock of which
1,250 of the shares were issued as compensation for the new CEO of the Company
and were valued at $40.00 per share, the closing price on the grant date of
March 15, 2004 and are being amortized over the term of the employment agreement
from March 15, 2004 through March 15, 2005 - see Deferred Compensation below.
11,250 of the 16,250 shares issued were for consulting services provided to the
Company and were valued at $40.00 per share, the closing share price on the
grant date of March 15, 2004. These shares were issued as the last modification
of the terms related to the November 9, 2003 issuance of 10,125 shares (see
Deferred Consulting below) and additional shares issued as discussed above.
Accordingly, the Company will amortize these shares over the term of the
agreements based upon the grant date of March 15, 2004 through March 15, 2005 -
see Deferred Consulting below. 3,750 shares of the 16,250 shares issued were for
legal services provided to the Company and were valued at $40.00 per share, the
closing price on the grant date of March 15, 2004. The agreement for services
did not specify a term and can be terminated by either party on a monthly basis.
Accordingly, the Company has expensed the entire amount and recorded $150,000 of
legal expense in the accompanying Statements of Operations.

     In April and May 2004, the Company issued 3,167 shares of Common Stock. The
shares were issued for the conversion of $67,500 of convertible debentures at
$24.7449 per share

     In April 2004, the Company issued 2,750 shares of Common Stock. The shares
were valued at $40.00 per share, the closing price on the grant date of April
12, 2004, and were issued to a consultant for the conversion of $54,999 of
accounts payable and $55,001 of additional consulting services provide to the
Company. The agreement for the additional consulting services was for a term of
three months and the Company has expensed the entire $55,001 as consulting
expense in the accompanying statement of operations.


                                      F-20
<PAGE>

     In April 2004, the Company issued 10,625 shares of common stock. 3,750
shares of the 10,625 shares issued were for legal services provided to the
Company and were valued at $40.00 per share, the closing price on the grant date
of April 12, 2004. The agreement for services did not specify a term and can be
terminated by either party on a monthly basis. Accordingly, the Company has
expensed the entire amount and recorded $150,000 of legal expense in the
accompanying Statements of Operations. 5,250 of the 10,625 shares issued were
for consulting services provided to the Company and were valued at $40.00 per
share, the closing share price on the grant date of April 12, 2004.
Subsequently, additional shares were issued to the same consultants as a
modification of the agreements (see 14,000 shares issuance below). Accordingly,
the Company has expensed the entire amount of the 5,250 shares issued and
recorded $210,000 of consulting expense in the accompanying Statement of
Operations. 1,625 of the shares were issued as the last modification for two
consultants that were issued shares previously. Accordingly, the Company will
amortize these shares over the six month term of the agreements based upon the
grant date of April 19, 2004 through October 19, 2004 - see Deferred Consulting
below.

     In April 2004, the Company issued 1,250 shares of Common Stock. In March
2004, the Company issued 16,250 shares of common stock as discussed above.
Subsequently, the Company determined that an error was made and 17,500 shares of
common stock should have been issued. The 1,250 shares were recorded as common
stock issuable at March 31, 2004 and were valued at $40.00 per share, the
closing price on the date of grant of the 16,250 shares discussed above and was
being amortized over the term of the agreement from March 15, 2004 through March
15, 2005. The Company recorded $50,000 of Deferred Consulting at March 31, 2004
and subsequently, additional shares were granted to this consultant as a
modification of the agreement for the 1,250 share issuance (see 14,000 share
issuance below) and the Company has expensed the remaining unamortized deferred
consulting balance - see Deferred Consulting below.

     In May 2004, the Company issued 14,000 shares of common stock. 1,050 of the
shares were issued as compensation for the new CEO of the Company and were
valued at $40.00 per share, the closing price on the grant date of March 7, 2004
and are being amortized over the term of the employment agreement from March 15,
2004 through March 15, 2005 - see Deferred Compensation below. 10,450 of the
14,000 shares issued were for consulting services provided to the Company and
were valued at $40.00 per share, the closing share price on the grant date of
May 7, 2004. These shares were issued as the last modification of the terms
related to previously issued shares to the consultants. Accordingly, the Company
will amortize these shares over the term of the agreements based upon the grant
date of May 7, 2004 through May 7, 2005 - see Deferred Consulting below. 2,500
of the 14,000 shares issued were for legal services provided to the Company and
were valued at $40.00 per share, the closing price on the grant date of May 7,
2004. The agreement for services did not specify a term and can be terminated by
either party on a monthly basis. Accordingly, the Company has expensed the
entire amount and recorded $150,000 of legal expense in the accompanying
Statements of Operations.

ISSUANCES OF PREFERRED STOCK:

     On August 23, 2004, the Company sold 10,000,000 shares of newly designated
Series A Convertible Preferred Stock. The obligation to buy the Series A
Convertible Preferred Stock created by the Subscription Agreement was, on the
same date, exchanged for a promissory note executed by the buyer as maker and
the Company as holder. The promissory note is in the principal amount of
$100,000, bears interest at the rate of 2% per annum and will be paid in
installments. The first installment is due on October 15, 2004 in the amount of
$10,000 and thereafter installments of $7,500 plus accrued interest are due each
month with all principal and interest due to be paid on or before October 15,
2005. (See Note 12 - Subsequent Events).


                                      F-21
<PAGE>

     Pursuant to the Designation Certificate, The Series A Convertible Preferred
Stock will have no preferences in the event of liquidation and has no stated
dividend rate or dividend preference. The newly designated Series A Convertible
Preferred Stock has voting rights equal to the equivalent of 100 shares of
common stock for each 1 share of Series A Convertible Preferred held. These
voting rights are limited to the specific purpose of voting on a 100 to 1
reverse stock split of Nannaco's issued and outstanding common stock, but not
the total authorized common capital stock, of the Nannaco. Otherwise, the
Series A Preferred Convertible Stock has no voting rights on any matter. The
Series A Convertible Preferred Stock is convertible into the common stock of
Nannaco at the option of Nannaco at a rate calculated to grant all holders
of the Series A Convertible Preferred Stock 5% of Nannaco's common stock then
outstanding.

     In accordance with EITF Issue 98-5, as amended by EITF Issue 00-027, the
Company has evaluated that the convertible preferred stock discussed above does
not have a beneficial conversion feature as the preferred stock is not
convertible at the option of the holder and is therefore not deemed convertible
preferred stock for evaluation of the beneficial conversion.

DEFERRED COMPENSATION

     On September 30, 2003, the Company authorized the issuance of 18,750 shares
of common stock as compensation for the former President in accordance with an
amendment to the employment agreement. However, the transfer agent did not issue
the shares until October 15, 2003 and accordingly; such shares were classified
as common stock issuable in the balance sheet at September 30, 2003. On October
15, 2003, the transfer agent issued these shares and they have been properly
reclassified as common stock in 2004. Of the 18,750 shares, 1,087 were issued to
settle $50,000 of accrued and unpaid salary for the former President through
September 30, 2003. In accordance with the amended employment agreement, these
shares were valued based upon a thirty percent (30%) discount to the average
stock price for the month of September or $48.00 per share. There was no loss on
settlement recorded since this was a related party transaction. The remaining
17,663 shares were valued based upon the closing price on September 30, 2003, or
$100.00 per share and the resulting $1,766,304 balance was recorded as Deferred
Compensation in the balance sheet at September 30, 2003. The deferred
compensation balance was being amortized over the remaining life of the
employment agreement from October 1, 2003 through June 1, 2005. For the three
months ended December 31, 2003, $264,946 was amortized and recorded as
compensation in the accompanying Statements of Operations (See below for
subsequent write-off).

     On November 9, 2003, the Company authorized the issuance of 3,750 shares of
common stock as compensation for the former President in accordance with an
amendment to the employment agreement. The shares were valued based upon the
closing price on the grant date of November 9, 2003, or $40.00 per share and the
resulting $150,000 was recorded as Deferred Compensation. The deferred
compensation balance was being amortized over the remaining life of the
employment agreement from November 9, 2003 through June 1, 2005. For the three
months ended December 31, 2003, $22,500 was amortized and recorded as
compensation in the accompanying Statements of Operations (See below for
subsequent write-off).

     On March 15, 2004, the President of the Company resigned from his position.
Accordingly, the Company has expensed the remaining balance of the deferred
compensation for the two issuances discussed above and recorded $1,628,858 of
compensation in the accompanying Statement of Operations.

     On March 15, 2004, the Company authorized the issuance of 1,250 shares as
compensation for the new CEO of the Company. The shares were valued at $40.00
per share, the closing price on the grant date of March 15, 2004 and are being
amortized over the term of the employment agreement from March 15, 2004 through
March 15, 2005. Accordingly, the Company has recorded Deferred Compensation in
the amount of $50,000 on the grant date of March 15, 2004 and $27,083 of the
balance has been amortized and recorded as compensation in the accompanying
Statement of Operations.


                                      F-22
<PAGE>

     On May 7, 2004, the Company authorized the issuance of 1,050 shares as
compensation for the new CEO of the Company. The shares were valued at $40.00
per share, the closing price on the grant date of May 7, 2004 and are being
amortized over the term of the employment agreement from March 15, 2004 through
March 15, 2005. Accordingly, the Company has recorded Deferred Compensation in
the amount of $42,000 on the grant date of May 7, 2004 and $20,000 of the
balance has been amortized and recorded as compensation in the accompanying
Statement of Operations.

DEFERRED CONSULTING

     On November 9, 2003, the Company authorized the issuance of 10,125 shares
of common stock for consulting services provided to the Company and was valued
at $40.00 per share, the closing share price on the grant date of November 9,
2003 and the resulting $405,000 was recorded as Deferred Compensation. The
deferred compensation balance is being amortized over the one year term of the
agreements through November 9, 2004 and for the three months ended December 31,
2003, $57,699 was amortized and recorded as consulting expense in the
accompanying Statements of Operations. As a result of the issuance of additional
shares to the consultants as discussed below, in May 2004, the entire remaining
Deferred Consulting balance in the amount of $347,301 was expensed by the
Company and recorded as consulting expense in the accompanying Statement of
Operations.

     In February 2004, the Company issued 1,250 shares of common stock for new
consulting services. The shares were valued at $80.00 per share, the closing
share price on the grant date of February 25, 2004 and are being amortized over
the one year term of the agreement. Accordingly, the Company recorded $100,000
of Deferred Consulting on the grant date of February 25, 2004 and $58,333 of the
balance has been amortized and recorded as consulting expense in the
accompanying Statement of Operations.

      In April 2004, the Company issued 11,250 shares of common stock for
consulting services as a modification of the November 9, 2003 and subsequent
issuances as discussed previously under Issuances of Common Stock. The shares
were valued at $40.00 per share, the closing share price on the grant date of
March 15, 2004 and are being amortized over the one year term of the agreement
from the grant date of March 15, 2004. Accordingly, the Company recorded
$450,000 of Deferred Consulting on the grant date of March 15, 2004 and $400,991
of the balance has been amortized and recorded as consulting expense in the
accompanying Statement of Operations.

      In March 2004, the Company issued 16,250 shares of common stock as
discussed above. Subsequently, the Company determined that an error was made and
17,500 shares of common stock should have been issued. The 1,250 shares are for
new consulting services and the Company recorded the 1,250 shares as common
stock issuable at March 31, 2004. In April 2004, the 1,250 shares were issued by
the transfer agent and reclassed from Common Stock Issuable to Common Stock. The
17,500 shares were valued at $40.00 per share, the closing price on the date of
grant and are amortized over the term of the agreement from March 15, 2004
through March 15, 2005. Accordingly, the Company recorded $500,000 of Deferred
Consulting on the grant date of March 15, 2004 and $437,936 of the balance has
been amortized and recorded as consulting expense in the accompanying Statement
of Operations.


                                      F-23
<PAGE>

     In April 2004, the Company issued 1,625 shares of common stock as the last
modification for two consultants that were issued shares previously. The Company
is amortizing these shares over the six month term of the agreements based upon
the grant date of April 19, 2004 through October 19, 2004. Accordingly, the
Company recorded $65,000 of Deferred Consulting on the grant date of April 12,
2004 and $59,583 of the balance has been amortized and recorded as consulting
expense in the accompanying Statement of Operations.

      In April 2004, the Company issued 10,450 shares of common stock as the
last modification for several consultants that were issued shares previously.
The Company will amortize these shares over the one year term of the agreements
based upon the grant date of May 7, 2004 through May 7, 2005. Accordingly, the
Company recorded $418,000 of Deferred Consulting on the grant date of May 7,
2004 and $270,353 of the balance has been amortized and recorded as consulting
expense in the accompanying Statement of Operations.

STOCK BASED COMPENSATION PLANS

     On September 29, 2003, the Company adopted a stock based compensation plan
for 5,000,000 shares of common stock for which stock options, restricted stock
and common stock may be granted from time to time to employees and consultants
of the Company in lieu of cash. Under this plan, the Company issued 2,000,000
shares of common stock into escrow for a pending merger. The merger was
terminated and the shares were subsequently cancelled. On October 3, 2003, the
Company adopted a stock based compensation plan for 10,000,000 shares of common
stock for which stock options, restricted stock and common stock may be granted
from time to time to employees and consultants of the Company in lieu of cash.
Under this plan, the Company issued 2,350 shares of common stock into escrow for
a pending merger. The merger was terminated and the shares were subsequently
cancelled.

OPTIONS

     In April 2000, the Company adopted the Nannaco 2000 Stock Option Plan (the
"2000 Plan"). The purpose of the 2000 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 2000
Plan's terms. The 2000 Plan reserved 5,000,000 shares for grant or issuance upon
the exercise of options granted under the plan. Stock Options under the Plan may
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.
The following table summarizes activity related to options:

                                           NUMBER OF SHARES    WEIGHTED AVERAGE
                                           ----------------    ----------------
Balance at September 30, 2002.............      40,000                 $1.00
 Granted..................................           0                     0
 Exercised................................           0                     0
 Forfeited................................           0                     0
                                                ------                ------
Balance at September 30, 2003.............      40,000                 $1.00
 Granted..................................           0                     0
 Exercised................................           0                     0
 Forfeited................................           0                     0
                                                ------                ------
Balance at September 30, 2004.............      40,000                $ 1.00
                                                ======                ======

     All options to purchase our common stock have been issued with exercise
prices equal to or greater than fair market value on the date of issuance.

The terms of options to purchase our common stock are summarized below:

<TABLE>
<CAPTION>
----------------------------OPTIONS OUTSTANDING-------------------------------  -------OPTIONS EXERCISABLE--------
                                                Weighted
                                                 Average                                             Weighted
                                Number          Remaining        Weighted            Number          Average
                            Outstanding at     Contractual       Average         Exercisable at      Exercise
------------------------------------------------------------------------------------------------------------------
Range of Exercise Prices     Sep. 30, 2004        Life        Exercise Price      Sep. 30, 2004       Price
------------------------------------------------------------------------------------------------------------------
<S>       <C>                   <C>             <C>                <C>              <C>              <C>
          $1.00                 40,000          .58 Years          1.00             40,000           $1.00
          =====                 ======          =========          ====             ======           =====
</TABLE>

COMPENSATION EXPENSE FOR OPTIONS GRANTED TO EMPLOYEES, OFFICERS AND DIRECTORS

     Had compensation cost for our stock options not been determined consistent
with SFAS 123, the Company's net loss per share would not have changed.


                                     F-24
<PAGE>

7.   INCOME TAXES

         There was no income tax during 2004 and 2003 due to the Company's net
loss.

         The Company's tax expense differs from the "expected" tax expense for
the period ended September 30, (computed by applying the Federal Corporate tax
rate of 34% to loss before taxes), as follows:

                                                     2004              2003
                                                -------------     --------------
Computed "expected" tax expense (benefit)       $ (2,176,036)     $   (332,233)
Stock based expenses                               2,079,910           146,683
Change in valuation allowance                         96,126           185,550
                                                -------------     --------------
                                                $        -        $       -
                                                =============     ==============

The tax effects of temporary differences that gave rise to significant portions
of deferred tax assets and liabilities at September 30, 2004 are as follows:

Deferred tax assets
  Net operating loss.................            $ 958,737
Total deferred tax assets............              958,737
                                             -------------------
Valuation allowance..................             (958,737)
                                             -------------------
Net deferred tax asset...............             $.... -
                                             ===================

     In assessing the recoverability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The valuation allowance has been increased
by $96,126 during fiscal year 2004 as a result of increased net operating
losses. Net operating loss carry-forwards aggregate approximately $2,819,814 and
expire in the years through 2023.

     As of October 1, 2003, the Company has changed its strategy and moved into
a new line of business. As a result of this change, under IRS rules,
approximately $2,537,000 of the net operating loss carry-forwards through
September 30, 2003 discussed above will not be allowable.

8.   LEASE COMMITMENTS

     On July 1, 2002, the Company relocated its facility and had a single month
to month operating lease agreement for the business office located in San
Antonio, Texas. There was no restriction on our activities concerning dividends,
additional debt or further leasing. In 2004, the Company closed this facility
and moved the business office from San Antonio, Texas to Gig Harbor, Washington.
We currently do not have a lease and we are not paying rent for our office
space. It is being provided to the Company by an officer/director free of charge
(See Note 8 - Related Party Transactions). Usage of this office space and the
related value is de minimis. Therefore, no expense has been recorded in the
accompanying Financial Statements. We expect we will have to lease more
substantial offices in the near future and that the cost of the space may be
material to our operations.

     Rental expense charged to continuing operations under operating leases for
the years ended September 30, 2004 and 2003 was $1,495 and $5,918, respectively.


                                      F-25
<PAGE>

9.   COMMITMENTS AND CONTINGENCIES

     From time to time we may become subject to proceedings, lawsuits and other
claims in the ordinary course of business including proceedings related to
environmental and other matters. Such matters are subject to many uncertainties,
and outcomes are not predictable with assurance.

     The Company is in litigation with Wyndham Hotel Company ("Wyndham") for
unpaid charges. On June 14, 2002, Wyndham obtained a summary judgment against
Nannaco in the amount of $42,308, representing $32,045 of unpaid charges plus
$10,263 of legal fees. The Company does not have sufficient resources to pay the
judgment and interest accrues at a rate of ten percent (10%) until paid in full.
At September 30, 2004, the total amount due is $53,110 (including $10,802 of
accrued interest) and is included under the caption Judgment Payable in the
accompanying balance sheet.

     The Company has not made timely payments of Federal payroll taxes and has
not remitted payments under an executed installment agreement with the IRS. At
September 30, 2004, the Company has recorded $258,608 in the accompanying
Balance Sheet for the estimated amount due (including accrued interest and
penalties). As a result, the IRS could attach a lien against the Company's
assets and bank accounts to protect their claim.

     In January 2005, the Company filed Form 12-25 (b) with the SEC as
notification that the Company would not be able to file its September 30, 2004
Form 10-KSB in a timely manner and received an automatic fifteen (15) day
extension. The Company did not subsequently file the Form 10-KSB within the
extension period. No provision has been made in the accompanying financial
statements for the cost of actions, if any, that may be taken by the SEC against
the Company for this non-compliance.

10.  CONCENTRATIONS OF RISK

     The Company sells its products to customers in the United States. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral.

     Our financial instruments that are potentially exposed to credit risk
consist primarily of cash and cash equivalents, accounts receivable, and
accounts payable, for which the carrying amounts approximate fair value. At
certain times during the year, our demand deposits held in banks exceeded the
federally insured limit of $100,000.

     Suppliers representing over 10% of purchases were as follows:

                                                                  2004     2003
                                                                  ----     ----
Supplier 1                                                         0%      17%

     Customers representing over 10% of revenues were as follows:

                                                                  2003     2002
                                                                  ----     ----
Customer 1 ...................................................     0%      15%
Customer 2 ...................................................    32%       1%
Customer 3 ...................................................    15%       0%
Customer 4 ...................................................    13%       0%

     Services were primarily provided in Bexar County, Texas


                                     F-26
<PAGE>

11.  RELATED PARTY TRANSACTIONS

     Beginning in January of 2001 and through July of 2001, a director of the
Company, loaned $43,700 to the Company in the form of a promissory note. The
note bears interest at ten percent (10%) per annum and the principal and accrued
interest was due one year from each of the investments. In April 2003, the
Company repaid $1,000 of principal resulting in the current balance due of
$42,700.

     At September 30, 2004, the same director discussed above was owed $25,092
in accrued compensation related to legal services provided to the Company and
has been classified as accrued compensation - related party in the accompanying
Balance Sheet at September 30, 2004.

     From October through December of 2003, the father of the Company's
President advanced $26,500 of funds to the Company and this has been classified
as other current liabilities in the accompanying Balance Sheet at September 30,
2004.

     We currently do not have a lease and we are not paying rent for our office
space. It is being provided to the Company by an officer/director free of charge
(See Note 8 - Lease Commitments). Usage of this office space and the related
value is de minimis. Therefore, no expense has been recorded in the accompanying
Financial Statements. We expect we will have to lease more substantial office in
the near future and that the cost of the space may be material to our
operations.

12.  SUBSEQUENT EVENTS

     In November 2004, the Company announced that the merger previously
announced with Red Alert was terminated (See History and Nature of Business -
Note 1). The Board of Directors of both Nannaco and Red Alert approved the
termination, without cause, of the Agreement and Plan of Merger. As a result of
the termination of the agreement, both companies will bear their own expenses in
connection with the merger and neither company will owe to the other either
break-up fees or other costs and expenses.

     The first installment under a promissory note receivable held by the
Company was due on October 15, 2004 in the amount of $10,000 (See History and
Nature of Business - Note 1). The Company did not receive this payment.
Additionally, installments of $7,500 plus accrued interest are due each month
with all principal and interest due to be paid on or before October 15, 2005.
The second, third and fourth installments due on November 15, December 15, 2004
and January 15, 2005 in the amount of $7,500 each plus accrued interest were not
received by the Company either. As of the date of these Financial Statements,
the Company has not notified the nonperforming party that an event of default
has occurred. However, the Company believes that the promissory note is fully
collectible and will obtain the required proceeds in the foreseeable future.

     On October 28, 2004, the Company and NAZZ Productions, Inc. entered into an
agreement to merge a subsidiary of Nannaco into NAZZ Productions, Inc. ("NAZZ")
and to rename the Company NAZZ Productions, Inc. (the "reverse merger"). The
agreement provides that all of the shares of common stock of NAZZ issued and
outstanding at the time the merger becomes effective under applicable state law
(the "Effective Time"), will be converted into common stock of Nannaco such that
the current holder of NAZZ common stock will hold 95% of all shares of Nannaco's
common stock outstanding immediately after the closing of this merger
transaction, on a fully diluted basis. The obligation of NAZZ to close is
conditioned on, among other things, the satisfactory completion of due diligence
review by NAZZ and the reduction of Nannaco liabilities to $50,000 or less. The
agreement may be terminated at any time prior to the Effective Time by written
agreement; by NAZZ for breach of any of the representations and warranties or
covenants of Nannaco if such breach is not cured within thirty days of written
notice; by Nannaco for breach of any NAZZ representations and warranties or
covenants if the breach is not cured within thirty days of written notice; by
either party in the event the merger is not closed by December 30, 2004. In the
event Nannaco breaches the agreement with NAZZ by engaging in efforts leading to
the acquisition of Nannaco by a corporation other than NAZZ then, NAZZ shall be
entitled to a $200,000 "break-up fee".


                                     F-27
<PAGE>

      On October 29, 2004, the Company issued shares of common stock to Steve
Careaga in the amount of 750,000 shares. The common stock is issued to Mr.
Careaga in his capacity as Chief Financial Officer and director as consideration
of services past and continuing and subject to substantial conditions
constituting events of forfeiture. Under conditions of the issuance, Mr. Careaga
must raise capital in excess of $5,000,000 within 90 days following this
issuance or forfeit the shares. The shares were valued at $1.20 per share, the
market price of the common stock on the date of grant. The Company will record
compensation expense in the amount of $900,000.

      In November 2004, the Company issued 675,000 shares of its $0.001 par
value common stock to four groups for legal and consulting services. The shares
were valued at $1.20 per share, the market price of the common stock on the date
of grant. The Company will record compensation expense in the amount of
$810,000.

         In November 2004, the Company provided an Information Statement to the
stockholders of Nannaco to authorize the board of directors to effect a 1-for-40
reverse stock split of the common stock. Nannaco is currently authorized to
issue 500,000,000 shares of its common stock of which 63,742,534 shares were
issued and outstanding as of November 4, 2004. Shareholders holding 51,000,000
of the voting capital stock have consented in writing to the proposal,
constituting approval in excess of 67% of the shares entitled to vote.

         In December 2004, the reverse split on a 1 for 40 basis was implemented
and reduced the number of issued and outstanding shares to approximately
1,543,563. The reverse split will not reduce the number of authorized shares of
common stock and will not have any effect on the stated par value of the common
stock. (See Note 6 - Capital Structure)


                                     F-28