SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-KSB





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





For the
fiscal year ended December 31, 2007





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





For the
transition period from ___________ to ___________





Commission
file number:000-52636





NANO HOLDINGS INTERNATIONAL,
INC.


(Name of
small business issuer in its charter)





Delaware
            20-3724068(State
      of organization)
            (I.R.S.
      Employer Identification No.)





1640
Terrace Way


Walnut Creek, California
94597


(Address
of principal executive offices)





(925)
938-0406


(Registrant's
telephone number)





SECURITIES
REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:





NONE





SECURITIES
REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:





COMMON
STOCK, $0.001 PAR VALUE PER SHARE





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter periods that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [  ]





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the 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. [  ]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [  ] No [X].




The
issuer's revenues for its most recent fiscal year were $155,025.





The
aggregate market value of the issuer's voting and non-voting common equity held
by non-affiliates computed by reference to the average bid and ask price of such
common equity as of March 18, 2008, was $0,
although the Registrant’s common stock has been approved for quotation on the
Over-The-Counter Bulletin Board under the symbol (“NNOH”), no shares have traded
and there was no bid or ask price for the Registrant’s common stock on the
Over-The-Counter Bulletin Board as of the date of this filing.





At March
27, 2008, there were 7,030,000 shares of the Issuer's common stock
outstanding.





Transitional
Small Business Disclosure Format (check one): Yes [  ] No [X].












TABLE OF
CONTENTS





PART
I





ITEM
      1. DESCRIPTION OF BUSINESS
            3ITEM
      2. DESCRIPTION OF PROPERTY
            6ITEM
      3. LEGAL PROCEEDINGS
            6ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            6PART
      IIITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
            7ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
            7ITEM
      7. FINANCIAL STATEMENTS
            F-1ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
            17ITEM
      8A. CONTROLS AND PROCEDURES
            17ITEM
      8B. OTHER INFORMATION
            17PART
      IIIITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
            18ITEM
      10. EXECUTIVE COMPENSATION
            20ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS
            23ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            24ITEM
      13. EXHIBITS
            24ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            25SIGNATURES
            27









PART
I





FORWARD-LOOKING
STATEMENTS









ALL
STATEMENTS IN THIS DISCUSSION THAT ARE NOT HISTORICAL ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT OTHERWISE INCLUDE
THE WORDS "BELIEVES", "EXPECTS", "ANTICIPATES", "INTENDS", "PROJECTS",
"ESTIMATES", "PLANS", "MAY INCREASE", "MAY FLUCTUATE" AND SIMILAR EXPRESSIONS OR
FUTURE OR CONDITIONAL VERBS SUCH AS "SHOULD", "WOULD", "MAY" AND "COULD" ARE
GENERALLY FORWARD-LOOKING IN NATURE AND NOT HISTORICAL FACTS. THESE
FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED
UTILIZING NUMEROUS IMPORTANT ASSUMPTIONS AND OTHER IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING OUR
FUTURE FINANCIAL PERFORMANCE, BUSINESS STRATEGY, PROJECTED PLANS AND OBJECTIVES.
THESE FACTORS INCLUDE, AMONG OTHERS, THE FACTORS SET FORTH BELOW UNDER THE
HEADING "RISK FACTORS." ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN
THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE
RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOST OF THESE FACTORS
ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. WE ARE
UNDER NO OBLIGATION TO PUBLICLY UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-KSB,
UNLESS ANOTHER DATE IS STATED, ARE TO DECEMBER 31, 2007. AS USED HEREIN, THE
"COMPANY," "NANO," "WE," "US," "OUR" AND WORDS OF SIMILAR MEANING REFER TO NANO
HOLDINGS INTERNATIONAL, INC. AND ITS WHOLLY OWNED FLORIDA SUBSIDIARY, SUNSHINE
GROUP, LLC.





ITEM
1.DESCRIPTION
OF BUSINESS





History:





We were
incorporated as Nano Holdings International, Inc. in Delaware on April 16, 2004.
We have 85,000,000 shares of stock authorized, representing 75,000,000 shares of
common stock, $0.001 par value and 10,000,000 shares of preferred stock, $0.001
par value.





On
December 15, 2005, we entered into a Share Exchange Agreement with Sunshine
Group, LLC, a Florida, limited liability company, whereby we exchanged 3,500,000
newly issued shares of our restricted common stock for 100% of the outstanding
membership units of Sunshine. The acquisition of Sunshine was an arms length
transaction, with the exchange rate of the exchange determined by the mutual
agreement of us and Sunshine based on the estimated value of Sunshine. Since
that time, Sunshine has been our wholly owned subsidiary. We run all of our
operations through Sunshine, and unless otherwise stated, all references to Nano
Holdings International, Inc., the “Company,” “we,” “us,” or words of similar
meaning used herein include the operations of Sunshine.





On or
about June 6, 2007, our common stock was cleared to be quoted on the
Over-The-Counter Bulletin Board (“OTCBB”) under the symbol “NNOH.”






-3-


We have a
webpage which describes our products and through which customers can purchase
our products at http://www.shotskis.com, www.shotskis.sitefly.com,
www.shotskisbarsupplies.com (and/or www.bombshots.com), which include
information which we do not wish to be included in this report.





Through
Sunshine, we sell party and drinking supplies including gelatin shot mixes, shot
glasses, flavored sugar and salts, and various other drinking containers and
paraphernalia including:





o
            Gelatin Shooters - Our
      Gelatin Shooters are drink mixes, which customers can mix with water and
      alcohol to create Jello shots for consumption in bars or at individual
      customer’s homes. We currently offer gelatin shooters in the following
      cocktail flavors: Sex on the Beach, Purple Hooter, Margarita, Mai Tai,
      Pina Colada and Kamikaze. We do not sell alcoholic beverages, but instead
      our powdered Gelatin Shooter drink mixes are intended to be combined with
      alcoholic or non-alcoholic beverages to create flavored gelatin shooters,
      which are then intended to be eaten once hardened. We believe that our
      Gelatin Shooters will be popular with individuals as well as bar owners
      because the Gelatin Shooters themselves do not compete with other
      alcoholic beverages, but act instead as an add on sale for bar owners, and
      are often a spur of the moment impulse purchase. As the Gelatin Shooters
      are not an alcoholic beverage themselves, they can be sold to anyone of
      any age in any type of store.




o
            Bomb Shots - Bomb shots
      are plastic shot glasses, which contain a smaller shot glass within a
      larger shot glass and allow the bartender to pour two liquids into the
      shot glass, but to keep the liquids separate until the shot is tilted up
      in a drinking position, at which time the two separate liquids mix as they
      are consumed.o
            Shotski's Flavored &
      Colored Sugars and Salts - Our flavored and colored sugars and
      salts add eye appeal to any drink while improving the flavor as the sugars
      and salts are designed to compliment each beverage. We currently offer
      flavored sugars for use as a bar supply in the following flavors:
      Strawberry, Sour apple, Lemon and Lime, Red Raspberry, Blue Raspberry,
      Cranberry, Chocolate, Watermelon, Mojito Mint, Orange, and Peach.
      Additionally, we offer flavored salt in Lime and Strawberry
      flavors.o
            Party Packages -
      Additionally, we sell party packages, containing Gelatin Shooters, shot
      glasses and various other drinking supplies.o
            Various other bar supplies
      - We also sell various other bar and drinking supplies, including
      various other shot glasses, instruments for injecting and squirting our
      gelatin shots into individuals’ mouths, serving trays and cocktail
      stirrers.





Sunshine
does business as "Shotski's" and "Shotski's Gelatin Cocktail Mixes," "Shotski's
Cocktail Sugars & Salts and Bar Supplies,” and “Shotski’s Bar Supplies &
Party Mixes.”





We
currently have partial distribution through our internet website in every state
in the United States.


We also
have full distribution in Florida, Nevada, Minnesota, and Oregon, which covers
all of such states through certain distributors which we distribute our products
through. Additionally, we provide direct shipments internationally through our
website as described herein.





We may
choose to expand our distribution channels in the future to cover all of the
states above with which we only have partial distribution and/or expand to other
states, however; we are able to sell all of our products to the entire country
though our website and have no such plans for expansion in the United States. We
currently have plans, funding permitting, to expand distribution to various
locations in Puerto Rico, Mexico, Switzerland, the Bahamas and Trinidad in the
next six (6) to twelve (12) months.  We have found international
expansion harder than anticipated due to freight costs and additional security
concerns, but are still working to expand our distribution
internationally.





We
distribute our products ourselves via web sales, trade shows and distributor
sales.  For our credit worthy customers, we extend net 30 day terms
for our distributor relationships. For our internet direct customer orders,
the products are paid for at the time of sale by credit card. Our sales mix at
present is approximately 65% distributor sales and 35% internet
sales.





-4-


Moving
forward, we plan to concentrate our marketing efforts to two separate types of
customers, 1) distributors to retail and on-site restaurant and beverage
businesses and 2) internet retail customers, who are not covered in our
distributor network and individual customers making one-time purchases. We
anticipate our sales mix to remain relatively static during the next fiscal
year, and plan to build our business base and hopefully add more distributors
and gain greater market awareness through the internet.




Competition





The
market for party drinks, drink mixes and drinking supplies is highly competitive
and fragmented. The Company expects competition to intensify in the future. We
compete in each of our markets with numerous national, regional and local
companies, many of which have substantially greater financial, managerial and
other resources than those presently available to us. Numerous well-established
companies are focusing significant resources on providing party drinks, drink
mixes and drinking supplies that will compete with our services. No assurance
can be provided that we will be able to effectively compete with these other
companies or that competitive pressures, including possible downward pressure on
the prices we charge for our products, will not rise. In the event that we
cannot effectively compete on a continuing basis or competitive pressures arise,
such inability to compete or competitive pressures will have a material adverse
effect on our business, results of operations and financial
condition.





We do not
currently depend on one or a small number of customers for our sales. We
currently offer and sell our products to a large number of customers, including
distributors, hotels, restaurants, bars and clubs and direct retail via our
website.





Research
and Development





Research
and development expenses for the years ended December 31, 2007 and 2006 totaled
approximately $2,500 per year.





Subsidiaries





Our
wholly owned subsidiary, Sunshine Group LLC, conducts business under the d/b/a
of "Shotski's Gelatin Cocktail Mixes," "Shotski's," "Shotski's Cocktail Sugars
& Salts and Bar Supplies” and “Shotski’s   Bar Supplies &
Party Mixes.”




Patents,
Trademarks And Licenses





The
President of Sunshine, Marion R. "Butch" Barnes, holds a registered trademark
for the term "Shotski's," serial number 76419327, registration number 2877880,
which he licenses to us free of charge. In September 2006, we entered into a
Trademark Licensing Agreement with Mr. Barnes in connection with our use of the
"Shotski's" trademark. Pursuant to the licensing agreement, Mr. Barnes agreed to
provide us a one (1) year non-revocable license to use of the trademark, which
license shall automatically renew for additional one (1) year terms unless
either party terminates the licensing agreement at least sixty, but not more
than ninety days prior to the end of the then current term of the agreement. In
September 2007, the licensing agreement renewed automatically for an additional
one (1) year term.  We have no reason to believe that Mr. Barnes will
not continue to license us the use of the "Shotski's" trademark
indefinitely.





Other
than the trademark for "Shotski's," which we license from Mr. Barnes, we have no
other patents, trademarks or licenses.





Need
For Government Approval





We
operate in the food and beverage industry and as such, our operations are
regulated by the U.S. Food and Drug Administration, as well as by various other
state, county and city regulations as required by law.





-5-


We have
obtained all required federal and state permits, licenses, and bonds to operate
our business. However, there can be no assurance that in the future, our
operations and profitability will not be subject to more restrictive regulation
and/or increased taxation by federal, state, or local agencies.





Material
Events





In April
2007, we entered into an agreement with Island Stock Transfer (“Island”) to
serve as our transfer agent on our behalf for a period of twelve months from the
date of the agreement, which does not include various other fees charged by
various third parties and billed by Island and/or any charges associated with
lost share certificates, issuances, cancellations, transfers or related fees,
and/or a monthly service fee charged by Island.  Pursuant to the
agreement we paid Island $5,000 and agreed to issue Island certain shares of our
common stock.  We subsequently verbally agreed to amend this agreement
with Island, whereby we agreed to pay Island $20,000 cash in lieu of issuing
Island shares of common stock; however, no formal written amendment has been
entered into to date.  On November 1, 2007, we wired $20,000 of cash
to Island to satisfy this commitment.





On August
1, 2007, with an effective date of July 31, 2007, we entered into a First
Amendment Agreement to Promissory Notes with Jenadosa Holdings Limited
(“Jenadosa” and the “First Amendment”).  Pursuant to the terms of the
First Amendment, Jenadosa agreed to extend the due date of $127,000 in
promissory notes (along with any accrued and unpaid interest thereon) which they
had previously granted us in 2006, from July 31, 2007 to July 31, 2008; and to
waive any event of default which may have occurred due to our failure to repay
such notes on the original due date, July 31, 2007, as well as any default
interest which may have otherwise been accrued thereunder.









On
November 1, 2007, we entered into a loan agreement with Viking Investment Group
II, Inc. (“Viking”).  Pursuant to the loan agreement, we received
$30,000 and entered into a promissory note which bears interest at the rate of
10% per year and is due and payable on December 31, 2008.





On
January 16, 2008, we borrowed $6,324.43 from Viking, which was evidenced by a
Promissory Note.    The note bears interest at the rate of
10% per year and is due and payable on December 31, 2008.





ITEM
2. DESCRIPTION
OF PROPERTY





Our
primary office space currently occupies approximately 240 square feet of office
space, at 1640 Terrace Way, Walnut Creek, California 94597, which we are
provided at the home of David Rector, our sole officer and Director, free of
charge. Mr. Rector does not have any current plans to cease providing such
office space free of charge, nor do we have any current plans to seek an
alternative office space arrangement.





We
additionally have approximately 200 square feet of office space at our
warehouse facility at 369 Blanding Blvd., Orange Park, Florida 32073. We entered
into a one (1) year warehouse lease for approximately 1,500 square feet of
warehouse space, which lease started on December 1, 2006 and expired on December
31, 2007. Since December 31, 2007, we have operated on a month-to-month lease
with the landlord.  The rent for the warehouse property is $10,593 per
year, payable in monthly installments of $882.75. The lease for the Orange Park,
Florida office space and warehouse facility is with a party not affiliated with
us.





ITEM
3.LEGAL
PROCEEDINGS





From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.





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




None.





-6-




PART
II





ITEM
5.MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





Our
common stock currently trades on the Over-The-Counter Bulletin Board under the
symbol "NNOH". However, no shares of common stock have been traded to date, and
there was no “bid” or “ask” price for our common stock as of the date of this
filing. As of March 18, 2008, the Company had approximately 7,030,000 shares of
common stock outstanding held by approximately forty (40) shareholders of
record.  To date, the Company has not paid dividends on its common
stock.





We have
no shares of common stock subject to outstanding options or warrants to
purchase, or securities convertible into, our common stock. We have no
outstanding shares of Preferred Stock.





Recent Sales of Unregistered
Securities





There
were no sales of securities during the three months ended December 31, 2007, or
through the date of this report.





On
October 29, 2007, the Company paid $15,000 to a shareholder, James Lundeen, Jr.,
to rescind his original June 2005 investment of $15,000 for a 10% interest in
Sunshine, which was then converted into 350,000 shares of the Company’s common
stock in connection with the Share Exchange Agreement described
above.  While the Company has paid the $15,000 to date in exchange for
Mr. Lundeen’s executed stock power for the 350,000 shares, in connection with
the rescission of his original investment in Sunshine, the shares have not been
cancelled to date, and such shares have therefore been included in the number of
issued and outstanding shares of common stock disclosed throughout this
report.  There was no written agreement entered into in connection
with the payment of the funds to Mr. Lundeen and/or his promise to rescind his
original investment in Sunshine, but both parties have verbally agreed on the
terms, and the Company plans to take steps subsequent to the filing of this
report to cancel such shares.





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





PLAN
OF OPERATIONS





We are
currently funded solely by our shareholders and from loans from Jenadosa
Holdings, Ltd. and Viking Investment Group II, Inc., and believe we can continue
operations for at least the next three months with the funds we receive through
sales of our products, the $25,326 of cash on hand we had as of December 31,
2007 and the $6,324.43 loan we received from Viking in January
2008.  We also believe that that we are close to generating sufficient
revenues to pay our ongoing liabilities, however we can provide no assurances
that we will not continue to generate net losses.  In addition to our
ongoing working capital needs, we do not currently have sufficient funds to
repay the $231,792 of notes payable plus accrued interest which are payable
to Jenadosa and Viking in 2008, which, could cause us to default on that payment
and could force us to curtail or abandon our business operations to pay such
debts. We plan to work to increase our sales in the future, by starting a mail,
fax and email marketing program, and by utilizing and building upon the interest
we generate for our products at trade shows.





We
believe we may require up to $250,000 in the next twelve months to expand
our operations, purchase a printing machine (which we believe would allow us to
increase the volume of our sales), pay the travel expenses associated with
attending trade shows, and purchase additional inventory and magazine ads. This
amount does not include the $231,792 of notes plus accrued interest due to
Jenadosa and Viking in 2008, which we do not currently have sufficient funds to
repay. We do not currently have any commitments for this funding.





We are
currently actively recruiting new distributors to expand our sales coverage for
our product lines. Distributors can be regional, serving multiple states, within
a state or distribute in or around a large city. We have found that getting the
attention of a larger distributor with a new product line can be difficult and
have found that we are more successful in recruiting multiple smaller
distributors with limited coverage areas to
date. However, because of this, we currently believe that there are currently
many open areas within the states that we distribute our products to that are
not serviced by the smaller distributors which we distribute our products
through. To provide coverage to these areas, we conduct direct email marketing
campaigns in an effort to attract customers and service such customers directly
through our website. This two-pronged approach of recruiting regional
distributors and directly marketing our products to individual customers will be
the primary sales and marketing strategy for us for the next several
years.





-7-


We have
experienced a limited amount of increased demand for our products around the
winter holidays, spring break and summer vacation. Other than these limited
seasonal increases in our sales, we have experienced no significant seasonal
increases in our sales to date. We are currently spending the majority of our
efforts in growing our distribution channels and sales. At present, our sales
growth has been relatively unaffected by any seasonality trends. For the
foreseeable future, we do not anticipate any significant increases or decreases
in sales due to seasonality factors.





Our
primary branded product, Shotski's Gelatin Bar Mixes, is a product concept that
has been in place for several years. With the unique formulation of the
Shotski's product and the supporting line of bar accessories to help the on-site
accounts market the products, we believe we have been able to differentiate
ourselves from the mainstream and begin to build brand awareness as well as our
revenue base. We believe that the key to our Shotski's mix product concept is
the longevity of the on-site prepared gelatin product; that is that it remains
useable for multiple weeks, where other gelatin products are only good for
approximately 24-48 hours before they spoil. We experienced a significant
increase in growth for the year ended December 31, 2007, compared to the year
ended December 31, 2006, and plan to use the majority of our revenues moving
forward, assuming we are able to continue to generate such revenues, and have
any funds left over after paying our expenses, of which there can be no
assurance, to increase our inventories and continue and expand our marketing
campaign.





Our
operations are based on just-in-time inventory policies and therefore our
working capital is held to a minimum. However, we also try to take advantage of
costs saving that can be gained from purchasing our supplies in bulk, which
benefits we believe, along with the practice of keeping our working capital at a
minimum has benefited our gross margins to date. We believe that our lines of
supply are well-established and reliable to date and that moving forward, our
suppliers have great flexibility to effectively handle any increases in sales
volume we may experience, without delays.




Additionally,
we may enter into a merger or acquisition transaction in the future, which
merger or acquisition if consummated may change our business focus, officers and
Directors and may cause substantial dilution to our existing shareholders. While
we have not entered into any agreements or understandings to date in connection
with a merger or acquisition and can provide no assurances that we will enter
into a merger or acquisition in the future, we have been in contact with several
parties regarding the entry into a potential merger and/or acquisition
transaction in the future.





RESULTS
OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 COMPARED TO THE FISCAL
YEAR ENDED DECEMBER 31, 2006





We had
product sales of $155,025 for the year ended December 31, 2007, compared to
product sales of $135,912 for the year ended December 31, 2006, an increase in
product sales of $19,113 or 14.1% from the prior year. The increase in product
sales was due to the introduction of new products during fiscal 2007 and the
results of our webmail marketing program which was undertaken during fiscal
2007.





We had
cost of goods sold of $46,830 for the year ended December 31, 2007, compared to
cost of goods sold of $84,136 for the year ended December 31, 2006, a decrease
in cost of good sold of $37,306 or 44.3%.  The decrease in cost of
goods sold was a direct result of us working to secure more favorable prices
from our suppliers  and increased bulk purchases of ram materials,
which generally have higher margins, during the year ended December 31, 2007,
compared to the year ended December 31, 2006.





We had a
gross profit of $108,195 for the year ended December 31, 2007, compared to a
gross profit of $51,776 for the year ended December 31, 2006, an increase in
gross profit of $56,419 or 109% from the prior
year. Our gross profit was 69.8% of sales for the year ended December 31, 2007,
compared to 38.1% for the year ended December 31, 2006.  The increase
in gross profit, as well as the increase in gross profit as a percentage of
sales for the year ended December 31, 2007, compared to the year ended December
31, 2006, was a direct result of the increased revenues and reduced costs of
goods sold in connection with our buying of raw materials in bulk.





-8-


We had
total expenses, consisting solely of general and administrative expenses of
$287,738 for the year ended December 31, 2007, compared to total expenses
consisting solely of general and administrative expenses of $255,032 for the
year ended December 31, 2006, an increase in general and administrative expenses
of $32,706 or 12.8% from the prior year. The increase in general and
administrative expenses was mainly caused by increased payroll associated with
the hiring of one (1) new full-time and one (1) new part-time employee during
the year ended December 31, 2007, compared to the year ended December 31,
2006.





We had a
loss from operations of $179,543 for the year ended December 31, 2007, compared
to a loss from operations of $203,256 for the year ended December 31, 2006, a
decrease in loss from operations of $23,713 or 11.7% from the prior
period.  This decrease in loss from operations was mainly caused by
the increase in gross profit as described above.





We had
other expenses, consisting of interest expense of $16,200 for the year ended
December 31, 2007, compared to other expenses consisting of interest expense of
$10,531 for the year ended December 31, 2006, an increase in interest expense of
$5,669 or 53.8% from the prior period. Interest expense for the year ended
December 31, 2007 and 2006, was in connection with the Jenadosa Notes and the
Viking Note (both of which described in greater detail and defined
below).  Interest expense increased due to a larger amount of Jenadosa
Notes and the Viking Note being outstanding during the year ended December 31,
2007, compared to the year ended December 31, 2006, and the resulting additional
accrual of interest on such larger outstanding amounts.




We had a
net loss of $195,743 for the year ended December 31, 2007, compared to a net
loss of $213,787 for the year ended December 31, 2006, a decrease in net loss of
$18,044 or 8.4% from the prior period.





LIQUIDITY
AND CAPITAL RESOURCES





We had
total assets of $38,928 as of December 31, 2007, which included current assets
of $35,429, consisting of cash on hand of $25,326, net accounts receivable of
$10,103, and non-current assets of $3,499, including equipment, net of
depreciation of $2,496, trademark of $275, consisting of the trademark
“Shotski’s” licensed to us from Mr. Barnes pursuant to the Trademark Licensing
Agreement described above, and deposits of $728.





We had
total liabilities of $241,439 as of December 31, 2007, consisting solely of
current liabilities, including accounts payable of $9,647, and notes payable and
accrued interest of $231,792 in connection with the notes payable to Jenadosa
Holdings Limited and Viking Investment Group II, Inc., described
below.





We
received two $50,000 loans, one $5,000 loan, one $7,000 loan and one $15,000
loan from a third party, Jenadosa Holdings Limited ("Jenadosa"), during the
years ended December 31, 2005 and 2006, and entered into promissory notes which
evidence the loans, which notes bear interest at the rate of 10% per year until
paid. We received $50,000 in connection with one promissory note on November 20,
2005, $50,000 in connection with another promissory note on February 14, 2006,
$5,000 in connection with a third promissory note on August 21, 2006, $7,000 in
connection with a fourth note on September 20, 2006, and $15,000 in connection
with a fifth note on October 13, 2006 (collectively the “2005 and 2006 Notes”).
The Notes were all payable on July 31, 2007, together with any accrued and
unpaid interest, but were later extended until July 31, 2008, pursuant to the
First Amendment Agreement to Promissory Notes, described above. Any amounts not
paid on the Notes when due bear interest at the rate of 15% per annum until
paid.






-9-


On
January 15, 2007, we received an additional $10,000 loan from Jenadosa and
entered into an additional promissory note with Jenadosa to evidence the loan,
which bears interest at 10% per annum and is due and payable on March 31, 2008
(the “January 2007 Note”).  On April 4, 2007, and April 24, 2007,
respectively, we received a $10,000 and a $7,500 loan from Jenadosa and entered
into Promissory Notes with Jenadosa to evidence such loans, which are due and
payable on June 30, 2008 (the “April 2007 Notes,” and collectively with the 2005
and 2006 Notes and the January 2007 Note, the “Notes” or the “Jenadosa
Notes”).





In
addition to loans received from Jenadosa, we also entered into a loan agreement
with Viking Investment Group II, Inc. on November 1, 2007.  Pursuant
to the loan agreement, we received $30,000 and entered into a promissory note
which bears interest at the rate of 10% per year until paid (the “Viking
Note”).  Additionally, on January 16, 2008, we borrowed $6,324.43 from
Viking, which was evidenced by a Promissory Note.    The
note bears interest at the rate of 10% per year and is due and payable on
December 31, 2008.





We had
negative working capital of $206,010, and total accumulated deficit of $567,332
as of December 31, 2007.





We had
$75,832 of net cash used by operating activities for the year ended December 31,
2007, which mainly consisted of $195,743 of net loss, offset by $117,000 of
contributed services to us by our Chief Executive Officer, David Rector and the
President of Sunshine, Marion "Butch" Barnes, neither of which we pay a salary,
a $5,994 decrease in receivables and a $3,882 decrease in
payables.




We had
$93,700  of net cash provided by financing activities for the year ended
December 31, 2007, which was due to proceeds from notes payable in connection
with the January 2007 Note, the April 2007 Notes and the Viking Note entered
into with Jenadosa as described above.





We have
no current commitment from our officers and Directors or any of our shareholders
to supplement our operations or provide us with financing in the future. If we
are unable to raise additional capital from conventional sources and/or
additional sales of stock in the future, we may be forced to curtail or cease
our operations. Even if we are able to continue our operations, the failure to
obtain financing could have a substantial adverse effect on our business and
financial results.





In the
future, we may be required to seek additional capital by selling debt or equity
securities, selling assets, or otherwise be required to bring cash flows in
balance when we approach a condition of cash insufficiency. The sale of
additional equity or debt securities, if accomplished, may result in dilution to
our then shareholders. We provide no assurance that financing will be available
in amounts or on terms acceptable to us, or at all.




-10-




RISK
FACTORS





You
should carefully consider the following risk factors and other information in
this annual report on Form 10-KSB before deciding to become a holder of our
Common Stock. If any of the following risks actually occur, our business and
financial results could be negatively affected to a significant
extent.





Our
business and the value of our common stock are subject to the following Risk
Factors:





WE
MAY NOT BE ABLE TO CONTINUE OUR BUSINESS PLAN WITHOUT ADDITIONAL
FINANCING.





We depend
to a great degree on the ability to attract external financing in order to
conduct our business activities and in order that we have sufficient cash on
hand to expand our operations. We are currently funded solely by our
shareholders and through loans received from Jenadosa Holdings, Ltd. and Viking
Investment Group II, Inc. and we believe that our business has attained a cash
flow sustainable base of operations that should continue onward at very slow
growth curve with the funds we receive through sales of our products, the
$25,326 of cash on hand we had as of December 31, 2007. We anticipate, however,
the need for approximately $250,000 in the next twelve months to expand our
operations (as described above under “Plan of Operations”), not including
approximately $231,792 (including accrued and unpaid interest) on the amounts
loaned to us by Jenadosa and Viking (as described below), which we do not
currently have any commitments from any related or third parties to provide. If
we are unable to generate sufficient revenues to support our operations and/or
fail to raise additional funds after the three months which we currently believe
we will be able to continue our operations, and/or if we are unable to raise
sufficient capital to increase our sales, we may be forced to abandon our
current business plan. If you invest in us and we are unable to raise the
required funds, your investment could become worthless.





AS
OF DECEMBER 31, 2007, WE WILL REQUIRE APPROXIMATELY $231,792, INCLUDING ACCRUED
AND UNPAID INTEREST, PRIOR TO THE DUE DATE OF SUCH NOTES ON MARCH 31, 2008, JUNE
30, 2008, JULY 31, 2008, AND DECEMBER 31, 2008, TO REPAY AMOUNTS WE OWE UNDER
OUTSTANDING NOTES PAYABLE, WHICH FUNDS WE DO NOT CURRENTLY HAVE.





Jenadosa
Holding Limited ("Jenadosa"), loaned us a total of $127,000 during 2006, which
was due and payable on July 31, 2007, but which has since been extended until
July 31, 2008, pursuant to the First Amendment as described above under “Recent
Events”; as well as $10,000 in January 2007, which is due and payable on March
31, 2008; and $17,500 in April 2007, which is due and payable on June 30,
2008.  Further, Viking Investment Group II, Inc. (“Viking”) loaned us
$30,000 on November 1, 2007, which is due and payable on December 31,
2008.  All of these promissory notes bear interest at the rate of 10%
per annum until paid, and we do not currently have sufficient cash on hand to
repay the $231,792 (including accrued and unpaid interest as of December 31,
2007) owed under the promissory notes with Jenadosa and Viking.  If we
are unable to generate a sufficient amount of net income to provide us enough
funds to repay the notes prior to March 31, 2008, June 30, 2008, July 31, 2008,
and/or December 31, 2008, respectively, we may be forced to raise additional
funds through the sale of equity or debt securities, and/or issue shares of
common stock to Jenadosa or Viking in consideration for the amounts owed, either
of which could cause substantial dilution to our existing shareholders. As a
result, if we fail to generate sufficient net income to repay our outstanding
promissory notes with Jenadosa and our note with Viking, the value of our
securities, if any, could decline in value or become worthless.





WE
HAVE BEEN IN CONTACT WITH OTHER ENTITIES IN CONNECTION WITH VARIOUS MERGER AND
ACQUISITION OPPORTUNITIES AND MAY CHOOSE TO ENTER INTO A MERGER AND/OR
ACQUISITION TRANSACTION IN THE FUTURE.




We have
been in contact with parties seeking to merge and/or be acquired by us. While we
have no immediate plans to merge with or acquire any entity, in the event that
we do enter into a merger and/or acquisition with a separate company in the
future, our majority shareholders will likely change and new shares of common
stock could be issued resulting in substantial dilution to our then current
shareholders.




-11-


As a
result, our new majority shareholders will likely change the composition of our
Board of Directors and replace our current management. The new management will
likely change our business focus and we can make no assurances that our new
management will be able to properly manage our direction or that this change in
our business focus will be successful. If we do enter into a merger or
acquisition, and our new management fails to properly manage and direct our
operations, we may be forced to scale back or abandon our operations, which will
cause the value of our common stock to decline or become worthless. We have not
entered into any merger or acquisition agreements as of the date of this
filing.





OUR
LARGEST SHAREHOLDER, VIKING INVESTMENT GROUP II, INC. CAN VOTE AN AGGREGATE OF
42.7% OF OUR COMMON STOCK AND WILL EXERCISE SIGNIFICANT CONTROL OVER CORPORATE
DECISIONS.





The
beneficial owner of our majority shareholder, Viking Investment Group II, Inc.
(“Viking”), Ian Markofsky, recently passed away, and as such, the executor of
his estate is currently in control of Viking.  Viking is our largest
shareholder currently voting 42.7% of our outstanding common
stock.  The executor will exercise significant control in determining
the outcome of corporate transactions or other matters, including the election
of directors, mergers, consolidations, the sale of all or substantially all of
our assets, and also the power to prevent or cause a change in control.
Furthermore, the executor may decide to sell Viking’s shareholdings in the
Company to other persons, who may decide to change our Board of Directors or
corporate organization and plan of operations.  Any investors who
purchase shares will be minority shareholders and as such will have little to no
say in the direction of the Company and the election of Directors regardless of
whether Viking retains their interest in the Company. Investors in the Company
should keep in mind that even if you own shares of the Company's common stock
and wish to vote them at annual or special shareholder meetings, your shares
will likely have little effect on the outcome of corporate
decisions.  Furthermore, investors should be aware that the executor
of Mr. Markofsky’s estate may choose to elect new Directors to the Board of
Directors of the Company and/or take the Company in a new business direction
altogether, and that current shareholders of the Company will have little to no
say in such matters as Viking is currently our largest shareholder.





OUR
AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT AS TO WHETHER OUR COMPANY CAN CONTINUE
AS A GOING CONCERN.





We have
generated only limited revenues since our inception and have incurred
substantial losses. We had negative working capital of $206,010, and a total
accumulated deficit of $567,332 as of December 31, 2007.  As such, our
auditors have expressed substantial doubt as to whether our Company can continue
as a going concern, particularly in the event that we cannot generate sufficient
cash flow to conduct our operations and/or obtain additional sources of capital
and financing.





WE
RELY UPON KEY PERSONNEL AND IF THEY LEAVE US, OUR BUSINESS PLAN AND RESULTS OF
OPERATIONS COULD BE ADVERSELY AFFECTED.





We rely
heavily on our Chief Executive Officer, Chief Financial Officer, Secretary,
Treasurer and Director, David Rector, as well as the President of Sunshine,
Marion R. "Butch" Barnes. Their experience and input create the foundation for
our business and they are responsible for the directorship and control over our
products. We do not currently have an employment agreement or "key man"
insurance policy on either Mr. Rector or Mr. Barnes. Moving forward, should we
lose the services of Mr. Rector or Mr. Barnes, for any reason, we will incur
costs associated with recruiting replacements and delays in our operations. If
we are unable to replace either Mr. Rector or Mr. Barnes with another suitably
trained individual or individuals, we may be forced to scale back or curtail our
business plan. As a result of this, your investment in us could become
devalued.





WE
FACE INTENSE COMPETITION FOR OUR PRODUCTS AND AS A RESULT, WE MAY BE UNABLE TO
COMPETE IN THE MARKET FOR PARTY AND ALCOHOLIC DRINKING MIXES AND
SUPPLIES.




The
market for party drinks, drink mixes and drinking supplies is highly competitive
and fragmented. The Company expects competition to intensify in the future. We
compete in each of our markets with numerous national, regional and local
companies, many of which have substantially greater financial, managerial and
other resources than those presently available to us. Numerous well-established
companies are focusing significant resources on providing party drinks, drink
mixes and drinking supplies that will compete with our services. No assurance
can be given that we will be able to effectively compete with these other
companies or that competitive pressures, including possible downward pressure on
the prices we charge for our products, will not rise. In the event that we
cannot effectively compete on a continuing basis or competitive pressures arise,
such inability to compete or competitive pressures will have a material adverse
effect on our business, results of operations and financial
condition.




-12-


OUR
INTERNET SALES ARE DEPENDENT ON OUR WEBSITES BEING OPERATIONAL.





We have
webpages which describe our products and through which customers can purchase
our products at http://www.shotskis.com, www.shotskis.sitefly.com,
www.shotskisbarsupplies.com (and/or www.bombshots.com), which include
information which we do not wish to be included in this report.  Our
website sales currently account for approximately 30% of our total sales, with
70% of our total sales coming from distributors.  In the event that
our website hosting company is down for maintenance and/or there are
problems with our customers and potential customers being able to display our
webpage and browse our products, our internet sales could be adversely impacted,
which in turn could cause our revenues to decrease and could cause any
investment in us to decline in value and/or become worthless.





WE
HAVE NOT AND DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS ON OUR COMMON STOCK AND
BECAUSE OF THIS OUR SECURITIES COULD FACE DEVALUATION IN THE
MARKET.





We have
paid no cash dividends on our common stock to date and it is not anticipated
that any cash dividends will be paid to holders of our common stock in the
foreseeable future. While our dividend policy will be based on the operating
results and capital needs of our business operations, it is anticipated that any
earnings will be retained to finance our business operations and future
expansion.





OUR
BYLAWS PROVIDE FOR INDEMNIFICATION OF OUR OFFICERS AND DIRECTORS, SO IT WILL BE
DIFFICULT TO SEEK DAMAGES FROM OUR OFFICERS AND/OR DIRECTORS IN A
LAWSUIT.





Our
Bylaws provide that our officers and Directors will only be liable to us for
acts or omissions that constitute actual fraud, gross negligence or willful and
wanton misconduct. Thus, we may be prevented from recovering damages for certain
alleged errors or omissions by our officers and Directors for liabilities
incurred in connection with their good faith acts on our behalf. Additionally,
such an indemnification payment on behalf of our officers and/or Directors may
deplete our assets. Investors who have questions respecting the fiduciary
obligations of our officers and Directors should consult with their own
independent legal counsel prior to making an investment in us. Additionally, it
is the position of the Securities and Exchange Commission that exculpation from
and indemnification for liabilities arising under the 1933 Act and the rules and
regulations thereunder is against public policy and therefore
unenforceable.




WE
HAVE A LIMITED OPERATING HISTORY AND BECAUSE OF THIS IT MAY BE DIFFICULT TO
EVALUATE OUR CHANCES FOR SUCCESS.





We were
formed as a Delaware corporation on April 16, 2004. From April 16, 2004, until
December 31, 2005, the date we acquired Sunshine Group, LLC, we had limited
operations. While we have had a limited volume of sales to date, we can provide
no assurances that our sales will increase in the future and/or that our sales
will not decline in the future. Although we feel that our results of operations
are encouraging, we are a relatively new company and, as such, run a risk of not
being able to compete in the marketplace because of our relatively short
existence. New companies in the competitive environment of drinking mixes and
supplies, such as ours, may have difficulty in continuing in the highly
competitive beverage and drink mix
industry, and as a result, we may be forced to abandon or curtail our business
plan. Under such a circumstance, the value of any investment in us may become
worthless.




-13-


WE
FACE A RISK OF A CHANGE IN CONTROL DUE TO THE FACT THAT OUR CURRENT SOLE
DIRECTOR DOES NOT OWN A MAJORITY OF OUR OUTSTANDING COMMON STOCK.





Our
current Director, David Rector, owns 100,000 shares of our common stock,
representing only 1.4% of our outstanding common stock and can therefore not
exercise majority voting control over us. As a result, our shareholders who are
not officers and Directors of us are able to obtain a majority of voting shares,
which would allow such shareholders to choose who serves as our Director(s).
Because of this, Mr. Rector may not be reappointed by our shareholders when he
is up for re-election and/or may be replaced by another individual or
individuals, and such replacement would be outside of Mr. Rector's control. If
that were to happen, our new management could affect a change in our business
focus and/or curtail or abandon our business operations, which in turn could
cause the value of our securities, if any, to decline.





DELAWARE
LAW AND OUR CERTIFICATE OF INCORPORATION AUTHORIZE US TO ISSUE SHARES OF STOCK,
WHICH SHARES MAY CAUSE SUBSTANTIAL DILUTION TO OUR EXISTING SHAREHOLDERS AND/OR
HAVE RIGHTS AND PREFERENCES GREATER THAN THE COMMON STOCK CURRENTLY
OUTSTANDING.





Pursuant
to our Certificate of Incorporation, we have 75,000,000 shares of common stock
and 10,000,000 shares of Preferred Stock authorized. As of the filing of this
Report, we have 7,030,000 shares of common stock issued and outstanding and - 0
- shares of Preferred Stock issued and outstanding. As a result, our Board of
Directors has the ability to issue a large number of additional shares of common
stock without shareholder approval, which if issued could cause substantial
dilution to our then shareholders. Additionally, shares of Preferred Stock may
be issued by our Board of Directors without shareholder approval with voting
powers, and such preferences and relative, participating, optional or other
special rights and powers as determined by our Board of Directors, which may be
greater than the shares of common stock currently outstanding. As a result,
shares of Preferred Stock may be issued by our Board of Directors which cause
the holders to have super majority voting power over our shares, provide the
holders of the Preferred Stock the right to convert the shares of Preferred
Stock they hold into shares of our common stock, which may cause substantial
dilution to our then common stock shareholders and/or have other rights and
preferences greater than those of our common stock shareholders. Investors
should keep in mind that the Board of Directors has the authority to issue
additional shares of common stock and Preferred Stock, which could cause
substantial dilution to our existing shareholders. Additionally, the dilutive
effect of any Preferred Stock, which we may issue may be exacerbated given the
fact that such Preferred Stock may have super majority voting rights and/or
other rights or preferences which could provide the preferred shareholders with
voting control over us and/or give those holders the power to prevent or cause a
change in control. As a result, the issuance of shares of common stock and/or
Preferred Stock, may cause the value of our securities to decrease and/or become
worthless.





EFFECT
OF UNFAVORABLE PUBLICITY FOR OUR PRODUCTS, OTHER DRINK MIX PRODUCTS, OR THE
ALCOHOLIC DRINK MARKET AS A WHOLE.





We
believe that the market for our products will be affected by national media
attention regarding the consumption of alcoholic beverages as a whole. Future
publicity regarding the potential effects of the daily consumption and/or excess
consumption of alcoholic beverages could have a material adverse effect on our
sales and marketing efforts. If we or other drink mix suppliers, and/or
alcoholic beverage suppliers were to suffer adverse media attention, it could
cause the value of our common stock to decrease, and could lead to any
investment you have in us becoming worthless.





EFFECT
OF GOVERNMENT REGULATIONS ON OUR FUTURE PRODUCTS AND POTENTIAL LEGAL PROCEEDINGS
SUCH CHANGES IN REGULATIONS COULD CREATE.




The
manufacturing, packaging, labeling, advertising, distribution and sale of our
products and mixes are subject to regulation by federal, state and local
agencies, the most active of which is the U.S. Food and Drug Administration (the
"FDA"). While we currently believe that our operations fully comply with all FDA
rules and regulations, there can be no assurance that the FDA will not enact
stricter rules and regulations in the future. There can be no assurance, that if
FDA rules are enacted, that we will be able to comply with them without
incurring material expenses. Additionally, any additional products we may choose
to distribute in the future, if any, will likely be regulated by federal, state
and local agencies as well, including the FDA. Currently all of our drink mix
ingredients have previously passed FDA approval, however there can be no
assurance that such ingredients will continue to be approved by the FDA. If any
of our ingredients were found in the future to be harmful by the FDA, we could
be forced to change the ingredients in our products and/or may face legal
proceedings in connection with the defense of any customers who claim they were
harmed by such ingredients. If this were to happen we could be forced to abandon
or curtail our business plan. Additionally, if stricter regulations are enacted
in the future and we are unable to meet these new laws or regulations, any
investment in our securities could become worthless.





-14-


OUR
SALES EXPERIENCE LARGE FLUCTUATIONS DUE TO THE SEASONALITY OF OUR
PRODUCTS.





We
generally experience greater sales in the spring, summer and during the winter
holidays, as in our opinion, there are a greater number of individuals consuming
alcoholic beverages during the spring and summer months and during the winter
holidays, due to the fact that schools are on spring break and summer and winter
vacations occur during those months. As such, our results of operations for any
one quarter may not be indicative of the results of operations for any other
quarter and/or our yearly results of operations.




IN
THE FUTURE, WE WILL INCUR SIGNIFICANT INCREASED COSTS AS A RESULT OF OPERATING
AS A FULLY REPORTING COMPANY UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE SUBSTANTIAL TIME TO NEW
COMPLIANCE INITIATIVES.





Moving
forward, we anticipate incurring significant legal, accounting and other
expenses in connection with our status as a fully reporting public company. The
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and new rules subsequently
implemented by the SEC have imposed various new requirements on public
companies, including requiring changes in corporate governance practices. As
such, our management and other personnel will need to devote a substantial
amount of time to these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance costs and will make
some activities more time-consuming and costly. In addition, the Sarbanes-Oxley
Act requires, among other things, that we maintain effective internal controls
for financial reporting and disclosure of controls and procedures. In
particular, for this Annual Report on Form 10-KSB, we were required to perform
system and process evaluation and testing of our internal controls over
financial reporting to allow management to report on the effectiveness of our
internal controls over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act.  For fiscal year 2009, Section 404 will require us
to obtain a report from our independent registered public accounting firm
attesting to the assessment made by management.  Our testing, or the
subsequent testing by our independent registered public accounting firm, may
reveal deficiencies in our internal controls over financial reporting that are
deemed to be material weaknesses. Our compliance with Section 404 will require
that we incur substantial accounting expense and expend significant management
efforts. We currently do not have an internal audit group, and we will need to
hire additional accounting and financial staff with appropriate public company
experience and technical accounting knowledge. Moreover, if we are not able to
comply with the requirements of Section 404 in a timely manner, or if we or our
independent registered public accounting firm identifies deficiencies in our
internal controls over financial reporting that are deemed to be material
weaknesses, the market price of our stock could decline, and we could be subject
to sanctions or investigations by the SEC or other regulatory authorities, which
would require additional financial and management resources.





IF
WE ARE LATE IN FILING OUR QUARTERLY OR ANNUAL REPORTS WITH THE SEC, WE MAY BE
DE-LISTED FROM THE OVER-THE-COUNTER BULLETIN BOARD.




On or
about June 6, 2007, our common stock was approved for trading on the
Over-The-Counter Bulletin Board (“OTCBB”) under they symbol “NNOH.” Pursuant to
OTCBB rules relating to the timely filing of periodic reports with the SEC, any
OTCBB issuer which fails to file a periodic report (Form 10-QSB's or 10-KSB's)
by the due date of such report (notwithstanding any extension granted to the
issuer by the filing of a Form 12b-25), three (3) times during any twenty-four
(24) month period is automatically de-listed from the OTCBB. Such removed issuer
would not be re-eligible to be listed on the OTCBB for a period of one-year,
during which time any subsequent late filing would reset the one-year period of
de-listing. If we are late in our filings three times in any twenty-four (24)
month period and are de-listed from the OTCBB, our securities may become
worthless and we may be forced to curtail or abandon our business
plan.





-15-


THERE
IS CURRENTLY NO MARKET FOR OUR COMMON STOCK, AND EVEN IF A MARKET DEVELOPS IN
THE FUTURE, WE ANTICIPATE SUCH MARKET REMAINING LIMITED, SPORADIC AND
VOLATILE.





While we
have been approved to trade our common stock on the OTCBB, no trades have been
affected in our common stock to date. Moving forward, in the event a market for
our common stock does develop, we expect such market to be limited, sporadic and
volatile.  We also anticipate the market for our common stock will be
subject to wide fluctuations in response to several factors, including, but not
limited to:





(1)
actual or anticipated variations in our results of operations;


(2) our
ability or inability to generate new revenues;


(3) the
number of shares in our public float;


(4)
increased competition; and


(5)
conditions and trends in the market for alcoholic and party drinks.





Furthermore,
because our common stock is traded on the OTCBB, our stock price may be impacted
by factors that are unrelated or disproportionate to our operating performance.
These market fluctuations, as well as general economic, political and market
conditions, such as recessions, interest rates or international currency
fluctuations may adversely affect the market price of our common stock.
Additionally, at present, we have a limited number of shares in our public
float, and as a result, there could be extreme fluctuations in the price of our
common stock. Further, due to the limited volume of our shares which trade and
our limited public float, we believe that our stock prices (bid, asked and
closing prices) may be entirely arbitrary, may not be related to the actual
value of the Company, and may not reflect the actual value of our common stock
(and reflect a value that is higher than the actual value of our common stock).
Shareholders and potential investors in our common stock should exercise caution
before making an investment in the Company, and should not rely on the publicly
quoted or traded stock prices in determining our common stock value, but should
instead determine the value of our common stock based on the information
contained in the Company's public reports, industry information, and those
business valuation methods commonly used to value private
companies.




INVESTORS
MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK DUE TO
FEDERAL REGULATIONS OF PENNY STOCKS.





Once our
common stock is listed on the OTC Bulletin Board, it is likely that it will be
subject to the requirements of Rule 15(g)9, promulgated under the Securities
Exchange Act as long as the price of our common stock is below $5.00 per share.
Under such rule, broker-dealers who recommend low-priced securities to persons
other than established customers and accredited investors must satisfy special
sales practice requirements, including a requirement that they make an
individualized written suitability determination for the purchaser and receive
the purchaser's consent prior to the transaction. The Securities Enforcement
Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure
in connection with any trades involving a stock defined as a penny stock.
Generally, the Commission defines a penny stock as any equity security not
traded on an exchange or quoted on NASDAQ that has a market price of less than
$5.00 per share. The required penny stock disclosures include the delivery,
prior to any transaction, of a disclosure schedule explaining the penny stock
market and the risks associated with it. Such requirements could severely limit
the market liquidity of the securities and the ability of purchasers to sell
their securities in the secondary market.





-16-





ITEM 7. FINANCIAL
STATEMENTS




















NANO
HOLDINGS INTERNATIONAL, INC.








FINANCIAL
STATEMENTS








December
31, 2007 and 2006



























F-1


C
O N T E N T S








Report
      of Independent Registered Public Accounting Firm
            F-3Balance
      Sheets
            F-4Statements
      of Operations
            F-5Statements
      of Stockholders’ Equity (Deficit)
            F-6Statements
      of Cash Flows
            F-7Notes
      to the Financial Statements
            F-8











F-2


MOORE
& ASSOCIATES, CHARTERED


ACCOUNTANTS AND
ADVISORS


PCAOB REGISTERED








REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM








To
the Board of Directors


Nano
Holdings International Inc








We have
audited the accompanying consolidated balance sheets of Nano Holdings
International Inc as of December 31, 2007 and December 31, 2006, and the related
statements of operations, stockholders’ equity and cash flows for the years
ended December 31, 2007 and December 31, 2006. 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 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 Nano Holdings International Inc as
of December 31, 2007 and December 31, 2006, and the related statements of
operations, stockholders’ equity and cash flows for the years ended December 31,
2007 and December 31, 2006, in conformity with accounting principles generally
accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 3 to the
financial statements, the Company has generated significant losses from
operations, which raises substantial doubt about its ability to continue as a
going concern.  Management’s plans concerning these matters are also
described in Note 3.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





/s/
Moore & Associates, Chartered





Moore
& Associates Chartered


Las
Vegas, Nevada


March 19,
2008





2675 S. Jones Blvd. Suite
109, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501








F-3





NANO
      HOLDINGS INTERNATIONAL, INC.Consolidated
      Balance SheetsASSETSDecember
      31,
            
            December
      31,2007
            
            2006CURRENT
      ASSETSCash
            
            $
            25,326
            
            
            $
            7,458Accounts
      receivable, net
            
            
            10,103
            
            
            
            16,097Total
      Current Assets
            
            
            35,429
            
            
            
            23,555EQUIPMENT,
      net
            
            
            2,496
            
            
            
            3,295OTHER
      ASSETSTrademark
            
            
            275
            
            
            
            275Deposits
            
            
            728
            
            
            
            728Total
      Other Assets
            
            
            1,003
            
            
            
            1,003TOTAL
      ASSETS
            
            $
            38,928
            
            
            $
            27,853LIABILITIES AND
      STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
            
            $
            9,647
            
            
            $
            13,529Notes
      payable and accrued interest
            
            
            231,792
            
            
            
            138,092Total
      Current Liabilities
            
            
            241,439
            
            
            
            151,621STOCKHOLDERS'
      EQUITY (DEFICIT)Preferred
      stock:$0.001 par value, 10,000,000 sharesauthorized;
      no shares issued and outstanding
            
            
            -
            
            
            
            -Common
      stock:$0.001 par value, 75,000,000 sharesauthorized;
      7,030,000 shares issued and outstanding
            
            
            7,030
            
            
            
            7,030Additional
      paid-in capital
            
            
            357,791
            
            
            
            240,791Deficit
      accumulated during the development stage
            
            
            (567,332
            )
            
            
            (371,589
            )Total
      Stockholders' Equity (Deficit)
            
            
            (202,511
            )
            
            
            (123,768
            )TOTAL
      LIABILITIES AND STOCKHOLDERS'


EQUITY
      (DEFICIT)
            
            $
            38,928
            
            
            $
            27,853The
      accompanying notes are an integral part of these financial
      statements.








F-4





NANO
      HOLDINGS INTERNATIONAL, INC.Consolidated
      Statements of OperationsFor
      the Year EndedDecember
      31,2007
            
            
            2006REVENUES
            
            $
            155,025
            
            
            $
            135,912COST
      OF GOODS SOLD
            
            
            46,830
            
            
            
            84,136GROSS
      PROFIT
            
            
            108,195
            
            
            
            51,776EXPENSESGeneral
      and administrative
            
            
            287,738
            
            
            
            255,032Total
      Expenses
            
            
            287,738
            
            
            
            255,032LOSS
      FROM OPERATIONS
            
            
            (179,543
            )
            
            
            (203,256
            )OTHER
      EXPENSESInterest
      expense
            
            
            (16,200
            )
            
            
            (10,531
            )Total
      Other Expenses
            
            
            (16,200
            )
            
            
            (10,531
            )NET
      LOSS
            
            $
            (195,743
            )
            
            $
            (213,787
            )BASIC
      LOSS PER SHARE
            
            $
            (0.03
            )
            
            $
            (0.03
            )WEIGHTED
      AVERAGE NUMBERNUMBER
      OF SHARES OUTSTANDING
            
            
            7,030,000
            
            
            
            6,815,000


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


F-5





NANO
      HOLDINGS INTERNATIONAL, INC.Consolidated
      Statements of Stockholders' Equity (Deficit)DeficitAccumulated
            
            
            TotalAdditional
            
            
            During
      the
            
            
            Stockholders'Common
      Stock
            
            
            Paid-In
            
            
            Development
            
            
            EquityShares
            
            
            Amount
            
            
            Capital
            
            
            Stage
            
            
            (Deficit)Balance,
      December 31, 2005
            
            
            6,600,000
            
            
            $
            6,600
            
            
            $
            120,920
            
            
            $
            (157,802
            )
            
            $
            (30,282
            )Common
      stock issued forservices
      performed by anofficer
      and shareholder
            
            
            100,000
            
            
            
            100
            
            
            
            116,901
            
            
            
            -
            
            
            
            117,001Common
      stock issued for cashat
      $0.01 per share
            
            
            330,000
            
            
            
            330
            
            
            
            2,970
            
            
            
            -
            
            
            
            3,300Net
      loss for the yearended
      December 31, 2006
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (213,787
            )
            
            
            (213,787
            )Balance,
      December 31, 2006
            
            
            7,030,000
            
            
            
            7,030
            
            
            
            240,791
            
            
            
            (371,589
            )
            
            
            (123,768
            )Services
      contributed by anofficer
      and shareholder
            
            
            -
            
            
            
            -
            
            
            
            117,000
            
            
            
            -
            
            
            
            117,000Net
      loss for the yearended
      December 31, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (195,743
            )
            
            
            (195,743
            )Balance,
      December 31,
      2007
            
            
            7,030,000
            
            
            $
            7,030
            
            
            $
            357,791
            
            
            $
            (567,332
            )
            
            $
            (202,511
            )


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


F-6







NANO HOLDINGS INTERNATIONAL, INC.Consolidated
      Statements of Cash FlowsFor
      the Year EndedDecember
      31,2007
            
            
            2006OPERATING
      ACTIVITIESNet
      loss
            
            $
            (195,743
            )
            
            $
            (213,787
            )Adjustments
      to Reconcile Net Loss to Net CashUsed
      by Operating Activities:Depreciation
      and amortization
            
            
            799
            
            
            
            503Allowance
      for bad debts
            
            
            -
            
            
            
            10,000Contributed
      services
            
            
            117,000
            
            
            
            117,001Changes
      in Operating Assets and Liabilities:(Increase)
      decrease in receivables
            
            
            5,994
            
            
            
            (21,778
            )(Increase)
      decrease in other assets
            
            
            -
            
            
            
            (1,003
            )Increase
      (decrease) in payables
            
            
            (3,882
            )
            
            
            19,53713,132Net
      Cash Used byOperating
      Activities
            
            
            (75,832
            )
            
            
            (89,527
            )INVESTING
      ACTIVITIESPurchase
      of fixed assets
            
            
            -
            
            
            
            (3,798
            )Net
      Cash Used byInvesting
      Activities
            
            
            -
            
            
            
            (3,798
            )FINANCING
      ACTIVITIESCommon
      stock issued for cash
            
            
            -
            
            
            
            3,300Proceeds
      from notes payable
            
            
            93,700
            
            
            
            77,000Net
      Cash Provided byFinancing
      Activities
            
            
            93,700
            
            
            
            80,300NET
      DECREASE IN CASH
            
            
            17,868
            
            
            
            (13,025
            )CASH
      AT BEGINNING OF YEAR
            
            
            7,458
            
            
            
            20,483CASH
      AT END OF YEAR
            
            $
            25,326
            
            
            $
            7,458SUPPLIMENTAL
      DISCLOSURES OFCASH
      FLOW INFORMATIONCASH
      PAID FOR:


Interest
            
            $
            -
            
            
            $
            -Income
      Taxes
            
            $
            -
            
            
            $
            -The
      accompanying notes are an integral part of these financial
      statements.







F-7


NANO
HOLDINGS INTERNATIONAL, INC.


Notes to
the Consolidated Financial Statements


December
31, 2007 and 2006








NOTE 1
-        ORGANIZATION AND DESCRIPTION OF
BUSINESS





The
Company was incorporated under the laws of the State of Delaware as Nano
Holdings International, Inc. on April 16, 2004 with a principal business
objective of seeking a merger with an existing operating company. Sunshine
Group, LLC., (Sunshine) was formed as a limited liability company, under the
laws of the State of Florida on June 24, 2002, to engage in the manufacture and
sale of alcoholic and non-alcoholic beverages.  On December 31, 2005,
Nano Holdings International, Inc. acquired all of the ownership interests of
Sunshine Group, LLC for 3,500,000 shares of its common stock. The shareholders
of Sunshine Group, LLC became the controlling shareholders of the Company and
Nano Holdings International, Inc. was inactive prior to the acquisition.
Accordingly, the accompanying financial statements reflect the historical
financial statements of Sunshine Group, LLC as the historical of the Company,
i.e. a reverse merger.





NOTE 2
-       SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





a.   Accounting
Method





The
Company’s financial statements are prepared using the accrual method of
accounting.  The Company has elected a December 31
year-end.





b.
            Revenue
      Recognition





The
Company recognizes revenue from the sales of its alcoholic and non-alcoholic
beverages upon delivery to the customer’s delivery site, the customers take
title and assume the risks and rewards of ownership, when persuasive evidence of
an arrangement exists, when the contract price is fixed or determinable, and
collectibility is reasonably assured.





The
Company has a policy of limiting returns to only non perishable non food
items.





c.
            Income
      Taxes





The
Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered.  The Company provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not. The Company has a net
operating loss carryover of approximately $567,332 as of December 31, 2007. The
benefit of the net operating loss carryover of $221,259 as of December 31, 2007
has been offset by a valuation allowance of $221,259.





Until its
acquisition by the Company, Sunshine elected to file its taxes as a limited
liability company, whereby its profits and losses are passed through to its
members.  Accordingly, the Sunshine did not pay or accrue income
taxes.  Also, Sunshine did not record an asset for the value of its
net operating loss carryforwards.





F-8


NANO
HOLDINGS INTERNATIONAL, INC.


Notes to
the Consolidated Financial Statements


December
31, 2007 and 2006








NOTE 2
-        SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)





d.   Use
of Estimates





The
preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.





e.
            Accounts
      Receivable





The
Company’s accounts receivable are shown net of the allowance for doubtful
accounts of $32,535 and $10,000 as of December 31, 2007 and 2006,
respectively.





f.
            Research
      and Development





The
Company expenses research and development costs in the period
incurred.  Research and development expenses for the years ended
December 31, 2007 and 2006 totaled approximately $2,500 per year.





g.
            Basic
      Income (Loss) Per Share





The
computation of basic income (loss) per share is based on the weighted average
number of shares outstanding during the periods covered by the financial
statements.  Diluted income per shares units is equal to the basic
income per unit as there are no potentially dilutive shares
outstanding.





h.  Cash
and Cash Equivalents





For
purposes of the statement of cash flows, the Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.





i. Common
Stock





The
holders of the Company’s common stock are entitled to receive dividends out of
assets or funds legally available for the payment of dividends of such times and
in such amounts as the board from time to time may determine.  Holders
of common stock are entitled to one vote for each share held on all matters
submitted to a vote of shareholders.  There is no cumulative voting of
the election of directors then standing for election.  The common
stock is not entitled to pre-emptive rights and is not subject to conversion or
redemption.  Upon liquidation, dissolution or winding up of the
company, the assets legally available for distribution to stockholders are
distributable ratably among the holders of the common stock after payment of
liquidation preferences, if any, on any outstanding payment of other claims of
creditors.








F-9


NANO
HOLDINGS INTERNATIONAL, INC.


Notes to
the Consolidated Financial Statements


December
31, 2007 and 2006











NOTE 2
-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)





j.
Preferred Stock





Shares of
preferred stock may be issued from time to time in one or more series, each of
which shall have such distinctive designation or title as shall be determined by
the board of directors of the Company.  Preferred stock shall have
such voting powers, full or limited, or no voting powers, and such preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as may be adopted from time
to time by the board of directors.





k. Costs
of Goods Sold





All
shipping costs and handling costs are classified in costs of goods sold. These
costs include inbound freight charges, receiving costs, inspection costs,
warehousing costs, internal transfer costs and the other costs of the Company’s
distribution network.





l.
General and Administrative Expenses





General
and administrative expenses include those costs not directly related to the
sales of the Company’s products. These expenses include travel, administrative
compensation, professional fees and marketing.





m.
Principles of Consolidation





The
accompanying financial statements include the accounts of Nano Holdings
International, Inc. and its wholly owned subsidiary Sunshine Group,
LLC.





NOTE 3
-      GOING CONCERN





The
Company’s financial statements are prepared using generally accepted accounting
principles applicable to a going concern which contemplates the realization of
assets and liquidation of liabilities in the normal course of
business.  The Company has generated significant losses from
operations.





In order
to continue as a going concern and achieve a profitable level of operations, the
Company will need, among other things, additional capital resources and
developing a consistent source of revenues.  Management’s plans
include raising capital from the private placement of its debt or
equity.





The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plan described in the preceding paragraph
and eventually attain profitable operations.  The accompanying
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.








F-10





NANO
HOLDINGS INTERNATIONAL, INC.


Notes to
the Consolidated Financial Statements


December
31, 2007 and 2006








NOTE 4
-      NOTES PAYABLE





The
      Company has incurred notes payable to an unrelated party as the source of
      the funding for its business operations. The notes payable total $204,500,
      are unsecured, bear interest at 10% per annum and are due with accrued
      interest on July 31, 2007. The Company has accrued $27,292 in interest
      payable on the notes payable as of December 31,
  2007.





NOTE 5
-     RELATED PARTY TRANSACTIONS





The
      Company has recorded the value of the uncompensated services provided by
      its officers and directors as a contribution of capital. The Company has
      recorded $117,000 and $117,001 in 2007 and 2006, respectively, for such
      uncompensated services.





NOTE 6
-     INCOME TAXES
 
 The
      Company provides for income taxes under Statement of Financial Accounting
      Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the
      use of an asset and liability approach in accounting for income taxes.
      Deferred tax assets and liabilities are recorded based on the differences
      between the financial statement and tax bases of assets and liabilities
      and the tax rates in effect when these differences are expected to
      reverse.
 
 SFAS No.
109 requires the reduction of deferred tax assets by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
 
 The
provision for income taxes differs from the amounts which would be provided by
applying the statutory federal income tax rate of 39% to the net loss before
provision for income taxes for the following reasons:
 December
      31, 2007
              
              
              December
      31, 2006Income
      tax expense at statutory rate
              
              $
              (76,340
              )
              
              $
              (95,354
              )Contributed  services
              
              
              45,630
              )
              
              
              45,630Valuation
      allowance
              
              
              30,710
              
              
              
              49,724Income
      tax expense per books
              
              $
              -
              
              
              $
              -
 
 Net
deferred tax assets consist of the following components as of:
 December
      31, 2007
              
              
              December
      31, 2006NOL
      carryover
              
              $
              (101,919
              )
              
              $
              71,209Valuation
      allowance
              
              
              (101,919
              )
              
              
              (71,209
              )Net
      deferred tax asset
              
              $
              -
              
              
              $
              -
 
 Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards of $261,331 for federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur net operating
loss carry forwards may be limited as to use in future years.
  F-11
 
 NOTE 7
-      RECENT ACCOUNTING
PRONOUNCEMENTS
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the information. This
statement is effective for us beginning January 1, 2008. The Company is
currently assessing the potential impact that adoption of SFAS No. 157
would have on the financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. SFAS No. 159 gives the
irrevocable option to carry many financial assets and liabilities at fair
values, with changes in fair value recognized in earnings. SFAS No. 159 is
effective beginning January 1, 2008, although early adoption is
permitted.
 NOTE 7
-   RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
 
 The
Company is currently assessing the potential impact that adoption of SFAS
No. 159 will have on the financial statements.
 
 The FASB
has revised SFAS No. 141.  This revised statement establishes uniform
treatment for all acquisitions.  It defines the acquiring
company.  The statement further requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquired at the acquisition date, measured at their fair market values as of
that date.  It requires the acquirer in a business combination
achieved in stages to recognize the identifiable assets and liabilities, as well
as the non-controlling interest in the acquired, at the full amounts of their
fair values. This changes the way that minority interest is recorded and
modified as a parent’s interest in a subsidiary changes over
time.  This statement also makes corresponding significant amendments
to other standards that related to business combinations, namely, 109, 142 and
various EITF’s.  This statement applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  The Company believes the implementation of this standard will
have no effect on our financial statements.
 
 NOTE 8
-      EQUIPMENT
 
 Equipment
      are stated at cost.  Depreciation is computed using the straight
      line method over the estimated useful life of 5 years. Depreciation
      expense for the years ended December 31, 2007and 2006 amounted to $799 and
      $503, respectively.  Gains from losses on sales and disposals
      are included in the statements of operations.  Maintenance and
      repairs are charged to expense as incurred.  As of December 31,
      2007 and 2006 equipment consisted of the
  following:
 
 2007
              
              
              2008Equipment
              
              $
              3,798
              
              
              $
              3,798Accumulated
      depreciation
              
              
              (1,302
              )
              
              
              (503
              )Total
              
              $
              2,496
              
              
              $
              3,295





F-12





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





None.





ITEM
8A. CONTROLS
AND PROCEDURES.





(a)
Evaluation of disclosure controls and procedures. Our Chief Executive Officer
and Principal Financial Officer, after evaluating the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by
this Annual Report on Form 10-KSB (the "Evaluation Date"), has concluded that as
of the Evaluation Date, our disclosure controls and procedures are effective to
provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Principal Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.





(b)
Changes in internal control over financial reporting. There were no changes in
our internal control over financial reporting during the last fiscal year and/or
up to and including the date of this filing that we believe materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.





ITEM
8B. OTHER
INFORMATION.





None.







-17-


PART
III





ITEM
9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.





The
following table sets forth the name, age and position of our Director and
executive officer, as well as the material officer of Sunshine, our wholly owned
subsidiary:





NAME
            AGE
            POSITIONDavid
      Rector
            61
            Chief
      Executive Officer,President,
      Principal Accounting Officer,Secretary,
      Treasurer and DirectorMarion
      R. "Butch" Barnes
            65
            President
      of Sunshine










David
Rector





Mr.
Rector has served as our Chief Executive Officer, President, Principal
Accounting Officer, Secretary, Treasurer and Director since April 19, 2004. Mr.
Rector does not have an employment agreement with us and does not receive
compensation for his services to us, other than the 100,000 restricted shares of
common stock which he was issued during the three months ended September 30,
2006, in consideration for services rendered, which shares were valued at
$10,000 or $0.10 per share. Mr. Rector previously served as President, Chief
Executive Officer and Chief Operating Officer of Nanoscience from June 2004 to
December 2006, when he resigned as an officer and Director of
Nanoscience.  Since June 1985, Mr. Rector has been the principal of
the David Stephen Group, which provides enterprise consulting services to
emerging and developing companies in a variety of industries. From January 1995
until June 1995, Mr. Rector served as the General Manger of the Consumer
Products Division of Bemis-Jason Corporation. Mr. Rector was employed by Sunset
Designs Inc., a manufacturer and marketer of consumer product craft kits from
June 1980 until June 1985. From June 1983 until June 1985, Mr. Rector served as
President and General Manager of Sunset, from August 1981 until May 1985, Mr.
Rector served as an Administrative and International Director of Sunset, and
from June 1980 until August 1981, Mr. Rector served as Group Product Manager for
Sunset.





Additionally,
Mr. Rector currently served on the Board of Directors of the following companies
as of December 31, 2007:





Name
            Director
      SinceSenesco
      Technologies, Inc. (AMEX:SNT)
            February
      2002Dallas
      Gold & Silver Exchange (AMEX:DSG)
            May
      2003RXelite,
      Inc.
              (OTCBB:RXEI)
            October
      2007







As a
result, the amount of time that Mr. Rector has to devote to our activities may
be limited.





Mr.
Rector obtained his Bachelors Degree in Business Administration from Murray
State University in 1969.





-18-


Marion R. "Butch"
Barnes





Mr.
Barnes has served as the President of Sunshine Group, LLC, our wholly owned
subsidiary since Sunshine was formed in June 2002. Mr. Barnes does not have an
employment agreement with us and does not receive a salary from us. From
approximately October 1996 until June 2002, Mr. Barnes was employed as President
of Unified Beverage Group, LLC ("UBG"), which produces Dos Toros Cerveza. While
at UBG, Mr. Barnes was in charge of distribution of their products. From October
1996 to June 1977, Mr. Barnes served as a market consultant and as brand
development manager with Markstein Enterprises, in Danville, California, which
had multiple Miller Beer distributorships throughout California. From August
1967 until October 1977, he served as western regional manager of Bacardi
Imports in Miami, Florida.





---------------------------





Our
Directors are elected annually and hold office until our next annual meeting of
the shareholders and until their successors are elected and qualified. Officers
will hold their positions at the pleasure of the Board of Directors, absent any
employment agreement. Our officers and Directors may receive compensation as
determined by us from time to time by vote of the Board of Directors. Such
compensation might be in the form of stock options. Directors may be reimbursed
by the Company for expenses incurred in attending meetings of the Board of
Directors. Vacancies in the Board are filled by majority vote of the remaining
Directors.





EMPLOYEES





We
currently have three (3) full-time employees, including Marion R. "Butch"
Barnes, the President of Sunshine and Robert Barnes, Sunshine's promotions and
Internet sales manager, who is the son of Marion R. "Butch" Barnes and one
part-time employee. Additionally, David Rector, our sole officer and Director
spends approximately four to six hours per week on Company matters.

























[Remainder
of page left intentionally blank.]




-19-


ITEM
10. EXECUTIVE
COMPENSATION.










Other(1)AnnualName
      & Principal
            
            Compen-
            
            Restricted
            
            TotalPosition
            
            Year
            
            Salary ($)
            
            sation
            
            Stock Awards
            
            CompensationDavid
      Rector,
            
            
            2007
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0CEO,
      President,
            
            
            2006
            
            $
            0
            
            $
            0
            
            $
            10,000(3)
            
            $
            10,000CFO,
      Secretary,
            
            
            2005
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0Treasurer,
      andDirector
      (2)Marion
      “Butch”
            
            
            2007
            
            $
            0
            
            $
            4,000
      (4)
            
            $
            0
            
            $
            0Barnes
            
            
            2006
            
            $
            0
            
            $
            6,000(4)
            
            $
            0
            
            $
            6,000President
      ofSunshine







Does not
include perquisites and other personal benefits in amounts less than 10% of the
total annual salary and other compensation. We had no executive employees who
have received more than $100,000 in compensation, including bonuses, options,
and SARS since our formation in July 2005.




(1) No
Executive Officer received any LTIP payouts, retirement payments, options,
warrants or bonuses during the last two fiscal years, and no salaries are being
accrued.





(2) Mr.
Rector was appointed as our Chief Executive Officer, President, Chief Financial
Officer, Secretary, Treasurer and Director on April 19, 2004. Mr. Rector does
not have an employment agreement with us.





(3) The
100,000 shares of common stock issued to Mr. Rector in July 2006 had a value of
$10,000 or $0.10 per share.





(4)
Represents Mr. Barnes’ automobile allowance.





COMPENSATION
DISCUSSION AND ANALYSIS





Director
Compensation





Mr. David
Rector, our sole Director, has not received any separate remuneration to date
for his service to the Board of Directors, other than the amounts he has
received in consideration for his services to the Company as an officer,
however, the Board of Directors reserves the right in the future to award the
members of the Board of Directors cash or stock based consideration for their
services to the Company, which awards, if granted shall be in the sole
determination of the Board of Directors.





Executive
Compensation Philosophy





Our Board
of Directors, consisting solely of Mr. Rector, determines the compensation given
to our executive officers in his sole determination. Our executive compensation
program currently consists solely of shares of common stock issued in
considerations for services rendered by Mr. Rector, which we believe aligns
our executives’ interests with the interests of our shareholders by making our
executive’s salary, if any, be paid through sales of our common stock, which
salary can therefore only increase in the event the share price of our common
stock increases. In addition, although we have not to date, our Board of
Directors also reserves the right to pay our executives competitive salaries and
award incentive bonuses which are linked to our performance, as well as to the
individual executive officer’s performance. This package may also include
long-term, stock based compensation to certain executives which is intended to
align the performance of our executives with our long-term business strategies.
While our Board of Directors has not granted any performance base stock options
to date, the Board of Directors reserves the right to grant such options in the
future, if the Board in its sole determination believes such grants would be in
the best interests of the Company.




-20-


Incentive
Bonus





The Board
of Directors may grant incentive bonuses to our executive officers in its sole
discretion, if the Board of Directors believes such bonuses are in the Company’s
best interest, after analyzing, our current business objectives and growth, if
any, and the amount of revenue we are able to generate each month, which revenue
is a direct result of the actions and ability of such executives.





As of the
date of this filing, no executive officers or Directors hold any outstanding
options to purchase shares of common stock in the Company, nor were there any
outstanding options to purchase shares in the common stock of the Company as of
December 31, 2007 or 2006.





Long-term,
Stock Based Compensation





In order
to attract, retain and motivate executive talent necessary to support the
Company’s long-term business strategy we may award certain executives with
long-term, stock based compensation in the future, in the sole discretion of our
Board of Directors, which we do not currently have any immediate plans to
award.





Criteria
for Compensation Levels




The
Company has always sought to attract and retain qualified executives and
employees able to positively contribute to the success of the Company for the
benefit of its various stakeholders, the most important of which is its
shareholders, but also including its customers, its employees, and the
communities in which the Company operates.




The Board
of Directors (in establishing compensation levels for the Company’s Chief
Executive Officer) and the Company (in establishing compensation levels for
other executives, if any) considers many factors, including, but not limited to,
the individual’s abilities and executed performance that results in: the
advancement of corporate goals of the Company, execution of the Company’s
business strategies, contributions to positive financial results, and
contributions to the development of the management team and other employees. An
officer must demonstrate his or her ability to deliver results in his or her
areas of responsibility, which can include, among other things: business
development with new and existing customers, development of new products,
efficient management of operations and systems, implementation of appropriate
changes and improvements to operations and systems, personnel management,
financial management, and strategic decision making. In determining compensation
levels, the Board of Directors also considers: competitiveness of compensation
packages relative to other comparable companies, both inside and outside of the
Company’s industry, and the experience level of each particular
individual.





Compensation
levels for executive officers are generally reviewed upon the expiration of such
executive’s employment agreement (if any), or annually, but may be reviewed more
often as deemed appropriate.




Compensation
Philosophy and Strategy




In
addition to the “Criteria for Compensation Levels” set forth above, the Company
has a “Compensation Philosophy” for all employees of the Company (set forth
below), and a “Compensation Strategy for Key Management
Personnel” (set forth below), a substantial portion of which also applies to all
employees of the Company.




-21-


Compensation
Philosophy




The
Company’s compensation philosophy is as follows:




•
            
            The
      Company believes that compensation is an integral component of its overall
      business and human resource strategies. The Company’s compensation plans
      will strive to promote the hiring and retention of personnel necessary to
      execute the Company’s business strategies and achieve its business
      objectives.




•
            
            The
      Company’s compensation plans will be strategy-focused, competitive, and
      recognize and reward individual and group contributions and results. The
      Company’s compensation plans will strive to promote an alignment of the
      interests of employees with the interests of the shareholders by having a
      portion of compensation based on financial results and actions that will
      generate future shareholder value.




•
            
            In
      order to reward financial performance over time, the Company’s
      compensation programs generally will consist of: base compensation, and
      may also consist of short-term variable incentives and long-term variable
      incentives, as appropriate.




•
            
            The
      Company’s compensation plans will be administered consistently and fairly
      to promote equal opportunities for the Company’s
  employees.




Compensation Strategy for
Key Management Personnel




The
Company’s compensation strategy for its key management personnel is as
follows:




•
            
            Total
      compensation may include base salary and short-term and long-term variable
      incentives based on annual performance, and long-term variable incentives,
      in each case, where appropriate.




•
            
            Compensation
      will be comparable to general and industry-specific compensation practices
      as practicable.




•
            
            Generally,
      base compensation, and targeted short and long-term variable compensation,
      if any, will be established within the range of compensation of similarly
      situated companies. The Company’s organization size and complexity will be
      taken into account, and therefore similarly situated companies includes
      companies of similar size and complexity whether or not such companies are
      in the Company’s industry or not.




•
            
            When
      determining compensation for officers and managers, the Company takes into
      account the employee’s knowledge and experience, including industry
      specific knowledge and experience, to the extent such knowledge and
      experience contributes to the Company’s ability to achieve its business
      objectives.




•
            
            The
      Company reserves the right to adjust annual base salaries of employees if
      individual performance is at or above pre-established performance
      expectations.







-22-


ITEM
11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT
AND RELATED STOCKHOLDER MATTERS.





The
following table provides the names and addresses of each person known to own
directly or beneficially more than a 5% of the outstanding common stock (as
determined in accordance with Rule 13d-3 under the Exchange Act) as of March 24,
2008 and by the officers and Directors, individually and as a group. Except as
otherwise indicated, all shares are owned directly.






Name
      and Address ofBeneficial
      Owner
            
            Shares Beneficially
      Owned
            
            Percent(1)David
      Rector (2)
            
            100,000
            
            1.4%President,
      Chief Executive Officer, Chief Financial Officer and
    Director1640
      Terrace WayWalnut
      Creek,California
      94597Viking
      Investment Group II, Inc. (3)
            
            3,000,000
            
            42.7%488
      Madison Avenue12th
      FloorNew
      York, New York10022Marion
      R. "Butch" Barnes
            
            2,047,500
            
            29.1%President
      of Sunshine709
      Martinique Ct.Orange
      Park,Florida
      32073William
      D. Blanchard
            
            1,039,500
            
            14.8%313
      Gatefield Dr.Wilmington,North
      Carolina 28412All
      the officers and Directorsof
      the Company as a group
            
            2,147,500
            
            30.5%(2
      Persons)







(1) Based
on 7,030,000 shares outstanding as of March 5, 2007.





(2) Mr.
Rector is our Chief Executive Officer, President, Chief Financial Officer,
Secretary, Treasurer and sole Director.





(3) The
Beneficial owner of Viking Investment Group II, Inc. is the executor of the
estate of Ian Markofsky, the recently deceased President of Viking Investment
Group II, Inc.








-23-


ITEM
12.CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS





In April
2004, we issued 3,000,000 shares of common stock to Viking Investment Group,
Inc., a greater than 10% shareholder of us, in consideration for financial
consulting and advisory services rendered to us in connection with our formation
as a Delaware corporation, including assisting us in obtaining the loans
received from Jenadosa, as described above.





In April
2004, we issued 100,000 shares of common stock, to our attorney, David M. Loev,
in consideration for legal services rendered to us in connection with our
formation as a Delaware corporation.





In
December 2005, we issued an aggregate of 3,500,000 shares of our common stock to
four individuals in connection with the Exchange (defined and described above),
whereby Sunshine Group, LLC, became our wholly owned subsidiary. Pursuant to the
terms of the Exchange, we issued 2,047,500 shares of common stock to Marion R.
"Butch" Barnes, for Mr. Barnes 58.5% interest in Sunshine, 1,039,500 shares of
common stock to William Blanchard, in consideration for Mr. Blanchard's 29.7%
interest in Sunshine, 350,000 shares of common stock to James Lundeen, Jr., in
consideration for Mr. Lundeen's 10% interest in Sunshine, and 63,000 shares of
common stock to Robert Barnes, in consideration for Mr. Barnes 1.8% interest in
Sunshine.





In July
2006, we issued 100,000 shares of our common stock to our Chief Executive
Officer and Director, David Rector, in consideration for services rendered to us
as our Chief Executive Officer.









We
recorded the value of uncompensated services provided by our officer and
Director, David Rector and the President of Sunshine, Marion “Butch” Barnes as a
contribution of capital for the year ended December 31, 2007, 2006 and 2005.
Those contributions to capital totaled $117,000, $117,001 and $36,000,
respectively for the year ended December 31, 2007, 2006 and 2005.






ITEM
13.
EXHIBITS





a)
The exhibits listed below are filed as part of this annual report.





Exhibit
      No.
            Description3.1(1)
            Certificate
      of Incorporation of Nano Holdings International, Inc.3.2(1)
            Bylaws
      of Nano Holdings International, Inc.10.1(1)
            Exchange
      Agreement between Nano Holdings International, Inc. and Sunshine Group
      LLC10.2(1)
            $50,000
      Promissory Note with Jenadosa Holdings Limited
  (11/20/05)10.3(1)
            $50,000
      Promissory Note with Jenadosa Holdings Limited
(2/14/06)10.4(2)
            $5,000
      Promissory Note with Jenadosa Holdings Limited
(8/21/06)10.5(3)
            $7,000
      Promissory Note with Jenadosa Holdings Limited
(9/20/06)10.6(3)
            $15,000
      Promissory Note with Jenadosa Holdings Limited
  (10/13/06)10.7(2)
            Trademark
      Licensing Agreement


10.8(4)
            $10,000
      Promissory Note with Jenadosa Holdings Limited
(1/15/07)10.9(5)
            $10,000
      Promissory Note with Jenadosa Holdings Limited
  (04/04/07)







-24-


10.10(5)
            $7,5000
      Promissory Note with Jenadosa Holdings Limited
  (04/24/07)10.11(6)
            First
      Amendment Agreement to Promissory Notes with Jenadosa10.12(7)
            $30,000
      Promissory Note with Viking Investment Group II, Inc.
      (11/01/07)10.13*
            Promissory
      Note with Viking Investment Group II, Inc.21(4)
            List
      of the Subsidiaries of Nano Holdings International,
  Inc.




31*
            Certificate
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232*
            Certificate
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002





* Filed
herein.





(1)
      Filed as exhibits to our Form SB-2 Registration Statement filed with the
      Commission on August 1, 2006 and incorporated herein by
      reference.(2)
      Filed as exhibits to our amended Form SB-2 Registration Statement filed
      with the Commission on September 20, 2006 and incorporated herein by
      reference.(3)
      Filed as exhibits to our amended Form SB-2 Registration Statement filed
      with the Commission on November 29, 2006 and incorporated herein by
      reference.





(4) Filed
as exhibits to our Report on Form 10-KSB filed with the Commission on April 2,
2007 and incorporated herein by reference.





(5) Filed
as an exhibit to our Form 10-QSB Quarterly Report, filed with the Commission on
May 11, 2007, and incorporated herein by reference.




(6) Filed
as an exhibit to our Form 10-QSB Quarterly Report, filed with the Commission on
August 10, 2007, and incorporated herein by reference.





(7) Filed
as an exhibit to our Form 10-QSB Quarterly Report, filed with the Commission on
November 13, 2007, and incorporated herein by reference.





b)
REPORTS ON FORM 8-K





None.




ITEM
14.PRINCIPAL
ACCOUNTANT FEES AND SERVICES.





AUDIT
FEES





The aggregate fees billed for each of the fiscal years
ended December 31, 2007 and 2006 for professional services rendered by the
principal accountant for the audit of the Company's annual financial statements
and the review of the financial statements included in the registrant's Form
10-QSB or for services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years was approximately $5,443 and $4,750, respectively.





-25-


AUDIT
RELATED FEES





None.





TAX
FEES





None.





ALL OTHER
FEES





None.




























[Remainder
of page left intentionally blank.]






-26-


SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





NANO
HOLDINGS INTERNATIONAL, INC.





By: /s/ David
Rector


David
Rector,


Chief
Executive Officer


April 7,
2008











In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.







Name
            Title
            Date/s/ David
      Rector
            Chief
      Executive Officer,
            April  7,
      2008David
      Rector
            President,
      Chief Financial Officer(Principal
      Accounting Officer),Treasurer,
      Secretary and Director







-27-


Exhibit
Index:








Exhibit
      No.
            Description3.1(1)
            Certificate
      of Incorporation of Nano Holdings International, Inc.3.2(1)
            Bylaws
      of Nano Holdings International, Inc.10.1(1)
            Exchange
      Agreement between Nano Holdings International, Inc. and Sunshine Group
      LLC10.2(1)
            $50,000
      Promissory Note with Jenadosa Holdings Limited
  (11/20/05)10.3(1)
            $50,000
      Promissory Note with Jenadosa Holdings Limited
(2/14/06)10.4(2)
            $5,000
      Promissory Note with Jenadosa Holdings Limited
(8/21/06)10.5(3)
            $7,000
      Promissory Note with Jenadosa Holdings Limited
(9/20/06)10.6(3)
            $15,000
      Promissory Note with Jenadosa Holdings Limited
  (10/13/06)10.7(2)
            Trademark
      Licensing Agreement




10.8(4)
            $10,000
      Promissory Note with Jenadosa Holdings Limited
(1/15/07)10.9(5)
            $10,000
      Promissory Note with Jenadosa Holdings Limited
  (04/04/07)10.10(5)
            $7,5000
      Promissory Note with Jenadosa Holdings Limited
  (04/24/07)10.11(6)
            First
      Amendment Agreement to Promissory Notes with Jenadosa10.12(7)
            $30,000
      Promissory Note with Viking Investment Group II, Inc.
      (11/01/07)10.13*
            Promissory
      Note with Viking Investment Group II, Inc.21(4)
            List
      of the Subsidiaries of Nano Holdings International,
  Inc.




31*
            Certificate
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232*
            Certificate
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002





* Filed
herein.





(1)
      Filed as exhibits to our Form SB-2 Registration Statement filed with the
      Commission on August 1, 2006 and incorporated herein by
      reference.(2)
      Filed as exhibits to our amended Form SB-2 Registration Statement filed
      with the Commission on September 20, 2006 and incorporated herein by
      reference.(3)
      Filed as exhibits to our amended Form SB-2 Registration Statement filed
      with the Commission on November 29, 2006 and incorporated herein by
      reference.







-28-


(4) Filed
as exhibits to our Report on Form 10-KSB filed with the Commission on April 2,
2007 and incorporated herein by reference.





(5) Filed
as an exhibit to our Form 10-QSB Quarterly Report, filed with the Commission on
May 11, 2007, and incorporated herein by reference.




(6) Filed
as an exhibit to our Form 10-QSB Quarterly Report, filed with the Commission on
August 10, 2007, and incorporated herein by reference.





(7) Filed
as an exhibit to our Form 10-QSB Quarterly Report, filed with the Commission on
November 13, 2007, and incorporated herein by reference.






-29-