FORM 10-QSB
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934 For the
                    three month period ended: December 31, 2001

                                       Or

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
               For the transition period from ________ to ________

                         Commission file number: 333-44188
                                                 ---------

                                NANNACO, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


               TEXAS                                            74-2891747
      ------------------------                                -------------
      (State of incorporation)                                (IRS Employer
                                                                  ID No.)

                9739 Cobb Street, # 1
                San Antonio TX                                    78217
      ---------------------------------------                   ----------
      (Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (210) 545 3570
                                                           --------------

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

As of February 25, 2002, the  Registrant  had 15,335,342  Shares of Common Stock
outstanding.

Transitional Small Business Disclosure Format (check one);  Yes        No  X
                                                                ---       ---

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.



                                  NANNACO, INC
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                                 Balance Sheets
                           December 31, 2001 and 2000




                                     ASSETS

                                                           December    December
                                                           31, 2001    31, 2000
                                                           --------    --------

Current Assets:
       Cash on hand and in banks                                  0         932
       Certificates of deposit                               42,547      41,443
       Cash held in escrow                                    2,472
       Accounts receivable                                    3,481      15,422
       Investment in mutual funds (at fair market
            value Cost at 12/31/00, $221,341)                     0     178,996

Other Current Assets:
       Prepaids and deposits                                  2,390      50,478
                                                           --------    --------
                  Total current assets                       48,418     289,743



Fixed Assets:
       Equipment and fixtures                               190,936     196,436
       Vehicles                                              66,714      93,783
       Less: accumulated depreciation                      (104,934)    (70,629)
                                                           --------    --------
                  Net property and equipment                152,716     219,590

Other Assets:
       Notes receivable - investors                         109,000     135,000
       Accrued interest on investors notes receivable        13,811       2,429
                                                           --------    --------
                  Total other assets                        122,811     137,429
                                                           --------    --------


TOTAL ASSETS                                                323,945     646,762
                                                           ========    ========

                                    UNAUDITED
                                       F-1

<PAGE>


                                  NANNACO, INC
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                                 Balance Sheets
                           December 31, 2001 and 2000


                      LIABILITIES AND STOCKHOLDER'S EQUITY

                                                         December     December
                                                         31, 2001     31, 2000
                                                        ----------   ----------
Current Liabilities:
      Bank overdrafts                                   $    7,525   $      --
      Accounts payable - trade                              62,678       28,918
      Accrued interest payable on loans                      9,607          352
      Accrued salaries payable                               9,790
      Loan payable - brokerage firm                            --       117,550
      Conversion notes payable
      Current portion of notes payable                      85,096      394,788
      Sales taxes payable                                   38,943       31,682
      Payroll taxes accured and/or withheld                100,975       41,071
                                                        ----------   ----------
              Total current liabilities                    314,614      614,361

Long-Term Liabilities:
      Installment notes payable                             31,892       37,614
      Notes payable - banks (lines of credit)               73,986       65,835
      Stock conversion notes payable                           --       317,975
      Less: current portion                                (85,096)    (394,788)
                                                        ----------   ----------
              Net long-term debt                            20,782       26,636
                                                        ----------   ----------

Other Liabilities:
      Loans from shareholders                               69,200          --
                                                        ----------   ----------
              Total liabilities                            404,596      640,997
                                                        ----------   ----------

Common Stock Subject to Redemption:
      Common stock (377,742 shares issued November
              15, 2001, an outstanding)                        378          --
      Additional paid-in capital                           377,364
                                                        ----------   ----------
              Total common stock subject to redemption     377,742          --
                                                        ----------   ----------

Stockholders' Equity:
      Common stock (1,000 shares $1 par value
           authorized, 0 shares issued and
           outstanding at 12/31/01 and 12/31/00)               --           --
           (50,000,000 shares $0.001 par value
           authorized, 14,957,600 shares issued
           and outstanding at 12/31/01 and 12/31/00)        14,958       14,958
      Preferred stock - 10,000,000 shares authorized,
          none issued and outstanding                          --           --
      Paid in surplus                                    3,379,829    1,735,810
      Retained deficit                                  (3,853,180)  (1,745,003)
                                                        ----------   ----------
              Total stockholder's equity                  (458,393)      (5,765)
                                                        ----------   ----------

TOTAL LIABLITIES AND STOCKHOLDER'S EQUITY               $  323,945   $  646,762
                                                        ==========   ==========


                                    UNAUDITED
                                       F-2
<PAGE>

<TABLE>
                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                 Statements of Operations and Retained Deficits
          For the three months periods ended December 31, 2001 and 2000
<CAPTION>


                                                     December               December
                                                     31, 2001               31, 2000
                                                  --------------         --------------
<S>                                               <C>                    <C>
Income:
    Revenue                                             $39,040                $65,995

Cost of Sales:
    Wages                                                14,140                100,565
    Supplies                                              5,918                 16,777
    Contract labor                                                               5,390
    Commissions                                             140                 36,600
                                                  --------------         --------------
        Total cost of sales                              20,198                159,332
                                                  --------------         --------------

Gross Profit (Loss)                                     $18,842                (93,337)

Administrative and General:
    Advertising and public relations                        178                 10,231
    Bank charges and wire fees                            1,200                    258
    Gas, fuel and oil                                     4,026                  5,021
    Depreciation                                          9,202                 11,705
    Dues and subscripitions                                 --                   1,031
    Insurance                                               --                   7,292
    Legal and professional                               14,400                 43,528
    Miscellaneous                                           459                  3,629
    Office supplies                                         234                  2,283
    Officer compensation                                 20,300                 48,425
    Payroll tax expense                                   1,884                 10,989
    Penalties                                               --                   7,084
    Rent                                                  8,100                 19,358
    Repairs and maintenance                                 700                  6,700
    Other taxes                                                                    230
    Stock transfer expense                                  391                    --
    Telephone                                               500                  9,634
    Trade show expense                                      178                  1,333
    Travel and entertainment                                360                  3,213
    Utilities                                               730                    561
                                                  --------------         --------------
        Total administrative and general expenses        62,842                192,505
                                                  --------------         --------------

Income (Loss) from Operations                           (44,000)              (285,842)

Other Income (Expense)
    Interest income                                       2,981                  3,249
    Divivdend income                                        --                  17,692
    Loss on disposition of assets                           --                  (1,906)
    Unrealized gains (losses) on mutual funds               --                 (42,345)
    Interest Expense                                     (8,865)               (16,313)
                                                  --------------         --------------
        Total other income (expense)                     (5,884)               (39,623)
                                                  --------------         --------------

Net Income (Loss)                                       (49,884)              (325,465)

Retained (deficit), beginning of period              (3,803,296)            (1,419,538)
                                                  --------------         --------------

Retained (Deficit), End of Period                   ($3,853,180)           ($1,745,003)
                                                  ==============         ==============


Net (loss) per share of common stock                     ($0.00)                ($0.02)
                                                  ==============         ==============
</TABLE>
                                    UNAUDITED
                                       F-3


<PAGE>

<TABLE>
                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                            Statements of Cash Flows
                 For the years ended December 31, 2001 and 2000
<CAPTION>

                                                                           December    December
                                                                           31, 2001    31, 2000
                                                                           --------    --------
<S>                                                                         <C>        <C>
Cash flows from operating activities:
Net income (loss)                                                           (49,884)   (325,465)
      Adjustments to reconcile net income to net cash
      provided by operating activities:
          Non-cash items:
              Depreciation                                                    9,202      11,705
          (Increase) decrease in certificates of deposit                       (302)       (819)
          (Increase) decrease in accounts receivable - trade                 (1,382)      4,882
          (Increase) decrease in accounts receivable - investors               --       (84,000)
          (Increase) decrease in accounts receivable - employee               1,913         353
          (Increase) decrease in accounts receivable - other                 (2,817)     (2,429)
          Increase (decrease) in bank overdraft                               2,184     (10,651)
          (Increase) decrease in mutual fund shares                            --        34,214
          (Increase) decrease in fair market value of mutual fund shares       --        42,345
          (Increase) decrease in prepaid expense and deposits                  --        66,847
          (Increase) decrease in equipment                                     --        (3,951)
          (Increase) decrease in vehicles                                      --       (27,069)
          Increase (decrease) in accounts payable                            14,400       5,784
          Increase (decrease) in accounts payable - other                     8,409        --
          Increase (decrease) in accounts payable - employees                 9,790        --
          Increase (decrease) in loans payable - brokerage firm                --       (15,247)
          Increase (decrease) in notes payable                                 --        (8,495)
          Increase (decrease) in conversion notes payable                      --       317,975
          Increase (decrease) in sales taxes payable                          2,451       4,314
          Increase (decrease) in payroll tax liabilities                      6,036      (9,361)
                                                                           --------    --------
             Total adjustments                                               49,884     326,397
                                                                           --------    --------
              Net cash provided (used) by operating activities                 --           932

Cash Flows from financing  activities:
          Conversion of debt to redeemable common stock:
          (Decrease) in conversion notes payable                           (345,500)       --
          (Decrease) in accrued interest on conversion notes                (32,242)       --
          Issuance of redeemable common stock for conversion notes          377,742        --
                                                                           --------    --------
              Net cash provided (used) by financing activities                 --          --
                                                                           --------    --------

Net increase (decrease) in cash and equivalents                                --           932

Cash and equivalents, beginning of period                                      --         2,472
                                                                           --------    --------

Cash and equivalents, end of period                                            --         3,404
                                                                           ========    ========
</TABLE>

                                    UNAUDITED
                                       F-4
<PAGE>


                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                       Statements of Stockholders' Equity
             For the Period of October 20, 1998 (date of inception)
                           through December 31, 2001


                                                 SHARES COMMON STOCK
                                      -----------------------------------------
                                       $1.00 PAR      $0.001 PAR       TOTAL
                                         VALUE          VALUE          SHARES
                                      -----------    -----------    -----------
Balance at October 1, 1998                   --             --             --
Original capitalization                       500           --              500
Property contributed by stockholder          --             --             --
Surrendered certificates                     (300)          --             (300)
Issued for services                          --       19,999,800     19,999,800
Loss for period ending 09/30/99              --             --             --
                                      -----------    -----------    -----------
              Total 09/30/99                  200     19,999,800     20,000,000
Reverse split (1,000,000 TO 1)               (200)   (19,999,788)   (19,999,988)
                                      -----------    -----------    -----------
              Sub Total                      --               12             12
Forward split (1 to 1,000,000)               --       11,999,988     11,999,988
Fractional redemption                        --             --             --
Fractional redemption                        --             --             --
                                      -----------    -----------    -----------
                                             --       12,000,000     12,000,000
Shares issued for services                   --           50,000         50,000
Shares issued for claim settlement           --          435,000        435,000
Shares issued for debt                       --        1,029,200      1,029,200
         less $154,105 costs                 --             --             --
Shares sold at private placement             --        1,443,400      1,443,400
     less $314,072 costs                     --             --             --
                                      -----------    -----------    -----------
              Total 06/30/00                 --       14,957,600     14,957,600
Shares issued for debt                       --             --             --
Shares issued for services                   --             --             --
Loss for FYE 09/30/00                        --             --             --
                                      -----------    -----------    -----------
              Total 09/30/00                 --       14,957,600     14,957,600
Loss period ending 09/30/01                  --             --             --
                                      -----------    -----------    -----------
              Total 09/30/01                 --       14,957,600     14,957,600
Loss period ending 12/31/01                  --             --             --
              Total 12/31/01                 --       14,957,600     14,957,600
                                      ===========    ===========    ===========

<PAGE>



<TABLE>
                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                       Statements of Stockholders' Equity
             For the Period of October 20, 1998 (date of inception)
                           through December 31, 2001

                                 CONTINUED - #2
<CAPTION>


                                                                   DOLLARS
                                      ------------------------------------------------------------------
                                         $1.00        $0.001       PAID IN       RETAINED
                                         STOCK         STOCK       SURPLUS       DEFICIT         TOTAL
                                      ----------    ----------    ----------    ----------    ----------
<S>                                   <C>           <C>           <C>           <C>           <C>

Balance at October 1, 1998                  --            --            --            --            --
Original capitalization                      500          --             500          --           1,000
Property contributed by stockholder         --            --         108,039          --         108,039
Surrendered certificates                    (300)         --             300          --            --
Issued for services                         --          19,999          --            --          19,999
Loss for period ending 09/30/99             --            --            --        (131,495)     (131,495)
                                      ----------    ----------    ----------    ----------    ----------
              Total 09/30/99                 200        19,999       108,839      (131,495)       (2,457)
Reverse split (1,000,000 TO 1)              --            --            --            --            --
                                      ----------    ----------    ----------    ----------    ----------
              Sub Total                      200        19,999       108,839      (131,495)       (2,457)
Forward split (1 to 1,000,000)              --            --            --            --            --
Fractional redemption                       (200)         --             199          --              (1)
Fractional redemption                       --          (7,999)       (6,800)         --         (14,799)
                                      ----------    ----------    ----------    ----------    ----------
                                            --          12,000       102,238      (131,495)      (17,257)
Shares issued for services                  --              50        49,950          --          50,000
Shares issued for claim settlement          --             435       434,565          --         435,000
Shares issued for debt                      --           1,019     1,028,172          --       1,029,191
         less $154,105 costs                --        (154,105)         --        (154,105)
Shares sold at private placement            --           1,444     1,234,081          --       1,235,525
     less $314,072 costs                    --            --        (307,563)         --        (307,563)
                                      ----------    ----------    ----------    ----------    ----------
              Total 06/30/00                --          14,948     2,387,338      (131,495)    2,270,791
Shares issued for debt                      --              10        (6,509)         --          (6,499)
Shares issued for services                  --            --         999,000          --         999,000
Loss for FYE 09/30/00                       --            --            --      (2,918,691)   (2,918,691)
                                      ----------    ----------    ----------    ----------    ----------
              Total 09/30/00                --          14,958     3,379,829    (3,050,186)      344,601
Loss period ending 09/30/01                 --            --            --        (753,110)     (753,110)
                                      ----------    ----------    ----------    ----------    ----------
              Total 09/30/01                --          14,958     3,379,829    (3,803,296)     (408,509)
Loss period ending 12/31/01                 --            --            --            --         (49,884)
              Total 12/31/01                --          14,958     3,379,829    (3,803,296)     (458,393)
                                      ==========    ==========    ==========    ==========    ==========
</TABLE>

                                    UNAUDITED
                                       F-5
<PAGE>


                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 1 -  GOING CONCERN
------    The accompanying  financial statements of NANNACO, Inc. (a development
          stage  company)  have  been  prepared  in  conformity  with  generally
          accepted accounting principles,  which contemplate continuation of the
          Company as a going concern. The Company has devoted  substantially all
          of its efforts to financial planning, raising capital, diversification
          of  services,   and  developing  markets  for  existing  and  expanded
          services.  These  factors  create an  uncertainty  about the Company's
          ability to continue as a going  concern.  The financial  statements do
          not include any adjustments that might be necessary, if the Company is
          unable to continue as a going concern.

          The Company has taken steps to curtail the operating losses for future
          periods.   These  steps  include  the  reduction  (not  deferrals)  of
          officers,  directors  and key personnel  salaries,  as well as cuts in
          every   expense   classification,    where   possible.   Additionally,
          concentration has been focused on the sources of current customers and
          business,  instead of spending time and money on new,  untried sources
          of customer acquisition.  Additionally, a three phase plan of business
          development has been  implemented to increase  current market share of
          existing  business,  extending to new geographic  areas,  and shifting
          focus to business segments which are not as weather  sensitive,  as is
          the  current  business  core.  With these  plans in place,  as well as
          guarding  against  additional one time charges to income,  it is hoped
          the Company will be able curtail its operating losses.

Note 2 -  NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
------
          POLICIES

          A. ORGANIZATION AND NATURE OF THE BUSINESS NANNACO, INC.
          (The Company) was incorporated under the laws of the State of Texas on
          October  20,  1998,  and began  operations  immediately.  The  Company
          provides  industrial  surface cleaning,  surface  protection,  surface
          restoration,   and  other   services  to  commercial   and  industrial
          businesses,  as well to the owners of historical buildings,  operating
          under  the  trade  name of  Surface  Pro in  order  to  relate  to the
          principal business activity,  since the NANNACO name does not indicate
          the type of business.

          B. REVENUE AND COST RECOGNITION
          The  Company  provides  its  services  on a  direct  basis.  A sale is
          recognized  when the service is provided and an account  receivable is
          recorded or payment is received.  The criteria for recording a sale is
          that all agreed services have been provided.

          Supplies and materials are purchased and consumed as necessary.

          The Company warranties its service within the standards and customs of
          the industry.  Due to the  immaterial  amounts  involved,  refunds and
          adjustments are recognized  when granted.  No liability is accrued for
          this  purpose and the  adjustments  and refunds are recorded on a cash
          basis.  Due to the immaterial  amount of the  adjustments and refunds,
          management does not feel that this is a misleading method.

          C.   USE OF ESTIMATES
          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial  statements and the reported  amounts of revenue
          and expenses during the reporting period.  Actual results could differ
          from these  estimates.  Such estimates relate primarily to depreciable
          assets and their useful lives.

                                       F-6
<PAGE>


                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 2 -  NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
------
          POLICIES (Continued)

          D. PROPERTY AND EQUIPMENT
          Equipment and vehicles are stated at cost.  Depreciation is calculated
          on the  straight  line method over the  estimated  useful lives of the
          assets for book  purposes and the Modified  Accelerated  Cost Recovery
          System (MACRS) for tax purposes.

          E. FEDERAL INCOME TAXES
          Provisions for income taxes are  calculated on pretax income  reported
          for financial  statement  purposes.  Deferred  income taxes or benefit
          from income taxes are provided through timing differences  between the
          reporting  of financial  statement  income and taxable  income.  These
          differences   result   primarily   from  the  use  of  straight   line
          depreciation  for  reporting  purposes and Modified  Accelerated  Cost
          Recovery System for tax purposes. If material,  these differences will
          be recorded as deferred income taxes or benefit from income taxes. Due
          to the  accumulated  deficit from  inception to September 30, 2001, no
          deferred taxes or benefit from income taxes has been provided.

Note 3 -  CERTIFICATES OF DEPOSIT
------    On June 23, 2000, the Company  invested in two certificates of deposit
          in the amounts of $20,000 each,  earning interest at the rate of 5.75%
          annually.  These  certificates  mature  in one  year  from the date of
          purchase.  These  certificates  matured June 23, 2001,  and along with
          accrued interest,  in the amount of $1,365,  were renewed for one year
          at the interest  rate of 3% per annum.  Interest in the amount of $879
          was accrued on both certificates.  These  certificates  secure line of
          credit notes payable.



Note 4 -  ACCOUNTS RECEIVABLE
------    ACCOUNTS RECEIVABLE - TRADE
          The trade accounts receivable are recorded by the date of the invoice,
          which is the date the work is completed. The terms on the invoices are
          due upon completion,  unless other  arrangements are made prior to the
          beginning of the project. At December 31,, 2001 and 2000, the balances
          of trade receivables were $3,481 and $15,422, respectively,  which are
          deemed to be collectible in full.

Note 5 -  PREPAIDS AND DEPOSITS
------    The following schedule  details the content of the asset  Prepaids and
          Deposits:
                                                  12/31/01    12/31/00
                                                   -------     -------
          Final month's rent on warehouse          $   --      $ 1,600
          Prepaid office lease                         --       15,822
          Prepaid legal fees                           --       29,639
          Prepaid interest on installment loan       2,390       3,417
                                                   -------     -------
                   Total prepaids and deposits     $ 2,390     $50,478
                                                   =======     =======


          The final  month's rent on warehouse  facility and the prepaid  office
          lease were absorbed  into  operating  expenses  during the fiscal year
          ended  September  30, 2001,  with  occupancy of the  facilities  being
          terminated June 15, 2001.

          The  prepaid  legal fees was the result of an  agreement  between  the
          Company and their legal  counsel.  A retainer of $100,000  was paid to
          the attorney for future services and applicable expenses. An amount of
          $5,000 per month  plus  expenses  was to be taken  into  income by the
          attorney and a like amount  expensed for legal expense by the Company.
          At December  31,  2000,  an amount of $25,361 had been treated in this
          manner and on December  5, 2000,  $45,000  was  refunded,  leaving the
          amount shown as prepaid. All prepayments were utilized

                                   (Continued)
                                       F-7


<PAGE>

                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 5 -  PREPAIDS AND DEPOSITS (Continued):
------    during the period ended  September 30, 2001. This attorney is retained
          for SEC compliance  issues,  including prior placements and offerings,
          registration statements,  and other SEC issues. There is no litigation
          pending, at this time.

          The  prepaid  interest  amount  carried  on the  balance  sheet is the
          interest included in an installment loan on a vehicle purchased by the
          company.  The  amounts  taken to expense  each period are based on the
          straight  line  method  over the life of the loan as each  installment
          payment is made.

Note 6 -  EQUIPMENT AND FIXTURES AND VEHICLES
------    Fixed assets are recorded at cost and are summarized as follows:

                                                      12/31/01     12/31/00
                                                     ---------    ---------
          Equipment                                  $ 190,936    $ 196,436
           Vehicles                                     66,714       93,783
                                                     ---------    ---------
                   Total Fixed Assets (at Cost)      $ 257,650    $ 290,219
          Less Accumulated Depreciation from
                   Inception (October 20, 1998) to
                   December 31, 2001 and 2000         (104,934)     (70,629)
                                                     ---------    ---------
          Net Fixed Assets at December 31,
                   2001 and 2000                     $ 152,716    $ 219,590
                                                     =========    =========

          Depreciation  expense charged against operations for the period ending
          December  31, 2001  totaled  $9,202 and  $11,705 for the period  ended
          December 31, 2000.

Note 7 -  Other Assets
------    A.   Notes Receivable - Investors
          The  Company  has made  advances  to sixteen of its  investors  in the
          amounts of $109,000 at December 31, 2001, and $135,000 at December 31,
          2000.  These cash  advances  were secured by  promissory  notes due on
          January 1, 2003.  These notes carry the  provision  of 9.75% per annum
          interest from the date of the advance to the due date.

          B.   Accrued Interest on Notes Receivable - Investors

          Interest accrual on Investors Notes Receivable  retroactively  accrued
          on the advances to investors  from the date of the advance to December
          31, 2001and 2000. This interest is due on January 1, 2003,  along with
          the principal.  Accumulated amounts were $13,811 at December 31, 2001,
          and $2,429 at December 31, 2000.

Note 8 -  CURRENT LIABILITIES
------    A. Bank  overdrafts on December 31, 2001 in the amounts of $7,525 were
          created by the practice of writing  checks at the end of the month and
          clearing  the  overdrafts  by the first  banking day of the  following
          month.

          B. Trade accounts  payable of $62,678 and $28,918on  December 31, 2001
          and December 31, 2000 were the amounts  owed to  suppliers,  utilities
          and other monthly operating expenses at the end of the periods.  These
          amounts are normally  cleared during the month following the purchase,
          or as soon as possible thereafter.

          C.   Accrued  interest on loans and notes  payable is accrued from the
               date of the last payment through December 31, 2001 and 2000.

                                   (Continued)
                                       F-8
<PAGE>

                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 8 -  CURRENT LIABILITIES
------    D.   LOANS PAYABLE
          Included  in current  liabilities  at December  31, 2000 is  $117,550,
          which represents  money owed to a brokerage  firm's cash account.  The
          stocks held by the brokerage firm secure these funds. Interest accrues
          on the  balance at the rate of 9.625% and is charged  the company on a
          monthly basis. For the month of December,  2000 interest in the amount
          of $1,184 was included in the balance due the brokerage firm.

          E.   CONVERSION NOTES PAYABLE
          On December 7, 2000,  an  agreement  was signed for the  purchase of a
          NANNACO,  Inc  Convertible  Promissory Note in the amount of $140,000.
          This note was for  conversion to NANNACO,  Inc.  common stock,  at the
          market price on the date of  conversion.  The maturity  date is set as
          September 25, 2001 and the note contains the provision for the payment
          of 10% interest.

          On December 11, 2000,  two additional  agreements  were signed for the
          purchase of the Company's  Convertible  Promissory Notes in the amount
          of $205,500.  These notes were for conversion to NANNACO,  Inc. common
          stock at the market price on the date of conversion. The maturity date
          is set as September  25, 2001 and the notes  contain the provision for
          the payment of 10% interest.

          By mutual  agreement with all parties,  as of November 15, 2001, these
          notes were converted into NANNACO, Inc. $0.001 common stock at a value
          of $1 per share. Including accrued interest,  this conversion resulted
          in the  issuance  of  377,742  shares  of common  stock  (See Note 12,
          concerning Redeemable Common Stock) .

          F. The  accumulations in Sales Taxes Payable and Payroll Taxes Accrued
          and/or Withheld are the amounts due to government  agencies for taxes.
          The Sales  Taxes due is the  aggregate  unremitted  amount  due to the
          State of Texas for sales taxes  applicable  to  commercial  jobs.  The
          Payroll Taxes are the employees'  portions and the employers'  portion
          of payroll taxes.

Note 9 -  LONG TERM LIABILITIES
------

          A. INSTALLMENT NOTES PAYABLE  Installment  obligations  consist of two
          notes  payable.  The  first  note  is  secured  by a  vehicle  and the
          endorsement of the Company  President,  for the purchase of a truck to
          transport Company equipment from one job site to another.  Interest on
          this obligation is included in the note balance,  and capitalized as a
          deferred charge. This interest is being amortized straight-line method
          over the term of the note.  As of  December  31,  2001 and  2000,  the
          details are as follows:

          Note payable to Auto One Acceptance Corporation, payable in 60 monthly
          installments of $390 each, secured by a 1994 GMC truck.

                                                     12/31/01        12/31/00
                                                     --------        --------
          Original Amount                            $ 23,400         $23,400
          Current Balance                            $  6,542        $  8,240
          Long-Term Portion                          $  1,862        $  2,780
          Portion due in twelve months               $  4,680        $  4,680
          Interest rate                                 20.75%          20.75%
          Unamortized interest                       $  2,390        $  3,418

          On February 19, 2000, an installment  loan was obtained from Bank One.
          This  note  is  secured  by the  personal  guarantee  of  the  Company
          president and is payable in sixty monthly  installments  of $745 each.
          The interest rate

                                  (Continued)
                                      F-9
<PAGE>

                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 9 -  LONG TERM LIABILITIES (Continued)
------    A. INSTALLMENT NOTES PAYABLE
          is 10% per annum.  The  details at  December  31, 2001 and 2000 are as
          follows:


                                                  12/31/01        12/31/00
                                                  --------        --------
                  Original Amount                 $35,000         $35,000
                  Current Balance                 $25,350         $29,374
                  Long-Term Portion               $18,920         $23,076
                  Portion due in twelve months    $ 6,430         $ 6,298
                  Interest Rate                        10%             10%
                  Due Date                        Monthly         Monthly

          B.   NOTES PAYABLE - LINES OF CREDIT

          The Bank One line of credit loan was  originated on July 15, 1999, and
          was secured by the personal  guarantee of the Company  president.  The
          due date was July 15,  2002,  with  interest at prime plus 1.25% to be
          paid monthly.

                                            12/31/01           12/31/00
                                            --------           --------
          Available Amount                  $35,000            $35,000
          Current Balance                   $33,986            $33,834
          Long-Term Portion                 $     0            $     0
          Portion due in twelve months      $33,986            $33,834
          Interest Rate                    Prime plus 1.25%    Prime plus 1.25%
          Due date                          07/15/02           07/15/01

          Additionally,  on June 21, 2000, the company  established two new line
          of  credit  notes  with the  Frost  National  Bank.  These  notes  are
          identical in structure and allow draws up to $20,000 each.  Both notes
          are  secured by  certificates  of deposit  (See Note 3). The two notes
          were due June 21, 2001 and both  require  interest on the  outstanding
          balance at the rate of 9.5% per annum. These notes were renewed with a
          new due date of June 21,  2002,  and an  interest  rate of 5.00%.  The
          summary of both notes at December 31, 2001, is as follows:

                                                         Note #1    Note #2
                                                         -------    -------
               Available Amount                          $20,000    $20,000
               Current  Balances                         $20,000    $20,000
               Long-Term Portion                         $     0    $     0
               Portion Due in twelve months              $20,000    $20 000
               Interest Rate                                 5.0%       5.0%
               Due Dates                                 06/21/02   06/21/02

          At December 31, 2000, the summary is as follows:

                                                         Note #1    Note #2
                                                         -------    -------
               Available Amount                          $20,000    $20,000
               Current Balances                          $14,000    $18,000
               Long-Term Portion                         $     0    $     0
               Portion Due in Twelve Months              $14,000    $18,000
               Interest Rate                                 9.5%       9.5%
               Due Dates                                 06/21/01   06/21/01

                                   (Continued)
                                      F-10
<PAGE>


                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 10-  LOANS FROM SHAREHOLDERS
-------   Since its inception, the Company has been compelled to seek capital on
          an interim  basis to support  its  operation.  Two  stockholders  have
          provided the necessary cash advances to meet the  requirements  of the
          Company.  These  advances are  evidenced by notes from the Company and
          bear  interest  at the rate of 10% per  annum,  with a due date of one
          year from the dates of the advances.

Note 11 - LEASE COMMITMENTS
-------   The Company leased a warehouse  location and office space on an annual
          basis.  The warehouse  lease was in the amount of $18,674,  payable in
          monthly installments of $1,600 per month, following an initial payment
          of  $1,074.  The final  month's  rent in the  amount of $1,600  was on
          deposit with the lessor. A twelve month lease on the office space from
          June 15,  2000  through  June  15,  2001  was  prepaid  in full at the
          inception  of the lease.  This lease was  amortized  each month in the
          amount of $2,886.  Both of these leases  expired on June 15, 2001, and
          were not renewed.  All prepaid  amounts were utilized as rent payments
          and are included in the Company's operations for September 30, 2001.

          On June 15,  2001,  the Company  relocated  to new  facilities,  which
          offered a combination  of warehouse  space and office  accommodations.
          This  space is leased  for one year  payable at the rate of $1,300 per
          month. No prepayment was required.

Note 12 - REDEEMABLE COMMON STOCK AND PAID IN SURPLUS
-------   As  discussed in Note 8E, the Company  entered into an agreement  with
          three  parties for purchase of a NANNACO,  Inc.  common stock  through
          Convertible Promissory Notes. These notes were made with non-qualified
          purchasers.  As of November 15, 2001,  these notes were converted into
          377,742 shares of NANNACO,  Inc. $0.001 common stock. This resulted in
          an allocation of $378 to the stock and $377,364 to additional  paid-in
          capital.  Since the purchasers  were  non-qualified  purchasers,  this
          stock can be redeemed at the option of the  purchaser  at any time for
          three years from the dates of the  original  notes.  The company has a
          liability to redeem these shares, at the option of the shareholder, at
          the issued  value,  plus accrued  interest to the date of  redemption.
          This  stock is  therefore  carried on the  balance  sheet in a special
          category and not included in the equity portion of the Company,  since
          the Company has no control of the redemption.  Also, this stock is not
          included in the  computation of earnings  (losses) per share of common
          stock  outstanding.  The  treatment of this stock will  continue to be
          segregated  until it is  redeemed or the three year period of optional
          redemption  expires (three years from the date of the original notes).
          The  potential  liability of interest on the  redemption of this stock
          was not  considered in the  computation of the net loss for the period
          ended December 31, 2001,  since it is only due if the option to redeem
          is exercised by the purchasers of the stock.  As of December 31, 2001,
          the potential liability for interest on this stock is $4,354.

Note 13 - COMMON STOCK, PREFERRED STOCK, PAID IN SURPLUS
-------   The company  was charted  October 20, 1998 under the laws of the State
          of Texas. 1,000 shares of $1.00 par value common stock was authorized.
          Nine  individuals  were  party to the  initial  capitalization  of 500
          shares at an issue price of $2.00 per share.

          Included in Paid-In Capital is $108,039,  which  represents  equipment
          contributed  by the  company's  president  and founder.  The valuation
          assigned by the board of directors  is less than the original  cost or
          the fair market value of the equipment.

          An additional  50,000,000  shares of $0.001 par value common stock and
          10,000,000 shares of $0.00 par value preferred stock was authorized in
          a charter amendment in 1999.

          Also, in 1999,  the company  issued  19,999,800  shares of the new par
          value ($0.001) per share common stock for services.  Details as to the
          type of services and the number of shares is as follows:

                                   (Continued)
                                      F-11
<PAGE>



                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 13 - COMMON STOCK, PREFERRED STOCK, PAID IN SURPLUS (Continued):
-------
                      Summary of Service            Number of Shares
               --------------------------------       ------------
               Administrative and accounting               73,000
               --------------------------------       ------------
               Business development                     3,300,000
               --------------------------------       ------------
               Corporate attorney                       1,015,000
               --------------------------------       ------------
               Employment                                   3,000
               --------------------------------       ------------
               Company president                       12,302,800
               --------------------------------       ------------
               Procedure consultant                         3,000
               --------------------------------       ------------
               Public relations                           300,000
               --------------------------------       ------------
               Technical advisor                            3,000
               --------------------------------       ------------
               Trust shares for expansion               3,000,000
               --------------------------------       ------------
                  Total                                19,999,800
               --------------------------------       ------------

          At a  stockholders  meeting in March of 2000 a 1,000,000  to 1 reverse
          stock  split was  approved.  All  certificates  for under a  1,000,000
          shares were  canceled and the  resultant  amounts were refunded to the
          respective  shareholders.  Later in  March,  2000,  a  1,000,000  to 1
          forward split was declared by the board of directors.

          During 2000 the company  became  aware that certain  individuals  have
          raised money from five  investors  allegedly on behalf of the company.
          These  investors  had been  promised  NANNACO,  INC.  Common  stock in
          exchange for cash.  The company  never  received the funds raised from
          these investors. In an effort to protect the good name of the company,
          the board of directors  agreed to honor the  investment  made by these
          individuals  and  issue  them the  appropriate  number  of  shares  in
          exchange for a Memoranda of Agreement not to take legal action against
          the company.  A non-cash charge of $435,000 ($1.00 per share) was made
          against operations for the year ending September 30, 2000.

          In exchange for  consulting  services,  public  relations  the company
          issued  50,000 shares of new par value ($.001 per share) common stock.
          Consulting  fees of $50,000  ($1.00 per share) was charged  (non-cash)
          against  operations  for the year ending  September  30, 2000,  and an
          increase in common stock of $50 and paid-in capital $49,950.

          Also in the fiscal year ended September 30, 2000,  1,029,200 shares of
          new par value ($.001)  common stock was  converted  from debts held by
          certain  individuals.  This  conversion  converted  $519,700  of  debt
          received through April,  2000, and a charge against  operations in the
          amount of $509,500.  Allocation of the  $1,029,200  (based on an issue
          price of $1.00 per share) was as follows:

            Debt conversion                                      519,700
            ------------------------------------------        -----------
            Non-cash charge against operations                   509,500
            ------------------------------------------        -----------
                                                               1,029,200
            ------------------------------------------        -----------
            Less cash expenses relating to conversion            154,105
            ------------------------------------------        -----------
                                                                 875,095
            ------------------------------------------        -----------

                                   (Continued)
                                      F-12
<PAGE>


                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 13 - COMMON STOCK, PREFERRED STOCK, PAID IN SURPLUS (Continued):
-------   A regulation D private  placement of 1,442,400 shares of new par value
          ($.001)  common  stock was held in 2000.  These  shares were sold at a
          $1.00 per share  pursuant to Rule 506 of the  Securities  and Exchange
          Commission,  and this is the value  ($1.00) that is the  benchmark for
          securities transactions during fiscal years 2001 and 2000.

          The company  president  and founder  also  canceled  1,000,000  of his
          personal  shares,  and  distributed  these shares as gifts to selected
          individuals.  Individual  gifts  ranged  in size  from 300  shares  to
          450,000  shares  and  were  for  uncompensated  services  rendered  in
          assisting  with  the  formation,  organization  and  operation  of the
          company in this  development  stage. A non-cash charge of $999,000 was
          made against operation at September 30, 2000.

Note 14 - NET LOSS PER SHARE OF COMMON STOCK
-------   In the  computation  of the net loss per share of common stock for the
          period,  the retroactive stock splits and other changes in equity have
          been  taken  into  consideration  in this  computation,  however,  the
          Redeemable  Common  Stock  shares  have  not been  considered  in this
          computation..

Note 15 - SEGMENTED DISCLOSURES
-------   A.  Reportable  Segments - Due to the  criteria  for the  selection of
          reporting segments,  NANNACO,Inc.  has seven reporting segments. These
          segments all meet one or more of the required  criteria now or in past
          periods.  These  segments  are  classified  by the type of customer to
          which the services are  provided.  The  customers are divided into two
          categories,  which are residential customers and commercial customers.
          The services performed for residential customers are wood restoration,
          stone  restoration,  sealing,  and pressure  washing.  For  commercial
          customers   the  service   classifications   are   pressure   washing,
          environmental services, and historical restoration.

          Residential  wood  restoration   involves  wood  surface  preparation,
          including chemical or mechanical stripping. Stone restoration involves
          essentially  the same process,  except on concrete and stone surfaces.
          The sealing service to residential customers is the chemical finishing
          process  applied to either stone or wood surfaces,  whether or not the
          surface is cleaned by the Company.  Pressure  washing for  residential
          customers  is general  water and pressure  cleaning of surfaces  where
          water reclamation procedures are not a factor and need not apply.

          For commercial customers, the pressure washing is essentially the same
          service  as  offered  to  residential  customers,   only  provided  to
          commercial (business) customers. The environmental services offered to
          commercial  customers  is  spill  response  and/or  other  specialized
          cleaning  services that require water  containment or special chemical
          processes and waste water removal. For historical restoration services
          to commercial customers,  NANNACO, Inc. performs services similar to a
          combination of residential  wood  restoration  and  residential  stone
          restoration,  plus  specialized  cleaning and sealing  procedures  for
          historical structures.

          B.  Measurement  of Segment  Profit or Loss and  Segment  Assets - The
          accounting  policies  of all  the  segments  are  the  same  as  those
          described in the summary of  significant  accounting  policies.  Sales
          revenue and cost of goods sold for each segment can be determined on a
          segment basis. The remaining  operating expenses are general corporate
          expenses,  but are  allocated to the various  segments on the basis of
          the same  percentages  as result  from the  allocation  of the cost of
          sales for the  individual  segments.  Management  feels that this is a
          fair allocation of the general corporate expenses to give a net profit
          from  operations  for each  individual  segment.  The  allocation  for
          interest expense is based upon the same  percentages.  Since all fixed
          assets are jointly utilized by all segments,  the depreciation expense
          is allocated to the segments by the

                                   (Continued)
                                      F-13
<PAGE>

                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

Note 16 - SEGMENTED DISCLOSURES (Continued)
-------   percentage of revenue  generated by the segment.  Interest  income and
          investment  revenues  are  common  to all  segments,  so this  also is
          allocated by the segment income  percentage.  Gains or losses on asset
          dispositions are also allocated by the income allocation method.

         SCHEDULE OF SEGMENTED ACCOUNTS FOR THE THREE MONTH PERIOD ENDED
                               DECEMBER 31, 2001:



                                            RESIDENTIAL SEGMENTS
                              --------------------------------------------------
                                 WOOD         STONE                   PRESSURE
                              RESTORATION   RESTORATION   SEALING      WASHING
                              --------------------------------------------------
Net sales                        568          1,419        9,706        1,480
Interest income                   45            104          745          119
Interest (expense)              (133)          (310)      (2,216)        (355)
Depreciation (expense)          (138)          (322)      (2,301)        (368)
Segmented profits (loss)        (521)        (1,218)      (8,700)      (1,392)
Allocation of fixed assets
      To segments              3,865          9,018       64.413       10,306


                                             COMMERCIAL SEGMENTS
                              --------------------------------------------------
                              PRESSURE    ENVIRONMENT    HISTORIC      COMPANY
                              WASHING      SERVICES     RESTORATION     TOTALS
                              --------------------------------------------------
Net sales                      11,276        8,780         5,811        39,040
Interest income                   850          671           447         2,981
Interest (expense)             (2,526)      (1,995)       (1,330)       (8,865)
Depreciation (expense)         (2,623)      (2,070)       (1,380)       (9,202)
Segmented profits (loss)       (9,917)      (7,830)       (5,220)      (34,798)
Allocation of fixed assets
      To segments              73,429       57,971        38,648       257,650


         SCHEDULE OF SEGMENTED ACCOUNTS FOR THE THREE MONTH PERIOD ENDED
                               DECEMBER 31, 2000:

                                            RESIDENTIAL SEGMENTS
                              --------------------------------------------------
                                 WOOD         STONE                   PRESSURE
                              RESTORATION   RESTORATION   SEALING      WASHING
                              --------------------------------------------------
Net sales                     11,192            939       18,787        1,916
Interest income                  552             49          926           97
Unrealized gain or (loss)
      on mutual funds         (7,199)          (635)     (12,068)      (1,270)
(Loss) on disposition of
      assets                    (324)           (29)        (543)         (57)
Interest (expense)            (2,773)          (245)      (4,649)        (489)
Depreciation (expense)        (1,990)          (176)      (3,336)        (351)
Segmented profits (loss)     (43,596)        (3,847)     (73,087)      (7,693)
Allocation of fixed assets
      To segments             49,337          4,353       82,712        8,707


                                   (Continued)
                                      F-14
<PAGE>

                                  NANNACO, INC.
                          (A Development Stage Company)
                               d.b.a. Surface Pro
                          NOTES TO FINANCIAL STATEMENTS
          For the Three Months Periods Ended December 31, 2001 and 2000
                                   (Unaudited)

         SCHEDULE OF SEGMENTED ACCOUNTS FOR THE THREE MONTH PERIOD ENDED
                               DECEMBER 31, 2000:
                                   (Continued)



                                             COMMERCIAL SEGMENTS
                              --------------------------------------------------
                              PRESSURE    ENVIRONMENT    HISTORIC      COMPANY
                              WASHING      SERVICES     RESTORATION     TOTALS
                              --------------------------------------------------

Net sales                       5,510       19,442         8,209        65,995
Interest income                   276          942           406         3,249
Unrealized gain or (loss)
      on mutual funds          (3,599)     (12,280)       (5,293)      (42,345)
(Loss) on disposition of
      assets                     (162)        (553)         (238)       (1,906)
Interest (expense)             (1,387)      (4,731)       (2,039)      (16,313)
Depreciation (expense)           (995)      (3,394)       (1,463)      (11,705)
Segmented profits (loss)      (21,798)     (74,369)      (32,055)     (256,445)
Allocation of fixed assets
      To segments              24,669       24,669        36,277       290,219


C. RECONCILIATION OF SEGMENTED AMOUNTS:

                                                             PERIOD ENDED
                                                      -------------------------
                                                       12/31/01        12/31/00
                                                      ---------       ---------
Interest income                                       $   2,981       $   3,249
Unrealized gain (loss) on mutual funds                     --           (42,345)
(Loss) on disposition of assets                            --            (1,906)
Interest (expense)                                       (8,865)        (16,313)
Depreciation (expense)                                   (9,202)        (11,705)
Segmented profits (loss)                                (34,798)       (256,445)
                                                      ---------       ---------

Net income (loss) to retained earnings                $ (49,884)      $(325,465)
                                                      =========       =========


Note 17 - MANAGEMENT STATEMENT
-------   These unaudited  financial  statements  contain all of the adjustments
          and notes considered necessary by management.


                                      F-15
<PAGE>


Item 2. Management's Discussion and Analysis or Plan of Operation.

This  section  contains  forward-looking   statements  that  involve  risks  and
uncertainties. These forward-looking statements are not guarantees of our future
performance.  They are  subject to risks and  uncertainties  related to business
operations,  some of which are beyond our control. Our actual results may differ
materially from those anticipated in these forward-looking  statements.  Amounts
presented here have been rounded to the nearest $1,000.

Nannaco's  objective  is to  maximize  shareholder  value by focusing on growth,
product  innovation  and  profitability.  The  following  discussion  highlights
Nannaco's  performance and should be read in conjunction  with the  Consolidated
Financial Statements and related notes included therein.


Overview

We have been in operation  since October 1998,  beginning with pressure  washing
surfaces.  Since that time we have expanded to include our residential services,
other commercial services, and vehicle cleaning. Beginning in the current fiscal
year, we have begun contaminated soil and water removal and hauling services.


Results of Operations  for the Three Months Ended  December 31, 2001 Compared to
the Three Months Ended December 31, 2000

We had gross  profit  from  operations  of $19,000  for the three  months  ended
December 31, 2001 and a loss of $93,000 for the three months ended  December 31,
2000 Revenues were $39,000 for the three months ended December 31, 2001 compared
to $66,000 for the for the three  months ended  December  31, 2000.  The $27,000
decrease in revenues is due primarily to a severe  general  downturn in business
in the weeks and months directly following the tragedies of September  eleventh.
Calls from residential customers declined severely for a period of three to four
weeks.  Commercial  calls  also  declined,  but for a  shorter  period  of time.
Currently,  the volume of customer calls has resumed its pre-September  eleventh
levels.  Revenues  were also  affected by a lag period  between the  purchase of
large  yellow  pages ads,  and their  appearance  in the current  edition of the
yellow  pages.  The company  opted to shift  advertising  resources  away from a
targeted,  direct mail program,  which was not producing desired results.  Calls
from the yellow  pages ads have been  steadily  coming  in,  and should  improve
revenues  during the next quarter.  Also, due to the length of time the business
has  existed,  the  benefits  of  repeat  opportunities  and  positive  customer
referrals have become a source of additional revenue.

                                        2
<PAGE>

Cost of Sales was  $20,000  for the three  months  ended  December  31,  2001 as
compared to $159,000 for the three months ended  December 31, 2000. The decrease
in cost of sales is due to better  management of labor and supply costs per job,
including  elimination  and decreases in executive  compensation.  We believe we
have improved our cost of sales  management  to achieve  positive cash flow from
operations during the current fiscal year.

Administrative  and general  expenses  were  $63,000 for the three  months ended
December 31, 2001as  compared with $193,000 for the three months ended  December
31, 2000. The $130,000  reduction in administrative and general expenses results
from approximately $30,000 less in legal and professional expense,  $28,000 less
in officer  compensation,  $10,000 less in advertising expense,  $16,000 less in
payroll and other tax expenses, $11,000 less in rent expense, and $9,000 less in
telephone expenses.

We had a net loss from operations of $50,000 for the three months ended December
31,  2001 and  $325,000  for the three  months  ended  December  31,  2000.  The
reduction in the net loss is a result of management's efforts to reduce expenses
and improve  operating  efficiency as well as the  elimination of legal expenses
relative  to  the  registration  statement  with  the  Securities  and  Exchange
Commission which became effective on January 16, 2002.

Our revenues are derived from the various  services we provide.  Our residential
services  include  wood  restoration,  stone  restoration,  sealing and pressure
cleaning. These had revenues in the three months ended December 31, 2001 and for
the three months ended December 31, 2000 as follows:

                           3 months ended 12/31/01       3 months ended 12/31/00
                           -----------------------       -----------------------
Wood Restoration                    $16,825                       $11,750
Stone Restoration                    $9,250                        $4,750
Sealing                             $12,950                       $23,000
Pressure Cleaning                    $4,200                        $3,250

Our commercial services include pressure cleaning,  environmental  services such
as fleet  cleaning  and vent  hood  cleaning  and  historical  restoration.  The
environmental  services do not include  contaminated  soil and water removal and
hauling  services  which are expected to produce  revenues in the current fiscal
quarter.  Please see Plan of  Operation  below.  These  commercial  services had
revenues in the three  months  ended  December 31, 2001 and for the three months
ended December 31, 2000 as follows:

                           3 months ended 12/31/01       3 months ended 12/31/00
                           -----------------------       -----------------------
Pressure Cleaning                    $4,225                        $4,500
Fleet and Hood Cleaning             $12,775                       $17,000
Historical Restoration               $4,200                        $5,000

The decrease in  commercial  revenue is also a reflection  of the  allocation of
advertising resources to residential wood and stone restoration. The increase in
wood and stone restoration revenue is due to our increased advertising for these
services.  The  decrease in sealing  revenue is a result of our not  advertising
this service in favor of advertising stone restoration.

                                        3
<PAGE>

The current quarter's  operations have included our first  contaminated soil and
water removal and hauling  project.  Despite the minimal revenue from this first
project we believe we have  demonstrated  our  abilities  to the Texas  Railroad
Commission and anticipate  additional  contracts  during the current fiscal year
which will substantially increase revenues.

The current quarter's operations have also included an expansion of our services
to include metal  fabrication and installation of metal framing for solar panels
and other  applications.  These  services allow us to utilize our existing metal
fabrication  equipment and personnel skills for directly producing revenue where
previously  used primarily for equipment  maintenance.  We have obtained and are
performing  under two  contracts  for these types of services  with  anticipated
revenue of  approximately  $100,000  for fiscal  year 2002,  with  approximately
$65,000 realized during the current quarter.


Liquidity  and  Capital  Resources  for Three  Months  Ended  December  31, 2001
Compared to the Three Months Ended December 31, 2000

For the three months ended  December 31, 2001 , we had current assets of $48,000
and $290,000 for the three months ended December 31, 2000. The $242,000 decrease
in current assets is due primarily to $48,000 less in prepaid legal expenses and
deposits and the  liquidation of $179,000 of an investment in mutual funds which
was used for  operating  expenses.  Fixed  assets  for the  three  months  ended
December 31, 2001 were  $153,000 as compared to fixed assets of $220,000 for the
three months ended  December 31, 2000.  The $67,000  decrease in fixed assets is
from $27,000 less in vehicles and a $30,000 increase in depreciation.

We had total  liabilities  of $405,000 for the three  months ended  December 31,
2001 and $641,000 for the three  months  ended  December 31, 2000.  The $236,000
decrease  in  liabilities  is  primarily  due to  the  conversion  of the  below
described promissory notes into common stock.

In December 2000, we issued three convertible promissory notes totaling $345,500
of  principal.  The notes  matured in  September  2001,  accrue  interest at ten
percent per annum and are convertible  into common stock at the five day average
closing bid price for our common stock.  The sale of these  debentures  was made
after we had filed  the  registration  statement  with the U.S.  Securities  and
Exchange  Commission for the public offering described in this prospectus.  As a
result the exemption from registration  which we relied upon for the sale of the
debentures may not have been  available  resulting in the sale of the debentures
to have  been in  violation  of  section  of the  Securities  Act of  1933.  The
debenture   holders  would  have  the  right  to  demand   rescission  of  their
investments.  If any of these debenture holders demand  rescission,  we could be
liable to repay the  debentures  as well as attorneys  fees and  possible  other
incidental  damages.  In addition,  we could face civil penalties from state and
federal  securities law enforcement  agencies.  If rescission is demanded and or
penalties  are  imposed  it would  have a  materially  adverse  effect  upon our
financial  condition by increasing our losses.  Rescission and or the imposition
of penalties would also have a materially adverse effect upon the development of
our business as funds  otherwise  available for  development  purposes  would be
required to be expended for the rescission  and or penalties.  In November 2001,
the debentures  were  converted  into 377,742 shares of common stock.  As of the
date of this report, none of the debenture holders have demanded rescission. The
value of the shares subject to recession is $377,742. These shares are accounted
for in a separate  section of the balance sheet entitled Common Stock Subject to
Recession,  with a  description  of the  shares  issued and  outstanding  in the
transaction.  A  footnote  to  the  financial  statements  fully  describes  the
transaction and the potential ramifications thereof. These shares will remain in
this classification until the expiration of the recession rights, and at no time
during  this period will these  shares be included in the  Stockholders'  Equity
section  of the  balance  sheet,  nor  will  these  shares  be  included  in the
computation  of  Earnings  (Loss)  per share  calculations  until the  recession
possibility expires.

                                       4
<PAGE>

Our  contaminated  soil and water  removal and hauling  services are expected to
improve our liquidity,  however no assurances can be made that liquidity will in
fact improve.  Recently enacted Texas legislation  requires the state to pay for
the remediation of abandoned or closed oil or gas well drilling sites which have
pits and ponds of used  waste  water and  drilling  sludge.  During  the  fourth
quarter  of fiscal  2000 we have  obtained  the  necessary  U.S.  Department  of
Transportation  and Texas  registrations to act as a  sub-contractor  to a fully
licensed provider of remediation services and anticipate obtaining contracts for
specific  sites.  Presently  we are  only  licensed  to  provide  sub-contractor
services as and when we are  selected  to provide  sub-contractor  services  for
contaminated soil and water removal and hauling.

We have  obtained and  completed our first  contract for  contaminated  soil and
water removal and hauling services.  We anticipate  revenue from these contracts
to increase during the current fiscal year and result in a substantial  increase
in revenues.

Weather  can and does  play a  significant  factor  in  revenue  and  liquidity.
Throughout  the  summer  of  2000,  we were  faced  with the  prospect  of water
shortages  which could have resulted in forced  curtailment of operations due to
either higher water cost or actual  restrictions on outdoor use. During the fall
of 2001 we experienced  problems on the other end of the spectrum. A wetter than
usual  weather  pattern  created  delays  in the  wood  sealing  segment  of our
operations.  We  require  approximately  two  days of dry  weather  between  the
cleaning and sealing  components of our wood  restoration  projects.  An unusual
pattern of constant,  intermittent  rainfall during the fall created  unforeseen
problems with project  completion.  The weather pattern did, however,  alleviate
any concerns over water usage or restrictions in our commercial  operations,  as
the local aquifer remained at levels well above normal.

Plan of Operations

We intend to achieve  profitability  through  increased  revenue  and  decreased
expenses.  During the  previous  fiscal year we hired the  personnel we consider
necessary to expand our  residential  and  commercial  services as well as enter
into the hazardous waste remediation  business  including  marketing  expertise.
Residential and commercial  services will remain our primary  business focus for
the next year.  While we believe the hazardous waste  remediation  business will
develop into a  substantial  portion of our business we believe the  development
will be  incremental  over the next year as we establish our name and reputation
as a service  provider in this business.  In April 2001, our executive  officers
and  directors   accepted  a  fifty  percent  salary  reduction  to  realize  an
approximate $48,000 per quarter savings on compensation expense.

The private  placements  completed in July 2000 and December  2000  provided net
proceeds of approximately $1,700,000 which we used to pay operating expenses and
to acquire additional equipment required for expanded residential and commercial
services as well as our projected hazardous waste site remediation  services. We
anticipate  needing to raise  approximately  $150,000 in additional capital over
the next six to twelve months  primarily for  marketing  purposes.  We intend to
make private placements of our equity securities as well as seeking  traditional
debt financing when available.

                                      5
<PAGE>

Since February 2001 we have tendered over fifty commercial services bids with an
average  price  of  $3,800.  As of  December  1,  2001  bids  for  approximately
$1,480,000 have been accepted and work has begun or is scheduled. Based upon our
past experience,  we anticipate having about 60% or higher of the bids accepted.
In  addition,  we  continue  to seek out and submit  additional  bids and repeat
customer business.

Our plan of operations for our  contaminated  soil and water removal and hauling
services has been to first obtain the  necessary  licenses and permits to handle
and  transport  hazardous  material  in the  State of Texas and be placed on the
approved  vendors list of the State of Texas.  At present we have the  necessary
licenses and permits to bid as a  sub-contractor  to a fully licensed  hazardous
waste  site  remediation  service  provider  in the  State of  Texas.  It is our
intention to bid on various clean-up  projects as a sub-contractor  for specific
portions of the clean up plan.  We will rely upon our  licensing  consultant  to
keep us  informed as to the timing and  requirements  of  specific  bids.  As of
February  1,  2002,  we  have  bid  upon  four  sub  contracting   projects  for
contaminated  soil and  water  removal  and  hauling  services.  We were not the
accepted  bidder on one project and have been awarded our first project with the
Railroad  Commission  of Texas.  We have  completed  this first  project and our
performance has been rated as superior work..

Commencing  contaminated  soil and  water  removal  and  hauling  services  as a
sub-contractor is not initially  expected to increase our operating  expenses as
we currently  have the necessary  equipment and personnel to handle the projects
for which we have outstanding bids and we are not required to operating  permits
as a  sub-contractor.  In the event that that  multiple,  simultaneous  projects
become available we will either need to purchase  additional  equipment and hire
additional  personnel  or  further  sub-contract  out work..  In any  event,  as
contamination  removal and hauling projects are awarded with  compensatory  draw
schedules,  as and  when we are  awarded  projects,  we will be able to  collect
start-up/materials  draws to commence and sustain each job-site.  However in the
event we would seek or be required to obtain our own operating  permits we would
be required to commit significant human and capital resources which could result
in  increased   operating  costs.  Such  expenditures  can  be  substantial  and
accordingly could have a material adverse effect on our financial condition.

The current quarter's operations have also included an expansion of our services
to include metal  fabrication and installation of metal framing for solar panels
and other  applications.  These  services allow us to utilize our existing metal
fabrication  equipment and personnel skills for directly producing revenue where
previously  used primarily for equipment  maintenance.  We have obtained and are
performing  under two  contracts  for these types of services  with  anticipated
revenue of  approximately  $100,000  for fiscal  year 2002,  with  approximately
$65,000 realized during the current quarter. We intend to pursue this additional
service revenue primarily through repeat business with our current contracts.

We  estimate  that we  require  approximately  $250,000  to  $500,000  to expand
business as planned for the  remainder of our current  fiscal year.  These funds
will be used primarily for repayment of debt, equipment and marketing.  However,
in the event such funds are not obtained,  we believe we can continue to operate
at our present levels.  Further reductions in operating  expenses,  particularly
executive  salaries  may be  required to operate  within  cash flow.  Sources of
capital will be sought primarily  through the private placement of securities by
our officers.  While we do not believe  commercial loans are available to us for
operating  expenses,  debt financing of durable equipment is believed  available
through commercial lenders and equipment dealers.

                                       6
<PAGE>



Part II - Other Information

Item 1 - Legal Proceedings:  There are no proceedings to report.

Item 2. - Changes in Securities:  None

Item 3. - Default Upon Senior Securities:  There are no defaults to report.

Item 4. - Submission of Matters to a Vote of Security Holders:  None.

Item 5. - Other Information:  None

Item 6. - Exhibits and Reports on Form 8-K:  None


SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

NANNACO, INC.

Dated: February 13, 2002
       -----------------

/s/ANDREW DEVRIES, III
------------------------------
ANDREW DEVRIES, III, President

                                        7