How do I add sub-categories?

I'm using v1.39h

I've searched the forums and the FAQ, but still can not figure out how to add sub-categories to my categories.
Any help would be appreciated.
Thanks,

When you select a category in Admin- Catalog - Categories/Products, there will be a New Category button. If it isn't there, then you already have products in the category in question. You can have products or subcategories in a category, but not both.

I do have several categories and products in those categories.
But I would like to create sub-categories in a category, with products in the sub-categories. Can I do this? If so how?
Thanks for all the help

Thanks stevesh.

Here's a way to preserve your current category layout and preserve your product_id's:

1. Backup your database.
2. Put your store into maintenance mode.
3. Go to your Catalog->Categories/Products and create a new top-level category named Temp.
4. Navigate within that tool to the category within which you want to create a new sub-category but currently have products. Display the products within the category. For each of those products, move them (the purple button with an "m" in the middle) to the Temp category.
5. Once all products have been moved to Temp, create your new sub-category structure then move the products you moved to Temp back to where their "final resting place" is.
6. Once all products have moved from Temp, delete the Temp category.
7. Verify the catalog/product structure
8. Take the store out of maintenance mode.