Luna Technologies International 10QSB 2006 Q3 Quarterly report (small business)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-QSB

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

for the quarterly period endedSeptember 30, 2006

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

Commission file No.0-29991

LUNA TECHNOLOGIES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware	91-1987288
(State of incorporation)	(I.R.S. Employer Identification Number)

61 A Fawcett Road
Coquitlam, British Columbia, Canada V3K 6V2
(address of principal executive offices) (Zip Code)

(604) 526-5890
(Registrant's telephone number, including area code)

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [ X ]

As of November 17, 2006 the Company had 42,478,398 shares of common stock issued and outstanding with a par value of $0.0001 per share.

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

LUNA TECHNOLOGIES INTERNATIONAL, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2006

TABLE OF CONTENTS

		Page

PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of September 30, 2006 (Unaudited) and December 31, 2005	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2006 and 2005 (Unaudited)	2
	Consolidated Statement of Stockholders’ Deficit as of September 30, 2006 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005 (Unaudited)	4
	Notes to Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis	12
Item 3.	Controls and Procedures	22

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 2.	Changes in Securities	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Submission of Matters to a Vote of Security Holders	23
Item 5.	Other Information	23
Item 6.	Exhibits	24

SIGNATURES		27

Item 1. Financial Statements

LUNA TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS

		September 30,			December 31,
		2006			2005
		(Unaudited)
ASSETS
Current Assets
Cash	$	8,008		$	-
Accounts receivable		119,608			133,378
Prepaid expenses and deposits		2,590			37,305
Inventory		156,174			71,809
		286,380			242,492

Furniture and Equipment, net of depreciation of $96,321 (2005 – $89,370)		6,993			9,412

	$	293,373		$	251,904


LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Bank overdraft	$	-		$	12,739
Accounts payable and accrued liabilities		362,238			209,493
Customer deposits		5,820			-
Due to related parties (Note 3)		42,106			36,605
Current portion of note payable (Note 3)		149,735			143,237
		559,898			402,074

Convertible Notes(Note 4)		729,395			376,172
Note Payable (Note 3)		44,958			40,730
		1,334,251			818,976

Stockholders’ Deficit
Capital stock (Note 5)
Convertible preferred stock, $0.0001 par value, 10,000,000 shares
Authorized, nil issued and outstanding
Common stock, $0.0001 par value, 100,000,000 shares authorized,
39,978,398 (2005 – 13,598,398) issued and outstanding		3,999			1,360
Additional paid-in capital		10,315,173			3,558,535
Share purchase warrants		150,130			141,509
Accumulated deficit		(11,385,744	)		(4,177,005	)
Accumulated other comprehensive loss		(124,436	)		(91,471	)
		(1,040,878	)		(567,072	)

	$	293,373		$	251,904

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

LUNA TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2006		2005		2006		2005

Sales	$	262,870 $		189,343 $		879,655 $		527,817

Cost of Sales		188,230		87,149		665,363		273,212

Gross Profit		74,640		102,194		214,292		254,605


General and Administrative Expenses
Consulting		24,439		23,298		99,417		33,644
Consulting – stock-based (Note 5)		873,500		-		2,259,500		24,400
Depreciation		2,284		1,952		6,950		6,041
Financing costs (Note 4)		5,000		-		41,000		-
Interest (Note 4)		272,547		658		600,190		2,659
Loss on settlement of debts (Note 5)		-		-		614,113		-
Management fees		40,368		37,526		118,885		120,085
Management fees – stock-based (Note 5)		2,482,500		-		2,632,500		-
Office and general		110,756		64,362		297,537		160,004
Professional fees		37,222		47,218		234,038		85,531
Rent and utilities		18,026		10,147		38,700		26,918
Research and development, net of recoveries		6,911		15,229		25,259		27,386
Wages and benefits		142,995		31,625		383,242		149,897
Wages and benefits – stock-based (Note 5)		10,800		-		71,700		-
		4,027,348		232,015		7,423,031		636,565

Net Loss	$	(3,952,708	) $	(129,821	) $	(7,208,739	) $	(381,960	)


Basic and Diluted Net Loss per Share	$	(0.11	) $	(0.01	) $	(0.31	) $	(0.04	)


Weighted Average Number of Common
Shares Outstanding – Basic and Diluted		35,456,931		10,858,779		23,457,719		10,205,874

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

LUNA TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

	Common Stock				Additional		Share						Accum.
	Number of				Paid-in		Purchase			Accumulated			Other
	Shares		Amount		Capital		Warrants			Deficit			Comp. Loss			Total

Balance, December 31, 2005	13,598,398	$	1,360	$	3,558,535	$	141,509		$	(4,177,005	)	$	(91,471	)	$	(567,072	)
Issued for cash	100,000		10		11,990		-			-			-			12,000
Issued on exercise of options	1,000,000		100		99,900		-			-			-			100,000
Issued pursuant to stock bonus
plans	5,205,000		521		1,497,679		-			-			-			1,498,200
Issued pursuant to financing
services	525,000		53		88,947		-			-			-			89,000
Issued on conversion of debt	7,150,000		715		1,007,483		-			-			-			1,008,198
Stock-based compensation	12,400,000		1,240		3,459,260		-			-			-			3,460,500
Discount on convertible notes and
issuance of warrants	-		-		547,379		52,621			-			-			600,000
Share purchase warrants expired	-		-		44,000		(44,000	)		-			-			-
Net loss	-		-		-		-			(7,208,739	)		-			(7,208,739	)
Currency translation adjustment	-		-		-		-			-			(32,965	)		(32,965	)
Balance,
September 30, 2006 (Unaudited)	39,978,398	$	3,999	$	10,315,173	$	150,130		$	(11,385,744	)	$	(124,436	) $		(1,040,878	)

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

LUNA TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Nine Months Ended
		September 30,
		2006		2005

Cash Flows from Operating Activities
Net loss	$	(7,208,739	) $	(381,960	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		6,951		6,041
Stock-based compensation		4,963,700		24,400
Stock-based financing fees		31,000		-
Stock-based professional fees		60,000		-
Accretion of discount on convertible notes (Note 4)		12,429		139
Beneficial conversion interest (Note 4)		547,379		-
Loss on settlement of debts (Note 5)		614,113		-
Changes in operating assets and liabilities:
Accounts receivable		13,770		(13,051	)
Prepaid expenses		34,715		(32,497	)
Inventory		(84,365	)	32,026
Accounts payable and accrued liabilities		202,745		28,149
Customer deposits		5,820		-
Due to related parties		5,501		3,162

Net Cash Used in Operating Activities		(794,982	)	(333,591	)


Cash Flows from Investing Activities
Purchase of furniture and equipment		(4,532	)	-

Net Cash Used in Investing Activities		(4,532	)	-


Cash Flows from Financing Activities
(Decrease) increase in bank overdraft		(12,739	)	3,197
Increase in notes payable		10,726		-
Advances converted to equity under debt settlement agreements (Note 5)		137,500		-
Proceeds from issuance of common shares		105,000		370,350
Convertible debt proceeds (repayments)		600,000		(26,664	)

Net Cash Provided by Financing Activities		840,487		346,883

Effect of Exchange Rate Changes		(32,965	)	(13,292	)

Net Increase in Cash		8,008		-

Cash, Beginning of Period		-		-

Cash, End of Period	$	8,008 $		11,497

Supplemental Cash Flow Information (See Note 7)

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

LUNA TECHNOLOGIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 (UNAUDITED)

Note 1 – Nature of Operations and Basis of Presentation

The Company was incorporated on March 25, 1999 in the state of Delaware. The Company commenced operations April 30, 1999 and by agreement effective as of that date, acquired proprietary technology and patent rights from Luna Technology Inc. (“LTBC”), a private British Columbia company with certain directors and shareholders in common with the Company. In addition, by agreement effective November 15, 1999, the Company acquired proprietary technology and the trademark rights to “LUNA” and “LUNAPLAST” which relate to the acquired Photoluminescent technology. This technology is used for the development and production of photoluminescent signage, wayfinding systems and other novelty products with applications in marine, commuter rail, subway, building and toy markets.

The consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Luna Technologies (Canada) Ltd. (“LTC”), a company incorporated on June 9, 1999 in the province of British Columbia. All significant intercompany balances and transactions are eliminated upon consolidation.

At September 30, 2006, the Company had a working capital deficiency of $273,518 and has incurred losses since inception raising substantial doubt as to the Company’s ability to continue as a going concern. The ability of the Company and its subsidiary to continue as a going concern is dependent on raising additional capital and on generating future profitable operations.

The Company anticipates meeting its working capital requirement for the next year through the sale of shares of common stock or through loans and advances from related parties as may be required.

Unaudited Interim Financial Statements
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B as promulgated by the Securities and Exchange Commission (“SEC”). They may include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2005 included in the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The unaudited interim consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

Reclassifications
Certain amounts from prior periods have been reclassified to conform to the current period presentation.

Note 2 – Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share-Based Payment”, which replaced SFAS No. 123, “Accounting for Stock-Based Compensation” and superseded APB Opinion No. 25, “Accounting for Stock Issued to Employees”. In January 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment”, which provides supplemental implementation guidance for SFAS No. 123R. SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award.

LUNA TECHNOLOGIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 (UNAUDITED)

Note 2 – Stock-Based Compensation (continued)

SFAS No. 123R was to be effective for interim or annual reporting periods beginning on or after June 15, 2005, but in April 2005 the SEC issued a rule that permits most registrants to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period as required by SFAS No. 123R. The pro-forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition. Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated.

The Company has adopted the modified prospective method of SFAS No. 123R for the fiscal year beginning on January 1, 2006; however, no compensation expense was recorded in the first quarter of 2006 as all stock options existing prior to the adoption were fully vested or no longer outstanding. Stock-based compensation expense for awards granted prior to January 1, 2006 was based on the grant date fair-value as determined under the pro-forma provisions of SFAS No. 123.

As of September 30, 2006, no unrecognized compensation cost related to stock options is expected to be recognized in subsequent periods.

Prior to the adoption of SFAS No. 123R, the Company measured compensation expense for its employee stock-based compensation plans using the intrinsic value method prescribed by APB Opinion No. 25. The Company applied the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”, as if the fair-value-based method had been applied in measuring compensation expense. Under APB Opinion No. 25, when the exercise price of the Company’s employee stock options was equal to the market price of the underlying stock on the date of the grant, no compensation expense was recognized.

The following table illustrates the pro forma effect on net loss and net loss per share as if the Company had accounted for its stock-based employee compensation using the fair value provisions of SFAS No. 123 for the nine months ended September 30, 2005:


Net loss	As reported	$	(381,960	)
SFAS 123 compensation expense	Pro-forma		38,810

Net loss	Pro-forma	$	(420,770	)

Pro-forma basic and diluted net loss per share	Pro-forma	$	(0.04	)

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force (“EITF”) in Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services” (“EITF 96-18”). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

LUNA TECHNOLOGIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 (UNAUDITED)

Note 3 – Related Party Transactions

During 2003, LTC and the Company executed a guarantee of certain unpaid management fees owing to the then CEO of LTC totaling $123,750 (CDN$165,000). Effective August 31, 2004, this CEO resigned and entered into an agreement with the Company for the payment of these guaranteed amounts and additional fees owing. Effective August 3, 2004, the Company had guaranteed, by a non-interest bearing promissory note, outstanding management fees due totaling CDN$187,000 payable as follows: CDN$20,000 upon acceptance, CDN$20,000 on January 15, 2005, CDN$25,000 on June 15, 2005, CDN$30,000 on January 15, 2006, CDN$40,000 on June 15, 2006 and CDN$52,000 on January 15, 2007. In addition, the Company agreed to a severance payment of CDN$43,200 to be paid in twelve equal monthly installments of CDN$3,600. As of September 30, 2006, CDN$63,200 has been paid in connection with the above agreements leaving CDN$167,000 (US$149,735) owing. The Company did not pay the CDN$20,000 installment due January 15, 2005, the CDN$25,000 installment due June 15, 2005 the CDN$30,000 installment due January 15, 2006 or the CDN$40,000 installment due June 15, 2006. Accordingly, this debt is in default.

During the nine months ended September 30, 2006, the Company had transactions with directors and officers as follows: expenses paid on behalf of and advances made to the Company - $95,967 (2005 - $8,793); management fees incurred by the Company - $118,885 (2005 - $120,085); and payments and reimbursements made by the Company - $61,462 (2005 - $125,716) leaving $42,106 owing as of September 30, 2006 (December 31, 2005 -$36,605).

During the nine months ended September 30, 2006, the Company issued 500,000 shares of its common stock to a director and officer under the 2006 Stock Plan; the $150,000 fair value of this transaction has been expensed as a stock-based management fee. Also during the nine months ended September 30, 2006, the Company issued 5,250,000 registered shares of its common stock and 4,000,000 unregistered shares of its common stock to directors and officers pursuant to consulting services agreements; the $2,482,500 fair value of these transactions has been expensed as stock-based management fees.

Unless otherwise noted, all amounts due to related parties are unsecured, non-interest bearing and have no specific terms of repayment.

Note 4 – Convertible Notes

Secured Convertible Note
Effective December 16, 2005, (the “Closing Date”) the Company entered into a Securities Purchase Agreement (the “SPA”) with accredited investors for the sale of (i) $1,000,000 in secured convertible notes and (ii) five year warrants to buy 1,000,000 shares of the Company’s common stock at $0.40 per share. The investors are obligated to provide an aggregate of $1,000,000 as follows:

$400,000 on December 21, 2005 (received);
$300,000 on February 7, 2006 (received); and
$300,000 to be disbursed within five days of the effective date of the registration statement on Form SB-2 covering the number of shares of the Company's common stock underlying the secured convertible notes and warrants. The Company’s registration statement was declared effective on July 17, 2006 and the final disbursement was received on July 26, 2006.

The secured convertible notes bear interest at 8% per annum, unless the common stock of the Company is greater than $0.2125 per share for each trading day of a month, in which event no interest is payable during such month. The secured convertible notes mature three years from the date of issuance, and are convertible into the Company's common stock, at the Purchasers' option, at a 50% discount to the average of the three lowest trading prices of the common stock during the 20 trading day period prior to conversion.

The full principal amount of the secured convertible notes is due upon a default under the terms of secured convertible debentures. In addition, the Company granted the investors a security interest in substantially all of its assets and intellectual property.

LUNA TECHNOLOGIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 (UNAUDITED)

Note 4 – Convertible Notes (continued)

Under the SPA, the Company was required to file a registration statement with the Securities and Exchange Commission within 45 days of closing (filed on February 2, 2006).

The warrants are exercisable until December 16, 2010 at a purchase price of $0.40 per share. The investors may exercise the warrants on a cashless basis if the shares of common stock underlying the warrants are not then registered pursuant to an effective registration statement.

Upon an issuance of shares of common stock below the market price, the exercise price of the warrants will be reduced accordingly. The market price is determined by averaging the last reported sale prices for the Company's shares of common stock for the five trading days immediately preceding such issuance as set forth on the Company's principal trading market.

The conversion price of the secured convertible notes and the exercise price of the warrants may be adjusted in certain circumstances such as if the Company pays a stock dividend, subdivides or combines outstanding shares of common stock into a greater or lesser number of shares, or takes such other actions as would otherwise result in dilution of the selling stockholder's position.

The investors have agreed to restrict their ability to convert their secured convertible notes or exercise their warrants and receive shares of the Company's common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.9% of the then issued and outstanding shares of common stock.

In accordance with EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Company recognized the value of the embedded beneficial conversion feature of $547,379 (2005 - $375,841) as additional paid-in capital as the secured convertible notes were issued with an intrinsic value conversion feature. Accordingly, the Company recorded $547,379 (2005 - $375,841) of non-cash interest expense, being the difference between the stated value and carrying value at the date of issuance. In addition, in accordance with EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”, the Company has allocated the proceeds of issuance between the convertible debt and the detachable warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the warrants of $52,621 as a component of stockholders’ deficit. The Company will record further interest expense over the term of the secured convertible notes of $52,621 resulting from the difference between the stated value and carrying value at the date of issuance. The carrying value of the convertible notes will be accreted to the face value of $1,000,000 at maturity or the date of conversion. As of September 30, 2006, accrued interest of $41,231 has been included in accrued liabilities, and interest expense of $12,429 has been accreted increasing the carrying value of the convertible notes to $729,395 (2005 - $376,172), after conversion of $206,585 in convertible notes to equity (see Note 5).

In connection with the convertible notes payable, the Company incurred finance costs totaling $41,000 (2005 -$70,000), which consisted of professional fees, due diligence, and a finder’s fee. The Company also incurred consulting fees of $65,000 (2005 - $nil) in connection with establishing the Securities Purchase Agreement.

On September 20, 2006 the Company reached an agreement with the note holders, whereby the note holders ceased conversion of outstanding notes for a period of 45 days to allow the Company to redeem the balance outstanding at the time. Under the terms of the agreement, if the outstanding balance was not redeemed within 45 days of the date of the agreement, the note holders would be entitled to receive 1,000,000 additional unregistered shares as a penalty. The Company was not able to redeem the outstanding balance prior to the November 6, 2006 deadline and subsequently the note holders have continued converting the outstanding notes.

LUNA TECHNOLOGIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 (UNAUDITED)

Note 5 – Capital Stock

2006 Transactions
The Company issued 100,000 shares of common stock at a price of $0.05 per share for conversion of $5,000 in amounts advanced on behalf of the Company. An additional amount of $7,000 was expensed to recognize differences between the issue price and the market value at the time of the transaction.

The Company issued 1,000,000 shares of common stock under the Non-Qualified Stock Option Plan for total consideration of $100,000.

The Company awarded 605,000 shares of common stock under the Stock Bonus Plan, and 4,600,000 shares of common stock under the 2006 Stock Plan. The combined fair value of $1,498,200 has been expensed as consulting, management fees and wages and salaries.

The Company issued 200,000 shares of common stock pursuant to a financing services agreement, with a fair value of $24,000. The Company also issued 325,000 shares of common stock pursuant to a financing services agreement, with a fair value of $65,000 which has been expensed as consulting fees.

The Company issued 400,000 shares of common stock under the 2006 Stock Plan which was pursuant to a debt conversion agreement with an unrelated party. Under the agreement, an outstanding amount of $50,000 was converted to common stock at a price of $0.125 per share.

The Company issued 2,600,000 shares of common stock pursuant to a debt conversion agreement with a consultant of the Company who subsequently was appointed as an officer and director. Under the agreement, an outstanding amount of $80,000 was converted to common stock at a price of $0.0308 per share. An additional amount of $446,500 was expensed as a loss on settlement of debt to recognize differences between the issue price and the market value of the shares at the time of the transaction.

The Company issued 1,150,000 shares of common stock pursuant to a debt conversion agreement with a consultant of the Company. Under the agreement, an outstanding amount of $57,500 was converted to common stock at a price of $0.05 per share. An additional amount of $167,613 was expensed as a loss on settlement of debt to recognize differences between the issue price and the market value of the shares at the time of the transaction.

Effective March 1, 2006 the Company entered into an agreement to issue 150,000 shares of its common stock for legal services provided, the shares were issued on July 21, 2006 and the $60,000 fair value of the transaction has been expensed as professional fees.

On May 31, 2006, the Company increased its authorized share capital from 30 million common shares and 5 million preferred shares (none issued to date) to 100 million common shares and 10 million preferred shares pursuant to a vote of the majority of stockholders as of March 30, 2006 and applicable regulatory filings.

The Company issued 3,000,000 shares of common stock for the partial conversion of the secured convertible notes of $206,585, pursuant to the December 16, 2005 Securities Purchase Agreement. The stock was issued pursuant to the Company’s Registration Statement on Form SB-2 covering up to 7,185,714 shares of the Company's common stock underlying the secured convertible notes and warrants which became effective on July 17, 2006.

Only July 21, 2006 the Company issued 9,250,000 shares to officers and directors, and 3,000,000 shares to consultants of the Company pursuant to consulting services agreements. Of the 12,250,000 shares issued, 8,250,000 shares were issued pursuant to the Company’s Registration Statement on Form S-8 filed on July 20, 2006.

Stock Option Plans
The Company adopted plans allowing for the granting of stock options and awarding of shares of common stock as follows:

LUNA TECHNOLOGIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 (UNAUDITED)

Note 5 – Capital Stock (continued)

Incentive Stock Option Plan
The Company adopted an Incentive Stock Option Plan authorizing the issuance of options to purchase up to 750,000 shares of common stock of the Company. Options granted under this plan will have a price and term to be determined at the time of grant, but shall not be granted at less than the then fair market value of the Company’s common stock and can not be exercised until one year following the date of grant. This plan is available to officers, directors and key employees of the Company. Of the 750,000 common shares available under this plan, 305,000 shares have been granted and exercised and 445,000 shares remain available for granting as of September 30, 2006

Non-Qualified Stock Option Plan
The Company adopted a Non-Qualified Stock Option Plan authorizing the issuance of options to purchase up to 10,850,000 shares of common stock of the Company. Options granted under this plan will have a price and term to be determined at the time of grant, but shall not be granted at less than the then par value of the Company’s common stock and can be exercised at any time following the date of grant. This plan is available to officers, directors, employees, consultants and advisors of the Company. Of the shares available under this plan, 5,971,870 shares have been granted and 4,878,130 shares remain available for granting under this plan as of September 30, 2006.

Stock Bonus Plan
The Company adopted a Stock Bonus Plan authorizing the award of up to 1,650,000 shares of common stock of the Company solely at the discretion of the board of directors. This plan is available to officers, directors, employees, consultants and advisors of the Company. Of the shares available under this plan, 1,482,812 shares have been issued and 167,188 shares remain available for awards under this plan as of September 30, 2006.

On March 1, 2006, the Company adopted the 2006 Stock Plan authorizing the award of up to 5,000,000 shares of common stock of the Company solely at the discretion of the board of directors. This plan is available to officers, directors, employees, consultants and advisors of the Company. All 5,000,000 shares have been awarded under this plan as of September 30, 2006.

During 2004, the Company granted a total of 659,200 stock options to the Company’s president at exercise prices ranging from $0.35 per share to $0.75 per share, exercisable for a term of three years. The fair value of these stock options was estimated using the Black-Scholes option pricing model assuming an expected life of three years, a risk free interest rate of 3% and an expected volatility of 102% resulting in an aggregate pro-forma expense of $142,200 upon full vesting of the options. Of these options, 59,200 vested immediately and the remaining 600,000 vest at a rate of 16,667 per month for a period of three years. On February 3, 2006, the Company’s president resigned his position and the remaining unvested options were cancelled.

During 2006, the Company granted a total of 480,000 non-qualified stock options to a consultant of the Company an exercise price of $0.16 per share, exercisable for a term of three years. The Company has recorded a fair value stock-based compensation expense of $48,000 estimated using the Black-Scholes option pricing model assuming expected life of three years, a risk-free interest rate of 4.28% and an expected volatility of 105%.

The Company’s stock option activity was as follows:

				Weighted	Weighted
				Average	Average
	Number of			Exercise	Remaining
	Options			Price	Life

Balance, December 31, 2005	2,350,200		$	0.20	1.78 years
Granted	480,000			0.16
Expired	(739,200	)		0.40
Exercised	(1,000,000	)		0.10

Balance, September 30, 2006 (Unaudited)	1,091,000		$	0.13	1.68 years

LUNA TECHNOLOGIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 (UNAUDITED)

Note 5 – Capital Stock (continued)

Share Purchase Warrants
The Company’s share purchase warrant activity was as follows:

				Weighted	Weighted
				Average	Average
	Number of			Exercise	Remaining
	Warrants			Price	Life

Balance, December 31, 2005	2,518,750		$	0.44	1.96 years
Granted	600,000			0.35
Expired	(285,000	)		1.00

Balance, September 30, 2006 (Unaudited)	2,833,750		$	0.36	2.09 years

Note 6 – Income Taxes

There were no significant temporary differences between the Company’s tax and financial bases, except for the Company’s net operating loss carryforwards amounting to approximately $2,873,000 at December 31, 2005. These carryforwards will expire, if not utilized, beginning in 2006. The realization of the benefits from these deferred tax assets appears uncertain due to the Company’s limited operating history. Accordingly, a full valuation allowance has been recorded which offsets the deferred tax assets at the end of the year.

Note 7 – Supplemental Cash Flow Information

		Nine Months Ended
		September 30,
		2006		2005

Interest paid	$	4,385	$	2,659
Income taxes paid	$	-	$	-
Fair value of stock bonus grants	$	1,498,200	$	24,400
Fair value of option grants	$	48,000	$	-

Note 8 – Subsequent Events

On November 6, 2006 the 45 day hold on the conversion of outstanding notes expired without the redemption of the remaining balance. Under the terms of the September 21, 2006 agreement with the note holders, all conversion activities would cease to allow the Company to redeem the remaining balance outstanding. If the Company was not able to redeem the outstanding balance within the 45 day period, the note holders would be entitled to receive an additional 1,000,000 unregistered shares. The 1,000,000 shares were issued on November 17, 2006.

On November 7, November 14 and November 15, 2006, the Company issued 500,000 shares of common stock for the partial conversion of the secured convertible notes of $10,650, $9,750 and $9,150 respectively, pursuant to the December 16, 2005 Securities Purchase Agreement. As of November 20, 2006, 2,685,714 registered shares remain available for conversion.

Item 2. Management’s Discussion and Analysis

This quarterly report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "our company believes," "management believes" and similar language. These forward-looking statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions, including those set forth in the following discussion, including under the heading "- Risk Factors". Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. In addition, our historical financial performance is not necessarily indicative of the results that may be expected in the future and we believe that such comparisons cannot be relied upon as indicators of future performance.

To the extent that statements in the quarterly report is not strictly historical, including statements as to revenue projections, business strategy, outlook, objectives, future milestones, plans, intentions, goals, future financial conditions, future collaboration agreements, the success of the Company's development, events conditioned on stockholder or other approval, or otherwise as to future events, such statements are forward-looking, All forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this annual report are subject to certain risks and uncertainties that could cause actual results to differ materially from the statements made. Other important factors that could cause actual results to differ materially include the following: business conditions and the amount of growth in the Company's industry and general economy; competitive factors; ability to attract and retain personnel; the price of the Company's stock; and the risk factors set forth from time to time in the Company's SEC reports, including but not limited to its annual report on Form 10-KSB; its quarterly reports on Forms 10-QSB; and any reports on Form 8-K. In addition, the company disclaims any obligation to update or correct any forward-looking statements in all the Company’s annual reports and SEC filings to reflect events or circumstances after the date hereof.

As used in this quarterly report, the terms “we”, “us”, “our”, and “Luna” mean Luna Technologies International, Inc. and our wholly owned subsidiary, Luna Technologies (Canada) Ltd., unless otherwise indicated.

Corporate History

We were incorporated in the State of Delaware on March 25, 1999 for the purpose of developing, manufacturing and selling photoluminescent products (High Performance Photoluminescent Lighting) used for emergency lighting, signs and markings, wayfinding systems and novelty products with applications in marine, commuter, rail, subway, building and toy markets.

We have one subsidiary, Luna Technologies (Canada) Ltd., a British Columbia corporation incorporated on June 9, 1999.

The address of our principal executive office is 61A Fawcett Road, Coquitlam, British Columbia, Canada V3K 6V2. Our telephone number is (604) 526-5890.

Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.

Our Business

We are in the business of developing, manufacturing and selling photoluminescent products (High Performance Photoluminescent Lighting, “HPPL”) used for emergency lighting, signs and markings, wayfinding systems and novelty products with applications in marine, commuter, rail, subway, building and toy markets.

Phosphorescent (also referred to as photoluminescent) materials emit light continuously when they are excited by ultraviolet or visible light. However, unlike fluorescent materials, when the excitation source is extinguished, phosphorescent materials continue to emit light. It is this light (called afterglow) that people refer to as "glow-in-the-dark". The afterglow decreases (or decays) over time after the excitation source has been extinguished.

Although many people associate the word "photoluminescence" with "glow-in-the-dark" toys and novelties, in the lighting industry, photoluminescent products such as marker tapes and signs are commonly used to delineate emergency escape routes and danger areas, and to mark equipment, pipes, tools and working and accident prevention clothing.

Photoluminescent signs and markers are used in a variety of situations, including office buildings, industrial sites, passenger ships, offshore drilling platforms, underground mines, and aircraft. The use of photoluminescent materials for life safety applications is recommended or mandated in numerous building codes, fire safety codes, and transportation standards.

Most photoluminescent products are composed of inorganic pigments that can be incorporated into paint, plastic films, enamels, and flexible and rigid molded plastics. Typical products include adhesive vinyl tapes, rigid polyvinyl chloride (PVC) marker strips, and silk-screened plastic signage. Photoluminescent enamel-coated sheet metal and ceramic products are also available.

The main pigment commonly used in photoluminescent glow-type products is a zinc sulphide compound emitting a yellowish-green light. This material performs well when subjected to high ambient lighting levels but the decay rate is rather rapid. Our current Lunaplast pigment material, Strontium Aluminate, has a performance level 20 times that of zinc-based products. In addition, the decay curve for strontium-based products is measured in hours as opposed to minutes for zinc-based items.

Strontium Aluminate is more expensive than zinc sulphide and takes slightly longer to charge, but can "store" more light, making it much more suitable for use in locations where ambient light levels are low. Strontium Aluminate also offers much brighter and longer-lasting photoluminescence.

Although Strontium Aluminate PL material is superior to products made with zinc sulphide, the process required to manufacture Strontium Aluminate PL is very complex and manufacturers were unable to cost effectively produce Strontium Aluminate PL products in commercial quantities.

Between January 1995 and October 1999, Douglas Sinclair, formerly the chief executive officer of our Canadian subsidiary, developed the proprietary technology, formulas and processes needed to commercially manufacture Strontium Aluminate PL products on a cost-effective basis. The resulting product, referred to by our company as Lunaplast, is up to 20 times brighter than commercial zinc sulphide products, and is clearly visible after many hours of total darkness. During this same period of time, Mr. Sinclair and Kimberly Landry, an officer and director of our company, developed an advanced Strontium Aluminate HPPL material which is four times brighter than our Lunaplast product. Mr. Sinclair and Ms. Landry filed a patent application pertaining to this invention with the U.S. Patent and Trademark Office in November 1997. For a nominal consideration Mr. Sinclair and Ms. Landry assigned the rights in November 1997 to the patent application and related technology to Luna Technologies Inc. ("LTI"), a corporation formed by Ms. Landry in December 1994.

In April 1999, we acquired from LTI the rights to the patent application and related technology assigned to LTI by Mr. Sinclair and Ms. Landry. In consideration for this assignment, we agreed to pay LTI $90,000, without interest, on or before June 30, 2000. Subsequent to June 30, 2000, we paid this debt in full. As of March 30, 2004, the patent application had been placed in abeyance.

In November 1999, we acquired from Mr. Sinclair the proprietary technology required to manufacture Lunaplast into PVC sheets, vinyl rolls and paints as well as the trademark rights to these products. In consideration for the assignment of this technology and the trademarks, we paid Mr. Sinclair $60,000.

During 2000 we developed the processes required to manufacturer Strontium Aluminate PL products using vacuum forming, extrusion, and injection molding techniques.

Lunaplast is available in flexible vinyl and rigid PVC sheets. In addition, a wide range of polymer compounds for extrusions and injection molding was added during the year. The substantial increase in performance opens up a completely new range of opportunities in life safety. Direct replacement of electrical exit signs (Underwriters Laboratories UL 924) is expected to be a market for photoluminescent materials in the near future.

We began producing Lunaplast on a commercial basis during fiscal 2000.

Results of Operations

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
Sales: Sales of $262,870 during the three months ended September 30, 2006 increased $73,527 or 39% over the same period ended September 30, 2005. The increase in sales is due to a new reseller agreement with Firecom, Inc. (“Firecom”) which resulted in sales of $124,372 during the quarter, which represents 47% of total sales for the period.

Cost of Sales: Cost of sales of $188,230 during the three months ended September 30, 2006 increased $101,081 over the same period ended September 30, 2005. As a result, gross profit as a percentage of sales was 28% during the three months ended September 30, 2006 as compared to 54% over the same period ended September 30, 2005. Both the increase in overall costs and the decrease in gross profit as a percentage of sales result primarily from new product sales and pricing structure changes. The new products being distributed were not previously manufactured by the Company, and expected costs increased due to production inefficiencies that should decrease over time. The decrease in gross margin was also affected by a one-time write down of shipping surcharges.

Operating Expenses: General and administrative expenses of $4,027,348 during the three months ended September 30, 2006 increased $3,795,333 over the same period ended September 30, 2005. Significant changes in operating expenses are outlined as follows:

During the three months ended September 30, 2006 the Company issued stock-based consulting fees with a value of $873,500, stock-based management fees with a value of $2,482,500, and stock-based wages and benefits with a value of $10,800. No stock-based compensation was recorded in the three months ended September 30, 2005.
Interest increased to $272,547 in the three months ended September 30, 2006 from $658 in the three months ended September 30, 2005, due primarily interest charged on the beneficial conversion feature of the convertible debt and accrued interest on the convertible debt.
Office and general expenses increased to $110,756 in the three months ended September 30, 2006 from $64,362 in the three months ended September 30, 2005, due primarily to significant increases in travel related costs from a more active sales presence on the east coast of North America.
Wages and benefits increased to $142,995 in the three months ended September 30, 2006 from $31,625 in the three months ended September 30, 2005, due primarily to an increase in payroll costs for sales and management, and the commission cost associated with sales during the period.

Net Loss: The Company experienced a $3,952,708 net loss from operations for the three months ended September 30, 2006 which is $3,822,887 greater than the three months ended September 30, 2005. The increase in net loss from operations results primarily from stock-based compensation, interest charged on the beneficial conversion feature of the convertible debt, and increases in operating expenses described above.

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
Sales: Sales of $879,655 during the nine months ended September 30, 2006 increased $351,838 or 67% over the same period ended September 30, 2005. The significant increase in sales is due to the Firecom agreement which commenced during the period and resulted in total sales of $567,244, which represents 64% of total sales.

Cost of Sales: Cost of sales of $665,363 during the nine months ended September 30, 2006 increased $392,151 over the same period ended September 30, 2005. As a result, gross profit as a percentage of sales was 24% during the nine months ended September 30, 2006 as compared to 48% over the same period ended September 30, 2005. Both the increase in overall costs and the decrease in gross profit as a percentage of sales result primarily from new product sales and pricing structure changes. The new products being distributed were not previously manufactured by the Company, and expected costs increased due to production inefficiencies that should decrease over time. The decrease in gross margin was also affected by a one-time write down of shipping surcharges.

Operating Expenses: General and administrative expenses of $7,423,031 during the nine months ended September 30, 2006 increased $6,786,466 over the same period ended September 30, 2005. Significant changes in operating expenses are outlined as follows:

During the nine months ended September 30, 2006 the Company issued stock-based consulting fees with a value of $2,259,500, stock-based management fees with a value of $2,632,500, and stock-based wages and benefits with a value of $71,700. Stock-based consulting fees with a value of $24,400 were recorded in the nine months ended September 30, 2005.
Consulting fees increased to $99,417 in the nine months ended September 30, 2006 from $33,644 in the nine months ended September 30, 2005, due primarily to a marketing services and financial consulting agreements that was not in place in the prior year, and a one-time fee associated with staff recruitment.
Interest increased to $600,190 in the nine months ended September 30, 2006 from $2,659 in the nine months ended September 30, 2005, due primarily to interest charged on the beneficial conversion feature of the convertible debt and accrued interest on the convertible debt.
Loss on settlement of debts increased to $614,113 in the nine months ended September 30, 2006 from nil in the nine months ended September 30, 2005, due to charges for the valuation of debt settlement agreements where the issue price was below market price at the time of the transactions.
Office and general expenses increased to $297,537 in the nine months ended September 30, 2006 from $160,004 in the nine months ended September 30, 2005, due primarily to significant increases in travel related costs from a more active sales presence on the east coast of North America.
Professional fees increased to $234,038 in the nine months ended September 30, 2006 from $85,531 in the nine months ended September 30, 2005 which results from assistance and services related to the increased number of filings, transactions and potential transactions during the current period.
Wages and benefits increased to $383,242 in the nine months ended September 30, 2006 from $149,897 in the nine months ended September 30, 2005, due primarily to an increase in payroll costs for sales and management, penalties on the late-filing of payroll deductions, and the commission cost associated with sales during the period.

Net Loss: The Company experienced a $7,208,739 net loss from operations for the nine months ended September 30, 2006 which is $6,826,779 greater than the nine months ended September 30, 2005. The increase in net loss from operations results primarily from stock-based compensation, the loss on settlement of debts, interest charges, and increases in operating expenses described above.

Liquidity and Capital Resources

During the nine months ended September 30, 2006, the Company's operations used $794,982 in cash. The Company satisfied its operational requirements during the period through the issuance of convertible debentures for a total of $600,000, proceeds from the issuance of common stock totaling $105,000, and advances converted to equity under debt settlement agreements totaling $137,500.

The Company anticipates its capital needs during the twelve month period ended September 30, 2007 to be approximately $1,200,000 for general and administrative expenses, including $100,000 for research and development.

The Company does not have any available credit, bank financing or other external sources of liquidity. Due to operating losses of the Company since inception, the Company's operations have not been a source of liquidity. As at September 30, 2006, the Company has a working capital deficiency of $273,518. The ability of the Company to continue as a going concern is dependent on the Company raising additional capital and becoming profitable.

Off-Balance Sheet Arrangements

We have never entered into any off-balance sheet financing arrangements and have not formed any special purpose entities.

Purchase of Significant Equipment

We do not anticipate that we will expend any significant amount on equipment for our present or future operations.

Going Concern

As we have not yet generated significant revenues, in the consolidated financial statements for the year ended December 31, 2005, our Independent Auditors included in their Report to Shareholders dated April 10, 2006 an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure.

The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company would be the fiscal year beginning January 1, 2008. The Company is currently evaluating the impact of SFAS No. 157 but does not expect that it will have a material impact on its financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” This Statement requires an employer to recognize the over funded or under funded status of a defined benefit post retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company does not expect that the implementation of SFAS No. 158 will have any material impact on its financial position and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The Company is currently evaluating the impact of adopting SAB No. 108 but does not expect that it will have a material effect on its financial statements.

Risk Factors

Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward-looking statements”. Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Such estimates, projections or other “forward-looking statements” involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward-looking statements”. In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.

Risks Associated With Our Business
The fact that we have not earned substantial revenues since our incorporation raises substantial doubt about our ability to continue as a going concern.

We have generated small revenues since our incorporation and we will continue to incur operating loss for the foreseeable future. We had limited cash as of September 30, 2006. We estimate our average monthly operating expenses to be approximately $115,000. As a result, we need to generate significant revenues from our operations or acquire financing. We cannot assure that we will be able to successfully exploit and develop our business. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors’ report on our financial statements for the year ended December 31, 2005.

We have generated limited revenues to date and may never achieve profitability.

Our revenues and operating results may fluctuate from quarter to quarter and from year to year due to a combination of factors, including, but not limited to, cost of production, volume of sales and variations in expenditures for personnel and marketing. For the fiscal year ended December 31, 2005, we had revenues of $673,821 and $262,870 in revenues for the three month period ended September 30, 2006. We may incur significant expenditures for research and development of new products or improvements to our existing products which could adversely affect our ability to generate a profit. We may be unable to achieve profitability on a quarterly or annual basis. If we do not achieve profitability, we will be forced to curtail our operations and go out of business. Consequently, investors may lose all of their investment.

We will need additional financing to develop our products and services and to meet our capital requirements which can cause dilution to existing shareholders.

We continually require additional funds to develop our products and are dependent upon sources such as:

future earnings;
the availability of funds from private sources, including, but not limited to, our shareholders, loans and additional private placements; and
the availability of funds from public sources including, but not limited to a public offering of our securities.

Market conditions for private and public offerings are subject to uncertainty and there can be no assurance when or whether a private and/or public offering will be successfully completed or that other funds will be made available to us. In view of our operating history, our ability to obtain additional funds is limited. Such financing may only be available, if at all, upon terms which may not be advantageous to us. Debt financing must be repaid regardless of whether or not we generate profits or cash flows from our business activities. Equity financing may result in dilution to existing stockholders and may involve securities that have rights, preferences, or privileges that are senior to our common stock. If we do not receive funding at lower prices, this will have a dilutive effect on the value of our securities issued at higher prices. Further, the sale, or potential sale of large amounts of our securities will, in all likelihood, have a depressive effect on the price of our securities which will affect the value of your investment.

We are open to exchange losses due to our operations being located in Canada.

The majority of our sales and cost of sales are made in U.S. currency while a significant amount of our general and administrative expenses are made in Canadian currency. We do not currently hedge our foreign currency exposure and accordingly we are at risk for foreign currency exchange fluctuations which could adversely affect the operating results of our business.

We rely on subcontractors for the manufacture of our Lunaplast product.

All aspects of our manufacturing process is subcontracted to various third parties which formulate, mix and produce Lunaplast to our specifications. Once the manufacturing process is complete, Lunaplast is sold to fabricators which use Lunaplast in a variety of end user products. We do not have any long-term agreements with any of the third parties involved in manufacturing Lunaplast. While management believes that alternative manufacturers are available, there is however no guarantee that alternative manufacturers could produce Lunaplast on short notice and without disrupting product delivery schedules.

We may experience infringement of our intellectual property rights and confidential information, which would undermine our technology platform.

Our success will depend, in large part, on our ability to obtain and protect patents and trade secrets and operate without infringing on the proprietary rights of others. We cannot give any assurance that the patent applications that have been or will be filed on products developed by us will be approved, that any issued patents will provide us with competitive advantages or will not be challenged by others, or that the patents of others will not have an adverse effect on us.

Our subcontractors involved in manufacturing Lunaplast have agreed to maintain the confidential nature of our proprietary manufacturing technology, however, there is no guarantee that we will be able to prevent any breaches. The failure to protect our proprietary manufacturing technology could have a material adverse effect on our business.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

As a result of losses since our inception, our independent registered public accounting firm in their report on our financial statements for the fiscal year ended December 31, 2005, raised substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is subject to our ability to generate a profit and/or raise additional capital. We do not have any available credit, bank financing or other external sources of liquidity. Due to our operating losses, our operations have not been a source of liquidity. At September 30, we had a working capital deficiency of $273,518. Our ability to continue as a going concern is dependent on our raising additional capital and on future profitable operations. Our continued net operating losses increases the difficulty in our ability to raise additional capital and there can be no assurances that the infusion of capital will prove successful.

If we are unable to retain the services of key personnel or if we are unable to successfully recruit qualified managerial and sales personnel having experience in business, we may not be able to continue our operations.

Our success depends to a significant extent upon the continued service of Ms. Kimberly Landry, our President, Chief Executive Officer and Secretary. The loss of the services of Ms. Landry could have a material adverse effect on our growth, revenues, and prospective business. We may not be able to retain our executive officers and key personnel or attract additional qualified management in the future. In addition, in order to successfully implement and manage our business plan, we will be dependent upon, among other things, successfully recruiting qualified managerial and sales personnel having experience in business. Competition for qualified individuals is intense. In addition, there can be no assurance that we will be able to find, attract and retain existing employees or that we will be able to find, attract and retain qualified personnel on acceptable terms.

We are subject to section 203 of the General Corporation Law of the state of Delaware which may inhibit a takeover at a premium price that may be beneficial to our stockholders.

We are subject to Section 203 of the Delaware General Corporation Law. Subject to limited exceptions, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder unless the proposed business combination was approved by our board of directors before the stockholder became an interested stockholder. In general, Section 203 defines an interested stockholder as any stockholder directly or indirectly owning 15% or more of the outstanding voting stock of a Delaware corporation. Section 203 could have the effect of discouraging others from making tender offers for our shares, and also may have the effect of preventing changes in our management.

Risks Relating To Our Current Financing Arrangement
There are a large number of shares underlying our secured convertible notes and warrants that may be available for future sale and the sale of these shares may depress the market price of our common stock.

As of November 17, 2006, we had 42,478,398 shares of common stock issued and outstanding, secured convertible notes outstanding that may be converted into an estimated 50,924,333 shares of common stock at current market prices and outstanding warrants to purchase 2,833,750 shares of common stock. In addition, the number of shares of common stock issuable upon conversion of the outstanding secured convertible notes may increase if the market price of our stock declines. All of the shares, including all of the shares issuable upon conversion of the secured convertible notes and upon exercise of our warrants, may be sold without restriction. The sale of these shares may adversely affect the market price of our common stock.

The continuously adjustable conversion price feature of our secured convertible notes could require us to issue a substantially greater number of shares, which will cause dilution to our existing stockholders.

Our obligation to issue shares upon conversion of our secured convertible notes is essentially limitless. The following is an example of the amount of shares of our common stock that are issuable, upon conversion of our outstanding secured convertible notes (excluding accrued interest), based on market prices 25%, 50% and 75% below the market price, as of November 17, 2006 of $0.03:

% Below Market	Price Per Share	Discount of 50%	Number of Shares Issuable
25%	$0.0225	$0.01125	67,900,000
50%	$0.0150	$0.00750	101,800,000
75%	$0.0075	$0.00375	203,700,000

As illustrated, the number of shares of common stock issuable upon conversion of our secured convertible notes will increase if the market price of our stock declines, which will cause dilution to our existing stockholders.

The continuously adjustable conversion price feature of our secured convertible notes may have a depressive effect on the price of our common stock.

The secured convertible notes are convertible into shares of our common stock at a 50% discount of the trading price of the common stock prior to the conversion. The significant downward pressure on the price of the common stock as the selling stockholders convert and sell material amounts of common stock could have an adverse effect on our stock price. In addition, not only the sale of shares issued upon conversion or exercise of secured convertible notes and warrants, but also the mere perception that these sales could occur, may adversely affect the market price of the common stock.

The issuance of shares upon conversion of the secured convertible notes and exercise of outstanding warrants may cause immediate and substantial dilution to our existing stockholders.

The issuance of shares upon conversion of the secured convertible notes and exercise of warrants may result in substantial dilution to the interests of other stockholders since the selling stockholders may ultimately convert and sell the full amount issuable on conversion. Although AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC may not convert their secured convertible notes and/or exercise their warrants if such conversion or exercise would cause them to own more than 4.99% of our outstanding common stock, this restriction does not prevent AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC from converting and/or exercising some of their holdings and then converting the rest of their holdings. In this way, AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC could sell more than this limit while never holding more than this limit. There is no upper limit on the number of shares that may be issued which will have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock, including investors in this offering.

If we are required for any reason to repay our outstanding secured convertible notes, we would be required to deplete our working capital, if available, or raise additional funds. Our failure to repay the secured convertible notes, if required, could result in legal action against us, which could require the sale of substantial assets.

In December 2005, we entered into a Securities Purchase Agreement for the sale of an aggregate of $1,000,000 principal amount of secured convertible notes. The secured convertible notes are due and payable, with 8% interest, three years from the date of issuance, unless sooner converted into shares of our common stock. In addition, any event of default such as our failure to repay the principal or interest when due, our failure to issue shares of common stock upon conversion by the holder, our failure to timely file a registration statement or have such registration statement declared effective, breach of any covenant, representation or warranty in the Securities Purchase Agreement or related convertible note, the assignment or appointment of a receiver to control a substantial part of our property or business, the filing of a money judgment, writ or similar process against our company in excess of $50,000, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against our company and the delisting of our common stock could require the early repayment of the secured convertible notes, including a default interest rate of 15% on the outstanding principal balance of the notes if the default is not cured with the specified grace period. We anticipate that the full amount of the secured convertible notes will be converted into shares of our common stock, in accordance with the terms of the secured convertible notes. If we were required to repay the secured convertible notes, we would be required to use our limited working capital and raise additional funds. If we were unable to repay the notes when required, the note holders could commence legal action against us and foreclose on all of our assets to recover the amounts due. Any such action would require us to curtail or cease operations.

If an event of default occurs under the securities purchase agreement, secured convertible notes, warrants, security agreement or intellectual property security agreement, the investors could take possession of all our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property.

In connection with the Securities Purchase Agreements we entered into in December 2005, we executed a Security Agreement and an Intellectual Property Security Agreement in favor of the investors granting them a first priority security interest in all of our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. The Security Agreements and Intellectual Property Security Agreements state that if an even of default occurs under the Securities Purchase Agreement, Secured Convertible Notes, Warrants, Security Agreements or Intellectual Property Security Agreements, the Investors have the right to take possession of the collateral, to operate our business using the collateral, and have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise to satisfy our obligations under these agreements.

Risks Associated with Our Common Stock
Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

Our common stock is quoted on the OTC Bulletin Board service of the National Association of Securities Dealers. Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with the company’s operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of the shares.

Sales of a substantial number of shares of our common stock into the public market by the selling stockholders may result in significant downward pressure on the price of our common stock and could affect the ability of our stockholders to realize any current trading price of our common stock.

Sales of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our common stock, when and if such market develops. When our registration statement was declared effective, the selling stockholders had the ability to sell up to 33% of the issued and outstanding shares of our common stock. As a result of such registration statement, a substantial number of our shares of common stock which have been issued may be available for immediate resale when and if a market develops for our common stock, which would have the effect of decreasing the price of our common stock. As a result of any such decreases in price of our common stock, purchasers who acquire shares from the selling stockholders may lose some or all of their investment.

Any significant downward pressure on the price of our common stock as the selling stockholders sell the shares of our common stock could encourage short sales by the selling stockholders or others. Any such short sales could place further downward pressure on the price of our common stock, which may result in the loss of some or all of an investment in our common stock.

Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and the NASD’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the NASD has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

Other Risks
Because some of our officers and directors are located in non-U.S. jurisdictions, you may have no effective recourse against the management for misconduct and may not be able to enforce judgement and civil liabilities against our officers, directors, experts and agents.

All of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Similar difficulties will exist for enforcements of judgments against our Canadian subsidiary that we utilize, or any effort to attach the assets of such subsidiary, to the extent that such assets are located outside of the United States.

Item 3. Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this quarterly report, being September 30, 2006, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s president and chief financial officer. Based upon that evaluation, our company’s president along with our company’s chief financial officer concluded that our company’s disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no changes in our company’s internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried our evaluation.

Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our president and chief financial officer as appropriate, to allow timely decisions regarding required disclosure.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the three months ended September 30, 2006 and up to the date of this report, the Company issued 4,000,000 unregistered shares of its common stock for pursuant to consulting services agreements, and 1,000,000 unregistered shares of its common stock pursuant to an agreement with the holders of the Company’s convertible notes.

Item 3. Defaults Upon Senior Securities.

The Company is currently under default in connection with the non interest bearing promissory note payable to Douglas Sinclair for outstanding management fees. Refer to Note 3 of our September 30, 2006 interim period unaudited consolidated financial statements, as included in this Report on Form 10-QSB, for details.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-B

(4)	Instruments Defining the Rights of Security Holders

4.1	2006 Stock Plan (incorporated by reference from our Registration Statement on Form S-8 filed on March 17, 2006).

4.2	Incentive Stock Plan (incorporated by reference from our Registration Statement on Form S-8 filed on October 19, 2005).

4.3	Non Qualified Stock Option Plan (incorporated by reference from our Registration Statement on Form S-8 filed on October 19, 2005).

4.4	Stock Bonus Plan (incorporated by reference from our Registration Statement on Form S-8 filed on October 19, 2005).

(10)	Material Contracts

10.1	Agreement relating to purchase of patent rights, dated March 31, 1999, by and among Luna Technologies International, Inc. and Luna Technologies Inc. (incorporated by reference from our Registration Statement on Form 10-SB, filed on March 17, 2000).

10.2	Assignment of patent rights, dated April 30, 1999, by and among Luna Technologies International, Inc. and Luna Technologies Inc. (incorporated by reference from our Registration Statement on Form 10-SB, filed on March 17, 2000).

10.3	Agreement relating to proprietary purchase of property technology and trademarks, dated October 15, 1999, by and among Luna Technologies International, Inc. and Douglas Sinclair (incorporated by reference from our Registration Statement on Form 10-SB, filed on March 17, 2000).

10.4	Assignment of trademarks, dated November 15, 1999, by and among Luna Technologies International, Inc. and Douglas Sinclair (incorporated by reference from our Registration Statement on Form 10-SB, filed on March 17, 2000).

10.5	Non-Compete Agreement, dated November 15, 1999, by and among Luna Technologies International, Inc. and Douglas Sinclair (incorporated by reference from our Registration Statement on Form 10-SB, filed on March 17, 2000).

10.6	Securities Purchase Agreement, dated December 16, 2005, by and among Luna Technologies International, Inc. and AJW Offshore Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC. (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.7	Callable Secured Convertible Note issued to AJW Offshore, Ltd. dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.8	Callable Secured Convertible Note issued to AJW Qualified Partners, LLC, dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.9	Callable Secured Convertible Note issued to AJW Partners, LLC, dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.10	Callable Secured Convertible Note issued to New Millennium Capital Partners II, LLC, dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.11	Stock Purchase Warrant issued to AJW Offshore, Ltd., dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.12	Stock Purchase Warrant issued to AJW Qualified Partners, LLC., dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.13	Stock Purchase Warrant issued to AJW Partners, LLC., dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.14	Stock Purchase Warrant issued to New Millennium Capital Partners II, LLC., dated December 16, 2005 (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.15	Registration Rights Agreement, dated as of December 16, 2005, by and among Luna Technologies International, Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.16	Intellectual Property Security Agreement, dated as of December 16, 2005, by and among Luna Technologies International, Inc., AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC (incorporated by reference from our Current Report on Form 8-K filed on December 22, 2005).

10.17	Consulting Agreement dated March 1, 2006, by and among Luna Technologies International, Inc. and Leslie James Porter (incorporated by reference from our Current Report on Form 8-K filed on March 22, 2006).

10.18	Restricted Share Grant Agreement dated March 16, 2006, by and among Luna Technologies International, Inc. and Robert Humber (incorporated by reference from our Current Report on Form 8-K filed on March 22, 2006).

10.19	Amendment to Securities Purchase Agreement dated April 7, 2006, by and among Luna Technologies International, Inc. and AJW Offshore Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC. (incorporated by reference from our Current Report on Form 8-K filed on April 13, 2006).

10.20	Consulting Agreement with Kimberly Landry dated July 1, 2006 (incorporated by reference from our Current Report on Form 8-K filed on July 17, 2006).

10.21	Consulting Agreement with Leslie James Porter dated July 1, 2006 (incorporated by reference from our Current Report on Form 8-K filed on July 17, 2006).

10.22	Consulting Agreement with Antonio Treminio dated July 1, 2006 incorporated by reference from our Registration Statement on Form S-8 filed on July 20, 2006).

10.23	Consulting Agreement with Michael Harrison dated July 1, 2006 incorporated by reference from our Registration Statement on Form S-8 filed on July 20, 2006).

10.24	Consulting Agreement with Seth Shaw dated July 1, 2006 incorporated by reference from our Registration Statement on Form S-8 filed on July 20, 2006).

10.25	Consulting Agreement with Walter Doyle dated July 1, 2006 incorporated by reference from our Registration Statement on Form S-8 filed on July 20, 2006).

10.26	Letter Agreement dated September 20, 2006 among Luna Technologies International, Inc. and AJW Offshore Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC. (Filed herewith)

(21)	Subsidiaries

	Luna Technologies (Canada) Ltd., a British Columbia corporation incorporated on June 9, 1999.

(31)	Section 302 Certifications

31.1	Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, promulgated pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).

31.2	Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, promulgated pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).

(32)	Section 906 Certifications

32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2	Certificate of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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.

	LUNA TECHNOLOGIES INTERNATIONAL, INC.


Date: November 20, 2006	By:	/s/ Kimberly Landry
		Kimberly Landry
		Chief Executive Officer


		/s/ L. James Porter
		L. James Porter
		Chief Financial Officer

Luna Technologies International (LTII) Inactive 10QSB2006 Q3 Quarterly report (small business)