SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


(Mark One)

   [X]   Quarterly report under Section 13 or 15(d) of the Securities Exchange

            Act of 1934 for the quarterly period ended September 30, 2004

   [ ]   Transition report under Section 13 or 15(d) of the Exchange Act
         for the transition period from __________ to __________.


                        Commission File Number: 000-31451
                        ---------------------------------

                           CALIFORNIA CLEAN AIR, INC.
                           --------------------------
        (Exact name of small business issuer as specified in its charter)



             NEVADA                                              75-3090496
             ------                                              ----------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)



           3790 VIA DE LA VALLE, SUITE 103, DEL MAR, CALIFORNIA 92014
          ------------------------------------------------------------
               (Address of principal executive office) (Zip Code)

                                 (760) 494-6497
                                ----------------
                           (Issuer's telephone number)




  Check  whether  the  issuer:  (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                          Yes    XX                  No
                              --------                  --------

As of  September  30,  2004,  the number of  outstanding  shares of the issuer's
common stock, $0.001 par value, was 3,479,620 shares.


          TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: Yes [ ] No [x]




<PAGE>
                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS ................................................ 3

         Consolidated Unaudited Balance Sheet as of September 30, 2004
                  and Audited Balance Sheet as of December 31, 2003........... 3

         Consolidated Unaudited Statements of Operations for the
                  Quarters ended September 30, 2004 and September 30, 2003
                  and for the First Nine Months of 2004 and 2003.............. 5

         Consolidated Unaudited Statements of Cash Flows for the
                  First Nine Months of 2004 and 2003.......................... 6

         Notes to Consolidated Financial Statements........................... 7


ITEM 2.  MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS ...............................................13

         Business Organization and Description ...............................13

         Results of Operations for the Quarter Ended September 30, 2004
                  and the First Nine Months of 2004 Compared to the Quarter
                  Ended September 30, 2003 and the First Nine Months of 2003..14


ITEM 3.  CONTROLS AND PROCEDURES..............................................16


                           PART II - OTHER INFORMATION


ITEM 6.  EXHIBITS ............................................................17

SIGNATURES....................................................................17





















                                        2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                           CALIFORNIA CLEAN AIR, INC.
                          CONSOLIDATED BALANCE SHEETS


                                                 AS OF               AS OF
                                            SEPTEMBER 30,2004   DECEMBER 31,2003
                                              (Unaudited)          (Audited)
                                            -----------------   ----------------
                                     ASSETS
                                     ------
CURRENT ASSETS
   Cash                                        $      90,175      $       3,285
   Prepaid expenses                                    2,890              1,417
                                            -----------------   ----------------
     TOTAL CURRENT ASSETS                             93,065              4,702


NET PROPERTY & EQUIPMENT                              81,116             96,296

OTHER ASSETS

   Deposits                                            6,798              6,649
                                            -----------------   ----------------
     TOTAL OTHER ASSETS                                6,798              6,649
                                            -----------------   ----------------
                  TOTAL ASSETS                 $     180,979      $     107,647
                                            =================   ================

        The accompanying notes are an integral part of these statements.


























                                        3
<PAGE>

                                              AS OF                  AS OF
                                        SEPTEMBER 30,2004       DECEMBER 31,2003
                                           (Unaudited)             (Audited)
                                        -----------------       ----------------

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

CURRENT LIABILITIES
   Accounts payable                        $      20,736          $      39,903
   Accrued payroll and payroll
         related liabilities                      74,567                 25,860
   Accrued state minimum franchise taxes           2,400                    800
   Capitalized lease obligation
      - current portion                            6,133                  5,471
   Note payable to related party                 123,157                      0
                                        -----------------       ----------------
     TOTAL CURRENT LIABILITIES                   226,993                 72,034
                                        -----------------       ----------------

LONG-TERM LIABILITIES
     Capitalized lease obligation                 26,923                 31,610
     Notes payable to related party                    0                265,134
                                        -----------------       ----------------
     TOTAL LONG-TERM LIABILITIES                  26,923                296,744
                                        -----------------       ----------------
TOTAL LIABILITIES                                253,916                368,778



STOCKHOLDERS' EQUITY (DEFICIT)
   Preferred stock ($0.001 par value),
   20,000,000 shares authorized;
   4,000,000 shares issued & outstanding           4,000                  4,000
   as of September 30, 2004

   Common stock ($0.001 par value),
   100,000,000 shares authorized;
   1,000,000 and 3,479,620 shares
   issued & outstanding as of
   December 31, 2003 and
   September 30, 2004, respectively                3,480                  1,000
   Additional Paid-In Capital                  2,477,140                      0

   Retained earnings (deficit)                (2,557,557)              (266,131)
                                        -----------------       ----------------
   TOTAL STOCKHOLDERS' EQUITY (DEFICIT)          (72,937)              (261,131)
                                        -----------------       ----------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY (DEFICIT)             $     180,979          $     107,647
                                        =================       ================

        The accompanying notes are an integral part of these statements.





                                        4
<PAGE>
                           CALIFORNIA CLEAN AIR, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                  THREE MONTHS               NINE MONTHS
                              ENDING SEPTEMBER 30        ENDING SEPTEMBER 30
                                  (Unaudited)                (Unaudited)
                          --------------------------  -------------------------
                            2004              2003      2004             2003
                          --------          --------  --------         --------

SALES REVENUES            $     51,773   $     3,334  $   155,790   $     3,334
                          ------------   -----------  -----------   -----------
Total Revenues                  51,773         3,334      155,790         3,334
                          ------------   -----------  -----------   -----------
COST OF REVENUES                27,036         6,054       77,868         6,054
                          ------------   -----------  -----------   -----------
GROSS PROFIT                    24,737        (2,720)      77,922        (2,720)
                          ------------   -----------  -----------   -----------
OPERATING COSTS
  Operating expenses         2,152,530        82,747    2,357,235       125,279
  Depreciation expense           5,060             0       15,180             0
                          ------------   -----------  -----------   -----------
Total Operating Costs        2,157,590        82,747    2,372,415       125,279
                          ------------   -----------  -----------   -----------

OPERATING INCOME (LOSS)     (2,132,853)      (85,467)  (2,294,493)     (127,999)

OTHER INCOME (LOSS)                  0             0        4,667             0
                          ------------   -----------  -----------   -----------
INCOME (LOSS) BEFORE
   INCOME TAXES           $ (2,132,853)  $   (85,467) $(2,289,826)  $  (127,999)
                          ------------   -----------  -----------   -----------

INCOME TAX PROVISION                 0             0        1,600            10
                          ------------   -----------  -----------   -----------

NET INCOME (LOSS)         $ (2,132,853)  $   (85,467) $(2,291,426)  $  (128,009)
                          ------------   -----------  -----------   -----------
BASIC EARNINGS
  (LOSS) PER SHARE        $      (1.43)  $    (0.085) $     (1.97)  $    (0.128)
                          ------------   -----------  -----------   -----------

WEIGHTED AVERAGE NO. OF
COMMON SHARES OUTSTANDING    1,490,202     1,000,000    1,164,593     1,000,000
                          ------------   -----------  -----------   -----------

DILUTED EARNINGS
 (LOSS) PER SHARE         $      (0.39)               $     (0.44)
                          ------------                -----------
DILUTED COMMON
  SHARES OUTSTANDING         5,490,202                  5,164,593
                          ------------                -----------

        The accompanying notes are an integral part of these statements.





                                        5
<PAGE>
                           CALIFORNIA CLEAN AIR, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       NINE MONTHS ENDING
                                                     2004              2003
                                                 (Unaudited)       (Unaudited)
                                                -------------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES

   NET INCOME (LOSS)                            $ (2,291,426)    $    (126,907)
   DEPRECIATION EXPENSE                               15,180               500
   (INCREASE) DECREASE IN PREPAID EXPENSES            (1,473)
   (INCREASE) DECREASE IN DEPOSITS                      (149)             (566)
   INCREASE (DECREASE) IN ACCOUNTS PAYABLE           (19,167)           15,353
   NON-CASH COMPENSATION EXPENSE                   2,055,000
   INCREASE (DECREASE) IN ACCRUED PAYROLL
         AND PAYROLL RELATED LIABILITIES              48,708             6,000
   INCREASE (DECREASE) IN ACCRUED STATE
         MINIMUM FRANCHISE TAXES                       1,600                10
                                                -------------     -------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES                                (191,728)         (105,610)


CASH FLOWS FROM INVESTING ACTIVITIES

   NET SALE (PURCHASE) OF PROPERTY & EQUIPMENT             0           (60,000)
                                                -------------     -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES        0           (60,000)


CASH FLOWS FROM FINANCING ACTIVITIES

  NOTE PAYABLE EXCHANGED FOR COMMON STOCK            293,800
  CHANGE IN CAPITALIZED LEASE OBLIGATIONS             (4,025)
  CHANGE IN NOTES PAYABLE TO RELATED PARTY          (141,977)          166,602
  PROCEEDS FROM STOCK ISSUANCES                      130,820
                                                -------------     -------------
NET CASH PROVIDED BY (USED IN)
 FINANCING ACTIVITIES                                278,618           166,602
                                                -------------     -------------


    NET INCREASE (DECREASE) IN CASH                   86,890               992
    CASH AT BEGINNING OF PERIOD                        3,285                 0
                                                -------------     -------------
      CASH AT END OF PERIOD                     $     90,175      $        992
                                                =============     =============

    SUPPLEMENTAL CASH FLOW DISCLOSURES:

    CASH PAID DURING YEAR FOR INTEREST          $      4,067      $          0
    CASH PAID DURING YEAR FOR TAXES             $        614      $          0

         The accompanying notes are an integral part of these statements.




                                        6
<PAGE>
                           CALIFORNIA CLEAN AIR, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

NOTE 1.  ORGANIZATION AND DESCRIPTION OF BUSINESS

GENERAL
-------
California Clean Air, Inc. (the "Company") is incorporated under the laws of the
State of Nevada.  On November 21, 2002,  the Company  organized  Smog Centers of
California,  LLC ("Smog  Centers"),  an Oregon limited liability  company.  Smog
Centers was organized to acquire,  own and operate test-only  vehicles emissions
inspection  facilities  in the State of  California  under  their  Smog Check II
program.  The Company is the sole member of Smog  Centers.  On August 21,  2003,
Smog Centers began operating a test-only vehicle emissions  inspection facility.
Smog Centers  currently  operates two  test-only  vehicle  emissions  inspection
facilities.


NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.       ACCOUNTING METHOD
         -----------------
The Company  utilizes the accrual  method of  accounting  to prepare and present
financial statements,  which conform to generally accepted accounting principles
(GAAP). The Company has elected a December 31 year-end.

b.       BASIS OF CONSOLIDATION
         ----------------------
Smog Centers is a wholly-owned  subsidiary of the Company.  The Company owns all
assets and liabilities of the consolidated financial statements.

c.       CASH EQUIVALENTS
         ----------------
The  Company  considers  pending  credit  card  sales  transactions  to be  cash
equivalents.

d.       PROPERTY AND EQUIPMENT
         ----------------------
Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Maintenance  and repairs,  as well as renewals for minor  amounts are charged to
expenses.  Renewals and betterments of substantial amounts are capitalized,  and
any replaced or disposed units are written off.

e.       PRE-PAID ASSETS
         ---------------
Prepaid  assets  are  comprised  of  smog  testing  equipment   warranty,   smog
certificates  and  certain  fees.  Equipment  warranty  is  expensed  using  the
straight-line  method  over the  remaining  warranty  term.  Equipment  warranty
expense was $849 for the quarter ending September 30, 2004, compared to $850 for
the quarter ending  September 30, 2003. Smog  certificates are reflected at cost
for the number of certificates on hand as of September 30, 2004.







                                        7
<PAGE>
f.       ADVERTISING
         -----------
The Company  expenses the cost of  advertising  as it is  incurred.  Advertising
expense was $21,856 for the quarter  ending  September 30, 2004,  and $4,077 for
the quarter ending September 30, 2003.

g.       ESTIMATES
         ---------
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates. In accordance with FASB 16 all
adjustments are normal and recurring.

h.       REVENUE RECOGNITION AND DEFERRED REVENUE
         ----------------------------------------
Smog Centers generates revenue through vehicle test-only emissions facilities in
the State of California  under the Smog Check II program.  Revenue is recognized
when a sale is made.

i.       EARNINGS PER SHARE
         ------------------
In February  1997,  the FASB issued SFAS No. 128,  "Earnings  Per Share",  which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities  with  publicly  held common  stock.  SFAS No. 128
supersedes the provisions of APB No. 15, and requires the  presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective June 2, 2000 (inception).

Basic  net loss per  share is based on the  weighted  average  number  of common
shares  outstanding.  Diluted net loss per share reflects the potential dilution
that could occur if preferred stock were converted into common stock. There were
no adjustments to net loss in the calculation of both basic and diluted net loss
per share for all periods presented.

j.       INCOME TAXES
         ------------
The Company  accounts  for income  taxes using the asset and  liability  method.
Under the asset and liability  method,  deferred income taxes are recognized for
the tax consequences of "temporary  differences" by applying  enacted  statutory
tax rates  applicable  to future  years to  differences  between  the  financial
statement carrying amounts and the tax bases of existing assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management,  it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

k.       REPORTING CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
         --------------------------------------------------
The Company reports and displays  consolidated  comprehensive  income (loss) and
its  components  in  the   consolidated   financial   statements.   Consolidated
comprehensive  income (loss)  includes all changes in equity during the reported
period that result from recognized  transactions and other economic events other
than transactions with owners.




                                        8
<PAGE>
l.       SEGMENT REPORTING
         -----------------
The Company reports information about operating segments and related disclosures
about  services and  geographic  areas using  Statement of Financial  Accounting
Standards No. 131,  "Disclosures  About  Segments of An  Enterprise  and Related
Information".  The Company  views its  operations  and  manages its  business in
principally one segment,  test-only vehicles emissions inspection  facilities in
the State of California.

m.       PRINCIPLES OF CONSOLIDATION
         ---------------------------
The consolidated  financial  statements include the accounts of the Company (the
parent) and Smog Centers (the  subsidiary).  The  subsidiary  is a  wholly-owned
subsidiary.  All significant  inter-company  balances and transactions have been
eliminated in consolidation.

NEW ACCOUNTING PRONOUNCEMENTS:

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145,
Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No.
13, and  Technical  Corrections  ("SFAS  145").  Among  other  things,  SFAS 145
eliminates the  requirement  that gains and losses from the  extinguishments  of
debt be  classified  as  extraordinary  items.  SFAS 145 is effective for fiscal
years beginning after May 15, 2002, with early adoption  permitted.  The Company
does not expect the adoption of this  standard to have a  significant  impact on
its financial statements.

In June 2002, the Financial  Accounting Standards Board issued SFAS No. 146. The
standard requires  companies to recognize costs associated with exit or disposal
activities  when they are incurred rather than at the date of a commitment to an
exit or disposal plan.  The adoption of SFAS 146 did not have a material  effect
on the Company's consolidated financial statements.

In October 2002, the Financial  Accounting  Standards Board issued SFAS No. 147,
"Acquisitions  of  Certain  Financial   Institutions  -  an  amendment  of  FASB
Statements  No. 72 and 144 and FASB  interpretation  No.  9".  SFAS 147  removes
acquisitions of financial  institutions  from the scope of both Statement 72 and
interpretation  9 and  requires  that those  transactions  be  accounted  for in
accordance  with FASB  Statements No. 141,  Business  Combinations,  and No. 142
Goodwill and Other  Intangible  Assets.  Thus, the requirement in paragraph 5 of
Statement 72 to recognize  (and  subsequently  amortize)  any excess of the fair
value of  liabilities  assumed over the fair value of tangible and  identifiable
intangible  assets  acquired  as an  unidentifiable  intangible  asset no longer
applies to acquisitions  within the scope of this Statement.  In addition,  this
Statement  amends FASB  Statement  No. 144,  Accounting  for the  Impairment  or
Disposal   of   Long-Lived   Assets,   to   include   in  its  scope   long-term
customer-relationship  intangible  assets  of  financial  institutions  such  as
depositor  and borrower  relationship  intangible  assets and credit  cardholder
intangible assets. Consequently, those intangible assets are subject to the same
undiscounted cash flow  recoverability  test and impairment loss recognition and
measurement  provisions that Statement 144 requires for other long-lived  assets
that are held and used.  SFAS 147 is effective  October 1, 2002. The adoption of
SFAS 147 did not have a material effect on the Companies  consolidated financial
statements.





                                        9
<PAGE>
In December 2002, the Financial  Accounting Standards Board issued SFAS No. 148,
"Accounting  for  Stock-Based  Compensation - Transition and  Disclosure"  (SFAS
148). SFAS 148 amends SFAS No. 123  "Accounting  for  Stock-Based  Compensation"
(SFAS 123), to provide  alternative methods of transition for a voluntary change
to  the  fair  value  based  method  of  accounting  for  stock-based   employee
compensation.  In addition,  SFAS 148 amends the disclosure requirements of SFAS
123 to  require  prominent  disclosures  in both  annual and  interim  financial
statements about the method of accounting for stock-based employee  compensation
and the effect of the method used on reported results. SFAS 148 is effective for
fiscal  years  beginning  after  December  15,  2002.  The  interim   disclosure
provisions are effective for financial reports containing  financial  statements
for interim periods  beginning after December 15, 2002. The Company is currently
evaluating  the effect that the adoption of SFAS 148 will have on its results of
operations and financial condition.


NOTE 3. PROPERTY & EQUIPMENT

Property  and  equipment  is  stated  at  cost  less  accumulated  depreciation.
Additions,  renovations,  and  improvements  are  capitalized.  Maintenance  and
repairs  which do not extend asset lives are expensed as incurred.  Depreciation
is provided on a straight-line basis over 5 years.  Depreciation expense for the
quarter ending  September 30, 2004 was $5,060,  compared to $566 for the quarter
ending September 30, 2003.
                                                   September 30, 2004
                                                   -------------
         Office Equipment                          $       8,060
         Smog Testing Equipment                           76,700
         Tools                                             1,416
                                                   -------------
                                                   $      86,176
         Less Accumulated Depreciation                    (5,060)
                                                   -------------
         Net Property and Equipment                $      81,116
                                                   =============

NOTE 4.  CAPITALIZED LEASE OBLIGATION

Smog  Centers  entered into a  non-cancelable  lease for the purchase of vehicle
emissions  testing equipment at its Escondido,  California  facility in October,
2003.  Under the terms of the lease,  Smog  Centers is obligated to pay $899 per
month  through  November,   2008.  The  lease  obligation  has  been  personally
guaranteed by the Company's President, Stephen D. Wilson. Lease payments for the
quarter  ending  September 30, 2004 totaled  $2,697,  compared to $0 the quarter
ending  September 30, 2003.  Interest  expense on the lease  obligation  for the
quarter  ending  September  30, 2004 was $1,304,  compared to $0 for the quarter
ending September 30, 2003.












                                       10
<PAGE>
Aggregate  minimum  future  lease  payments  under the  capitalized  lease as of
September 30, 2004 are:

                 2004                                     $           2,697
                 2005                                                10,788
                 2006                                                10,788
                 2007                                                10,788
                 2008                                                 9,889
                                                          -----------------

           Total minimum lease payments                   $          44,950
           Less amount representing interest                         11,006
                                                          -----------------

           Present value of minimum lease payments        $          33,944
                                                          =================

NOTE 5. OPERATING LEASE COMMITMENTS

Smog Centers  entered  into a  non-cancelable  assignment  of lease for the smog
station  premises  in Lemon  Grove,  California  which  requires  monthly  lease
payments  of  $1,500  through  July  1,  2006.   Smog  Centers  entered  into  a
non-cancelable  lease for the smog station  premises in  Escondido,  California,
which requires monthly payments of $1,500 through November 15, 2006; $1,700 from
November 15, 2006 through  November 14, 2007;  and $1,800 from November 15, 2007
through  November  14,  2008.  Smog Centers has options to extend the leases for
both locations for an additional five (5) years.  Aggregate minimum future lease
payments for the smog stations as of September 30, 2004, are:

                 2004                                     $          9,000
                 2005                                               36,000
                 2006                                               27,200
                 2007                                               20,500
                 2008                                               19,800
                                                          ----------------
           Total minimum lease payments                   $        112,500
                                                          ================

Lease  expense for the smog stations for the quarter  ending  September 30, 2004
was $9,000 compared to $4,500 for the quarter ending September 30, 2003.

NOTE 6.  TRANSACTIONS WITH RELATED PARTIES

Note Payable to Related  Party totaled  $123,157 as of September  30, 2004.  The
Note Payable is owed to our President, Stephen D. Wilson, who has advanced funds
for  administrative  and operating  expenses.  The Note Payable is  non-interest
bearing  and is due on demand.  Mr.  Wilson  has agreed not to demand  repayment
until  July 1,  2005,  and only  from  revenue  derived  from  operations.  This
obligation  has  been  reclassified  as a  current  liability  in the  Company's
financial  statements.  During the third quarter ending  September 30, 2004, the
Note  Payable  to  Daniel  Smith,   the  husband  of  one  of  the   controlling
shareholders,  was  extinguished  by the  issuance  of 293,800  shares of common
stock.






                                       11
<PAGE>
NOTE 7. BASIC & DILUTED INCOME (LOSS) PER COMMON SHARE

Basic earnings (loss) per common share has been calculated based on the weighted
average number of shares of common stock outstanding during the period.  Diluted
earnings  (loss)  per common  share has been  calculated  based on the  weighted
average number of shares of common and preferred  stock  outstanding  during the
period.  The variance between basic and diluted weighted average is the addition
of preferred stock in the calculation of diluted weighted average per share.

                                          FOR THE 9 MONTHS       FOR THE YEAR
                                               ENDED                ENDED
                                           SEPT 30, 2004         DEC 31, 2003
                                            (Unaudited)           (Audited)
                                        -------------------- -------------------
NET INCOME (LOSS)                       $        (2,291,426) $         (211,600)
BASIC EARNINGS (LOSS) PER SHARE         $             (1.97) $            (0.08)
                                        ==================== ===================
WEIGHED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                1,164,593           2,621,918
                                        ==================== ===================

DILUTED EARNINGS (LOSS) PER SHARE       $             (0.44) $            (0.03)
                                        ==================== ===================
WEIGHED AVERAGE NUMBER OF DILUTED
COMMON SHARES OUTSTANDING                         5,164,593           7,378,082
                                        ==================== ===================

NOTE 8.  INCOME TAXES

Deferred income taxes consist of the following:

                                                    AS OF           AS OF
                                                SEPTEMBER 30,    DECEMBER 31,
                                                     2004            2003
                                                 (Unaudited)      (Audited)
                                                --------------   ------------
    Deferred tax asset:
    Net operating loss carryover                $  (2,557,557)   $  (266,131)
                                                --------------   ------------
                                                    2,557,557        266,131
    Valuation allowance                            (2,557,557)      (266,131)
                                                --------------   ------------
    Net deferred income taxes                               0              0
                                                ==============   ============















                                       12
<PAGE>
NOTE 9.  STOCKHOLDERS' EQUITY

The following table summarizes the Company's common and preferred stock activity
during the nine months ended September 30, 2004:

<TABLE>
<CAPTION>
                                 Common Stock                 Series A Preferred Stock
                        (100,000,000 shares authorized)    (20,000,000 shares authorized)
                            Issued and Outstanding            Issued and Outstanding

<S>                             <C>                                 <C>
Balance at
December 31, 2003               1,000,000                           4,000,000

Stock Issued                    2,479,620                                   0

Balance At
December 31, 2004               3,479,620                           4,000,000
</TABLE>

Each share of common stock is entitled to one vote on all matters to be voted on
by the  stockholders.  Each share of Series A preferred stock is entitled to ten
votes on all  matters  to be voted on by the  stockholders.  Series A  Preferred
Stock is  convertible  into common stock on a  one-for-one  basis.  There are no
cumulative voting rights.

NOTE 10.  ISSUANCE OF SHARES FOR SERVICES - STOCK OPTIONS

The Company has a  non-qualified  stock  option  plan,  which  provides  for the
granting of options to key employees, consultants, and non-employee directors of
the Company.  These  issuances shall be accounted for based on the fair value of
the consideration  received or the fair value of the equity instruments  issued,
whichever is more readily  determinable.  The Company has elected to account for
the stock  option plan in  accordance  with  paragraph  30 of SFAS 123 where the
compensation  to employees  should be recognized over the period(s) in which the
related employee services are rendered.  In accordance with paragraph 19 of SFAS
123  the  fair  value  of  a  stock  option   granted  is  estimated   using  an
option-pricing  model.  As of  September  30,  2004 there were no stock  options
issued or outstanding.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

         BUSINESS ORGANIZATION & DESCRIPTION

We are in the  business  of owning and  operating  test-only  vehicle  emissions
inspection facilities in California. As a result of the federal Clean Air Act of
1990, California adopted the Smog Check II program, which was designed to reduce
vehicle emissions  pollution  through the establishment of emissions  inspection
facilities  and  mandating  periodic  emissions  testing by all vehicle  owners.
Test-only  vehicle  emissions  inspection  facilities  are  privately-owned  and
operated  stations  authorized to conduct vehicle  emissions testing and are not
permitted  to make  any  vehicle  repairs.  We  currently  have  two  inspection
facilities,  which  are  located  in  Lemon  Grove,  California  and  Escondido,
California.  The stations are owned and operated by our wholly owned subsidiary,
Smog Centers of California, LLC.


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<PAGE>
Our principal executive and administrative  offices and those of Smog Centers of
California,  LLC are  located  at 3790  Via de la  Valle,  Suite  103,  Del Mar,
California 92014.

         RESULTS OF  OPERATIONS  FOR THE THIRD  QUARTER AND FIRST NINE MONTHS OF
2004 AS COMPARED TO THE THIRD QUARTER AND FIRST NINE MONTHS OF 2003:

Sales Revenues: For the third quarter of 2004, the Company had sales revenues of
$51,773, compared to $3,334 in sales revenues for the third quarter of 2003. For
the first nine  months of 2004,  the Company  had sales  revenues  of  $155,790,
compared  to $3,334 in sales  revenues  for the first nine  months of 2003.  The
Company  attributes the  comparative  increases in revenues to the operations of
its two smog test-only  stations.  The Company's Lemon Grove facility  commenced
operations  in the last month of the third  quarter of 2003,  and the  Company's
Escondido facility commenced operations in the fourth quarter of 2003.

Cost of Revenues:  Cost of revenues is comprised  of smog  technician  expenses,
Vehicle Information Database  transmission fees, and smog certificates.  Cost of
revenues for the third quarter of 2004 totaled  $27,036 (52% of sales  revenue),
compared to $6,054 for the third quarter of 2003. Cost of revenues for the first
nine months of 2004 totaled $77,868 (50% of sales  revenue),  compared to $6,054
for the first nine  months of 2003.  The cost of revenues  increased  due to the
operations of the Company's two smog  test-only  stations.  The Company's  Lemon
Grove  facility  commenced  operations in the last month of the third quarter of
2003, and the Company's  Escondido facility  commenced  operations in the fourth
quarter of 2003.

Gross Profit: Gross profit is comprised of sales revenues less cost of revenues.
Gross  profit  for the  third  quarter  of 2004  totaled  $24,737  (48% of sales
revenue),  compared  to a gross  loss of $2,720  for the third  quarter of 2003.
Gross  profit for the first nine months of 2004  totaled  $77,922  (50% of sales
revenue),  compared  to a net loss of $2,720 for the first nine  months of 2003.
The  comparative  increases in gross profit are due to the fact that the Company
opened its two smog test-only stations in the last month of the third quarter of
2003, and the fourth quarter of 2003.

Operating  Costs:  Operating  costs  consist  of  the  Company's  administrative
expenses, and smog station operating expenses including depreciation.  Operating
costs for the third quarter of 2004 totaled $2,157,590,  compared to $82,747 for
the third  quarter of 2003.  Operating  costs for the first nine  months of 2004
totaled $2,372,415,  compared to $125,279 for the first nine months of 2003. The
comparative  increases in operating  costs are primarily  attributable  to stock
based  compensation  expenses for  consultants  incurred in the third quarter of
2004, which totaled $2,055,000,  as compared to $0 in the third quarter of 2003,
and to station operating costs and administrative  expenses incurred  subsequent
to the opening of the Company's two smog test-only stations in the third quarter
and fourth  quarter of 2003.  Operating  expenses for the third  quarter of 2004
(exclusive  of stock  based  compensation  expenses  totaling  $2,055,000)  were
$102,590 as compared to $82,747 for the third quarter of 2003.


Operating  Loss:  Operating  loss is comprised  of gross  profit less  operating
costs.  The  Company's  operating  loss for the third  quarter  of 2004  totaled
$2,132,853,  compared to $85,467 for the third  quarter of 2003.  The  Company's
operating loss for the first nine months of 2004 totaled $2,294,493, compared to
$127,999  for the  first  nine  months of 2003.  The  comparative  increases  in
operating loss are attributable to stock based compensation expenses incurred in


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<PAGE>
the third  quarter  of 2004  which  were not  incurred  in 2003,  and to station
operating costs and administrative  expenses incurred  subsequent to the opening
of the  Company's  two smog  test-only  stations in the third quarter and fourth
quarter of 2003.

Other Income:  The Company recognized other income of $0 in the third quarter of
2004,  compared  with $0 in the third  quarter of 2003.  The Company  recognized
other  income of $4,667 in the first nine months of 2004,  compared  with $0 for
the first nine months of 2003. The  recognition of other income of $4,667 in the
first nine months of 2004 resulted  from the  write-off of accounts  payable and
adjustments to income to accurately reflect asset balances.

Net Loss Before Income Taxes: Net loss before income taxes represents  operating
loss plus ordinary  (non-operating) income. The Company's net loss before income
taxes for the third quarter of 2004 totaled  $2,132,853,  compared to a net loss
before income taxes of $85,467 for the third quarter of 2003.  The Company's net
loss before  income taxes for the first nine months of 2004 totaled  $2,289,826,
compared to a net loss before income taxes of $127,999 for the first nine months
of 2003. The comparative increases in the Company's net loss before income taxes
from 2004 to 2003 are attributable to stock based compensation expenses incurred
in the third  quarter of 2004 which were not  incurred  in 2003,  and to station
operating costs and administrative  expenses incurred  subsequent to the opening
of the  Company's  two smog  test-only  stations in the third quarter and fourth
quarter of 2003.

Income Tax  Provision:  The  Company's  income tax provision is $0 for the third
quarter of 2004, as compared to $0 for the third quarter of 2003.  The Company's
income tax provision  was $1,600 for the first nine months of 2004,  compared to
$10 for the first nine months of 2003.  The  comparative  increase in the income
tax  provision  from the first nine  months of 2003 to the first nine  months of
2004 is  attributable  to the accrual of California  minimum  franchise tax fees
because the Company has commenced operations in California.

Net Loss: Net loss represents net income before income taxes less the income tax
provision.  The  Company's  net  loss  for the  third  quarter  of 2004  totaled
$2,132,853, compared to a net loss of $85,467 for the third quarter of 2003. The
Company's net loss before income taxes for the first nine months of 2004 totaled
$2,291,426, compared to a net loss before income taxes of $128,009 for the first
nine months of 2003.  The  comparative  increases in the Company's net loss from
2004 to 2003 are attributable to stock based  compensation  expenses incurred in
the third  quarter  of 2004  which  were not  incurred  in 2003,  and to station
operating costs and administrative  expenses incurred  subsequent to the opening
of the  Company's  two smog  test-only  stations in the third quarter and fourth
quarter of 2003.

Basic Loss Per Common Share: Basic loss per common share is computed by dividing
net loss by the weighted  average  number of common shares of stock  outstanding
during the period.  The weighted average number of common shares outstanding was
1,490,202 for the quarter ended September 30, 2004 and 1,000,000 for the quarter
ended  September  30,  2003.  The basic loss per common  share was $1.43 for the
quarter ended September 30, 2004, and $0.085 for the quarter ended September 30,
2003. For the nine months ended September 30, 2004, the weighted  average number
of shares of common stock outstanding  was  1,164,593,  as compared to 1,000,000
for the  nine  months  ended  September  30,  2003.  For the nine  months  ended
September  30, 2004,  the basic loss per common share was $1.97,  as compared to
$0.128 for the nine months ended September 30, 2003.



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<PAGE>
Diluted Loss Per Share: Diluted loss per common share is calculated based on the
weighted  average  number of shares of common and  preferred  stock  outstanding
during the period.  The variance  between basic and diluted  weighted average is
the addition of preferred stock in the calculation of diluted  weighted  average
per share.  The  weighted  average  of diluted  common  shares  outstanding  was
5,490,202  for the quarter  ended  September 30, 2004 and 5,164,593 for the nine
months  ended  September  30,  2004.  The diluted loss per share for the quarter
ending  September  30, 2004 was $0.39,  and the diluted  loss per share for the
nine months ending September 30, 2004 was $0.44.

Changes In Equity:  As of June 30,  2004,  the Company had  1,000,000  shares of
common stock  outstanding.  During the third quarter of 2004, the Company issued
424,620  shares of common  stock in exchange  for cash  proceeds of $130,820 and
satisfaction of $293,800 in Note Payable to Related Party,  Daniel M. Smith, the
husband of one of our  controlling  shareholders.  During  the third  quarter of
2004, the Company also issued  2,055,000  shares of common stock in exchange for
consulting services provided by Mr. Smith. As of September 30, 2004, the Company
had 3,479,620 shares of common stock outstanding.  The Company did not issue any
shares of preferred  stock during the third quarter of 2004. As of June 30, 2004
and September  30, 2004,  the Company had  4,000,000  shares of preferred  stock
outstanding.

Liquidity  And  Capital  Resources:  During the first nine  months of 2004,  the
Company used cash in operations of $191,728,  compared to $105,610 for the first
nine  months  of 2003.  The  comparative  increase  of  $86,118  in cash used in
operations  during these  periods is  primarily  attributable  to the  Company's
commencement  of  business   operations  in  the  third  quarter  of  2003,  and
subsequently  incurring  administrative  and  smog  station  operating  expenses
relating  thereto.  During the first nine months of 2004, cash used in investing
activities totaled $0 as compared with cash used in investing  activities during
the first nine months of 2003  totaling  $60,000.  The  comparative  decrease of
$60,000  in  cash  used  in  investing  activities  between  2004  and  2003  is
attributable to the Company's  purchase of smog station assets in the first nine
months of 2003 for $60,000.  During the first nine months of 2004, cash provided
by financing  activities  totaled  $278,618,  compared to $166,602 for the first
nine months of 2003. The net comparative  increase in cash provided by financing
activities from 2003 to 2004 of $112,016 is attributable to a decrease of $4,025
in  capitalized  lease  obligations,  a decrease of $141,977 in notes payable to
related  party,  an increase of $293,800 in  exchanging  note payable to related
party for stock, and an increase of $130,820 in proceeds from the sale of stock.
Cash on hand at the end of the nine months  ending  September  30, 2004  totaled
$90,175,  as  compared  to cash on hand  at the end of the  nine  months  ending
September 30, 2003 which  totaled $992.  The Company has paid $4,067 in interest
for the nine months ended September 30, 2004, as compared to $0 paid in interest
for the nine months ended September 30, 2003. The comparative increase of $4,067
in interest  paid  between  2004 and 2003 is  attributable  to the  interest the
Company  paid on the  lease  for the smog  testing  equipment  at its  Escondido
facility. The Company entered into the lease in the fourth quarter of 2003.

ITEM 3.  CONTROLS AND PROCEDURES.

Based on an evaluation of our disclosure controls and procedures as of September
30, 2004, we are satisfied as to the  effectiveness  of our disclosure  controls
and  procedures,  as Stephen D. Wilson,  our President,  is responsible  for the
day-to-day  operations  of our two smog check  stations  and also  serves as our
Chief Financial Officer.

There  was  no  significant  change  in the  Company's  internal  controls  over
financial reporting that occurred during the fiscal quarter ending September 30,


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<PAGE>
2004 that has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.


                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS.

The following documents are filed as part of this report:

EXHIBIT
NO.      DESCRIPTION
-------  -----------

31       Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
         (Rules 13a-14 and 15d-14 of the Exchange Act)

32       Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         (18 U.S.C. ss. 1350)


                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

Date: October 25, 2004           CALIFORNIA CLEAN AIR, INC.

                                 By: /s/ Stephen D. Wilson
                                 President, Chief Executive Officer,
                                 Chief Financial Officer, Secretary



























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