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,
            2006

   [ ]      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.)



               2055 Thibodo Rd, Suite B, Vista, California 92081
          ------------------------------------------------------------
               (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    X                   No
                              --------                  --------

As of October 1, 2006 the number of  outstanding  shares of the issuer's  common
stock, $0.001 par value, was 4,822,420 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 Sheets as of September 30, 2006
            and Audited Balance Sheet as of December 31, 2005................. 3

         Consolidated Unaudited Statements of Operations for the Quarters
            & nine months ended September 30, 2006 and September 30, 2005..... 5

         Consolidated Unaudited Statements of Cash Flows for the
            nine months ended September 30, 2006 and September 30, 2005....... 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

         Our Smog Check Test-Only Stations ...................................13

         Results of Operations for the Quarter Ended June 30, 2006
                  Compared to the Quarter Ended June 30,2005..................13


ITEM 3.  CONTROLS AND PROCEDURES..............................................14


                           PART II - OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................14

INDEX TO EXHIBITS.............................................................14

SIGNATURES....................................................................15



















                                       2
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS.

                           CALIFORNIA CLEAN AIR, INC.
                                 BALANCE SHEETS

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


                                     ASSETS
                                     ------

                                             AS OF             AS OF
                                         September 30,      December 31,
                                              2006              2005
                                          (unaudited)        (Audited)
                                        --------------    --------------


CURRENT ASSETS

   Cash                                  $     19,621      $     13,458

   Prepaid expenses                            11,816            14,878

   Loans receivable                           100,000           100,000
                                        --------------    --------------


     TOTAL CURRENT ASSETS                     131,437           128,336


NET PROPERTY & EQUIPMENT                      131,168           164,402

OTHER ASSETS

      Deposits                                 11,940            12,532
                                        --------------    --------------


     TOTAL OTHER ASSETS                        11,940            12,532
                                        --------------    --------------


                  TOTAL ASSETS           $    274,545      $    305,270
                                        ==============    ==============









        The accompanying notes are an integral part of these statements.
                                        3
<PAGE>

                           CALIFORNIA CLEAN AIR, INC.
                                 BALANCE SHEETS

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


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

                                                      AS OF           AS OF
                                                  SEPTEMBER 30,     DECEMBER 31,
                                                       2006            2005
                                                   (Unaudited)       (Audited)
                                                   ------------    ------------
CURRENT LIABILITIES
   Accounts payable                                 $    42,358     $   139,590
   Accrued payroll and payroll related liabilities      156,072          46,285
   Accrued state minimum franchise taxes                  4,800           4,000
   Capitalized lease obligation - current portion        35,860          32,034
   Loans payable to related party                       735,191         255,172
                                                   ------------    ------------

     TOTAL CURRENT LIABILITIES                          974,281         477,081

LONG-TERM LIABILITIES
   Capitalized lease obligation                          80,304         107,439
                                                   ------------    ------------

     TOTAL LONG-TERM LIABILITIES                         80,304         107,439
                                                   ------------    ------------

TOTAL LIABILITIES                                     1,054,585         584,520

STOCKHOLDERS'  EQUITY (DEFICIT)
   Preferred stock ( $0.001 par value,
   20,000,000 shares authorized;
   4,000,000 shares issued and outstanding as of
   September 30, 2006 and Dec. 31, 2005)                  4,000           4,000

   Common stock ( $0.001 par value,
   100,000,000 shares authorized;
   4,822,420 and 4,822,420 shares issued and
   outstanding as of September 30, 2006 and
   Dec. 31, 2005 respectively)                            4,822           4,822

   Additional paid-in capital                         3,818,598       3,818,598
 Retained earnings (deficit)                         (4,607,460)     (4,106,670)
                                                    ------------    ------------

     TOTAL STOCKHOLDERS' EQUITY (DEFICIT)              (780,040)       (279,250)

TOTAL LIABILITIES                                   ------------    ------------
  & STOCKHOLDERS' EQUITY (DEFICIT)                 $    274,545     $   305,270
                                                    ============    ============







        The accompanying notes are an integral part of these statements.
                                        4
<PAGE>
                           CALIFORNIA CLEAN AIR, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                       THIRD QUARTER                  FIRST NINE MONTHS
                                    ENDING SEPTEMBER 30              ENDING SEPTEMBER 30
                                        (Unaudited)                     (Unaudited)
                                   2006            2005            2006            2005
                               ------------    ------------    ------------    ------------
<S>                             <C>             <C>             <C>             <C>
SALES REVENUES                  $  140,762      $   76,775      $  397,380      $  197,322
                               ------------    ------------    ------------    ------------
Total Revenues                     140,762          76,775         397,380         197,322
                               ------------    ------------    ------------    ------------
COST OF REVENUES                    99,950          70,335         302,077         176,213
                               ------------    ------------    ------------    ------------
GROSS PROFIT                        40,812           6,440          95,303          21,109
                               ------------    ------------    ------------    ------------
OPERATING COSTS
  Operating expenses               172,447         109,611         506,987         965,921
  Depreciation expense              11,078           9,094          33,234          23,249
                               ------------    ------------    ------------    ------------
Total Operating Costs              183,525         118,705         540,221         989,170
                               ------------    ------------    ------------    ------------

OPERATING INCOME (LOSS)           (142,713)       (112,266)       (444,918)       (968,061)

OTHER INCOME & (EXPENSE)
   Interest expense                (33,572)              -         (55,072)              -
                               ------------    ------------    ------------    ------------
INCOME (LOSS) BEFORE
   INCOME TAXES                 $ (176,285)     $ (112,266)       (499,990)       (968,061)
                               ------------    ------------    ------------    ------------

INCOME TAX (PROVISION)
    BENEFIT                              0               0            (800)         (1,600)
                               ------------    ------------    ------------    ------------

NET INCOME (LOSS)               $ (176,285)     $ (112,266)       (500,790)       (969,661)
                               ------------    ------------    ------------    ------------

BASIC EARNINGS
  (LOSS) PER SHARE              $    (0.04)     $    (0.02)     $    (0.10)     $    (0.21)
                               ------------    ------------    ------------    ------------

WEIGHTED AVERAGE NO. OF
COMMON SHARES OUTSTANDING        4,822,420       4,822,420       4,822,420       4,705,486
                               ------------    ------------    ------------    ------------
</TABLE>






        The accompanying notes are an integral part of these statements.
                                        5
<PAGE>
                           CALIFORNIA CLEAN AIR, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                         FIRST NINE                 FIRST NINE
                                                        MONTHS ENDING              MONTHS ENDING
                                                     SEPTEMBER 30, 2006         SEPTEMBER 30, 2005
                                                         (Unaudited)                (Unaudited)
                                                     ------------------         ------------------
<S>                                                  <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES

    NET INCOME (LOSS)                                 $       (500,790)          $       (969,661)

ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES:
    COMMON STOCK ISSUED FOR SERVICES                                 -                    637,480
    DEPRECIATION EXPENSE                                        33,234                     23,249

Changes in assets and liabilities:
   (INCREASE) DECREASE IN LOAN RECEIVABLE                            -                   (100,000)
   (INCREASE) DECREASE IN PREPAID EXPENSES                       3,062                     (7,367)
   (INCREASE) DECREASE IN DEPOSITS                                 592                     (1,227)
    INCREASE (DECREASE) IN ACCOUNTS PAYABLE                    (97,232)                    (8,484)
    INCREASE (DECREASE) IN ACCRUED PAYROLL                     109,787                     29,062
    INCREASE (DECREASE) IN STATE INCOME TAXES                      800                      1,600
                                                     ------------------         ------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES                                          (450,547)                  (390,894)

CASH FLOWS FROM INVESTING ACTIVITIES
    NET SALE (PURCHASE) OF PROPERTY & EQUIPMENT                      -                    (81,017)
                                                     ------------------         ------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                  -                    (81,017)

  PAYMENTS ON (PROCEEDS FROM) CAPITALIZED
   LEASE OBLIGATIONS                                           (23,309)                    69,290
  PAYMENTS ON NOTES PAYABLE TO RELATED PARTY                   480,019                    161,627
  CASH FLOWS FROM FINANCING ACTIVITIES
   PROCEEDS FROM STOCK SALES                                         -                    231,500
                                                     ------------------         ------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES            456,710                    462,418

    NET INCREASE (DECREASE) IN CASH                              6,163                    (11,494)
    CASH AT BEGINNING OF PERIOD                                 13,458                     31,414
                                                     ------------------         ------------------
       CASH AT END OF PERIOD                          $         19,621           $         19,920
                                                     ==================         ==================
    SUPPLEMENTAL CASH FLOW DISCLOSURES:

    CASH PAID DURING YEAR FOR INTEREST                $         55,072           $          2,881
                                                     ==================         ==================
    CASH PAID DURING YEAR FOR TAXES                   $          1,421           $              0
                                                     ==================         ==================
    SUPPLEMENTAL NONCASH DISCLOSURES
    COMMON STOCK ISSUED FOR SERVICES                                 -                    231,500
        COMMON STOCK ISSUED FOR LOAN PAYABLE                         -                          -
</TABLE>
        The accompanying notes are an integral part of these statements.
                                        6
<PAGE>
                           CALIFORNIA CLEAN AIR, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  ORGANIZATION AND DESCRIPTION OF BUSINESS

GENERAL
-------

California Clean Air, Inc. (the "Company") is incorporated under the laws of the
State of Nevada.  From June 2, 2000, the date of original  incorporation,  until
August 21, 2003,  the Company was seeking a merger,  exchange of capital  stock,
participate in an asset  acquisition,  or any other business  combination with a
domestic or foreign  private  business and had not commenced any formal business
operations.  The  Company  was  considered  to be in the  development  stage and
accounted and reported its activities  using  Statement of Financial  Accounting
Standards No, 7, "Accounting and Reporting by Development Stage Enterprises". On
September  11,  2003,  the  Company's  subsidiary  began  operating  a test-only
vehicles emissions inspection facility.

The  Company is in the  business  of owning and  operating  "test-only"  vehicle
emissions  inspection  facilities under the Smog Check II program adopted in the
State of California. As a result of the federal Clean Air Act of 1990, the State
of  California  adopted  its Smog Check II program  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,  which are  authorized to conduct only the emissions  test but are not
permitted  to  make  any  vehicle  repairs.  The  Company's  current  inspection
facilities are located in Lemon Grove,  Escondido,  Santee, Vista, and El Cajon,
California, respectively.

The Company conducts business through its wholly owned affiliate  company,  Smog
Centers of California,  LLC. As a wholly owned subsidiary,  California Clean Air
(the  parent   Company)  has  complete   control  over  the  business  and  will
periodically  receive  distributions  and allocations of cash flow and operating
profits.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.       ACCOUNTING METHOD
         -----------------

The Company's  policy is to use 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
         ----------------------











                                        7
<PAGE>
On November 21, 2002,  the Company  organized  Smog Centers of  California,  LLC
(`Smog  Centers"),  an Oregon limited liability  company.  California Clean Air,
Inc. is the sole owner of Smog Centers. California Clean Air, Inc. owns title to
all  assets and  liabilities  of the  consolidated  financial  statements.  Smog
Centers was organized to acquire,  own and operate  test-only  vehicle emissions
inspection  facilities  in the State of  California  under  their  Smog Check II
program.

C.       CASH EQUIVALENTS
         ----------------

The Company  considers  all highly  liquid  investments  with  maturity of three
months or less when purchased to be cash equivalents.

D.       PROPERTY AND EQUIPMENT
         ----------------------

Property,  equipment  and  leasehold  improvements  are  stated  at  costs  less
accumulated  depreciation or amortization.  Maintenance and repairs,  as well as
renewals for minor amounts are charged to expenses.  Renewals and betterments of
substantial  amount are  capitalized,  and any  replaced or  disposed  units are
written off.

E.       ADVERTISING
         -----------

The Company  expenses the cost of  advertising  as it is  incurred.  Advertising
expense was $89,080 and $40,873 for the quarters  ended  September  30, 2006 and
2005, respectively.

F.       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.

G.       REVENUE RECOGNITION AND DEFERRED REVENUE
         ----------------------------------------

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

H.       BASIC 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).


                                        8
<PAGE>
Basic net loss per share  amounts is computed by dividing  the net income by the
weighted average number of common shares outstanding. Diluted earnings per share
are the same as basic  earnings  per share due to the lack of dilutive  items in
the Company.

I.       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 be realized.

J.       SEGMENT REPORTING
         -----------------

The Company reports information about operating segments and related disclosures
about  products  and  services,  geographic  areas  and  major  customer.  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.

K.       PRINCIPLES OF CONSOLIDATION
         ---------------------------

The Consolidated  financial  statements include the accounts of California Clean
Air, Inc., the parent company) and Smog Centers of California. The Subsidiary is
a  wholly  owned   subsidiary.   All  significant   intercompany   balances  and
transactions have been eliminated in consolidation.


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
quarters  ending  September  30,  2006 and  September  30,  2005 was $11,078 and
$9,094, respectively.

NOTE 4.  CAPITALIZED LEASE OBLIGATION

Smog Centers has a  non-cancelable  lease obligation for the purchase of vehicle
emission inspection equipment in Escondido,  Santee,  Vista, and El Cajon. Lease
payments for the quarters ending  September 30, 2006 and September 30, 2006 were
$13,103 and $6,371  respectively.  Interest  expense on the lease obligation for
the quarters  ending  September  30, 2006 and  September 30, 2005 was $4,694 and
$2,843, respectively.






                                        9
<PAGE>
Aggregate minimum future lease payments under capitalized  leases are as follows
for the years ending subsequent to September 30, 2006:

             Years ending December 31:
                   2006 (October 1-December 31)                    13,103
                   2007                                            52,411
                   2008                                            49,881
                   2009                                            22,045
                   2010 (through May 2009)                          7,348
             Total minimum lease payments                         144,788
             Less amount representing interest                    (28,624)
                                                            --------------
             Present value of minimum lease payments         $    116,164
                                                            ==============

NOTE 5. OPERATING LEASE COMMITMENTS

Smog Centers entered into non-cancelable leases for all stations.

Aggregate  minimum  future lease  payments for the smog stations as of September
30, 2006, are:

                 2006                                              19,375
                 2007                                              78,500
                 2008                                              77,350
                 2009                                              64,100
                       2010                                        33,900
                                                            --------------
           Total minimum lease payments                      $    273,225
                                                            ==============

Lease expense for the smog stations for the quarters  ending  September 30, 2006
and September 30, 2005 were $24,567 and $19,228, respectively.

NOTE 6.  TRANSACTIONS WITH RELATED PARTIES

Our  President,  Stephen D. Wilson,  has  advanced  $735,191 to the company from
inception   through   September   30,  2006.   These   advances  were  used  for
administrative  expenses  such  as  legal  and  accounting  fees,  smog  station
operating  expenses,  and to acquire and start smog  stations.  The advances are
reflected as "Payable to Related Parties" in the Company's financial  statements
and are interest bearing and due on demand.

NOTE 7. BASIC & DILUTED INCOME (LOSS) PER COMMON SHARE

Basic  earnings  (loss)  per  common  share  have 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









                                       10
<PAGE>
weighted  average is the  addition  of  preferred  stock in the  calculation  of
diluted weighted average per share.

                                     FIRST 9 MONTHS 2006    FIRST 9 MONTHS 2005
                                         (Unaudited)            (Unaudited)
                                     --------------------   --------------------
NET INCOME (LOSS)                    $          (500,790)   $          (969,661)
BASIC EARNINGS (LOSS) PER SHARE      $             (0.10)   $              (.21)
                                     ====================   ====================
WEIGHED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                             4,822,420              4,705,486
                                     ====================   ====================

 As of  September  30, 2006 no  dividends  have been  issued  that would  reduce
earnings available to common shareholders.

NOTE 8.  INCOME TAXES

Deferred income taxes consist of the following:

                                                SEPTEMBER 30,    DECEMBER 31,
                                                    2006            2005
                                                 (Unaudited)      (Audited)
                                               --------------   --------------
    Deferred tax asset:
    Net operating loss carryover                $  1,566,535     $  1,396,268
                                               --------------   --------------
                                                   1,566,535        1,396,268
    Valuation allowance                           (1,566,535)      (1,396,268)
                                               --------------   --------------
    Net deferred income taxes                              0                0
                                               ==============   ==============

NOTE 9.  STOCKHOLDERS' EQUITY

The stockholders'  equity section of the Company's financial statements contains
the following classes of capital stock as of September 30, 2006:

(A)  Preferred stock, $0.001 par value; 20,000,000 shares authorized;  4,000,000
     shares issued and outstanding;

(B)  Common stock, $ 0.001 par value;  100,000,000 shares authorized;  4,822,420
     shares issued and outstanding.

The Company is authorized to issue up to 100,000,000 shares of common stock. The
holders of common  stock are  entitled to one vote per share of common  stock on
all matters to be voted on by the  stockholders.  There are no cumulative voting
rights.  Subject  to  preferences  that  may be  applicable  to any  outstanding
preferred stock, the holders of common stock are entitled to receive  dividends,
if any,  as may be  declared  by the  board of  directors  out of funds  legally
available for dividends.  In the event of a liquidation,  dissolution or winding
up, the holders of common stock are entitled to share  ratably in the net assets
remaining  after  payment  in full of all of  liabilities,  subject to the prior
rights of preferred stock, if any, then outstanding.  There are no redemption or
sinking fund  provisions  applicable  to the common  stock.  As of September 30,
2006, there were 4,822,420 shares of common stock issued and outstanding.



                                       11
<PAGE>
The  Company  is  authorized  to issue up to  20,000,000  shares  of  designated
preferred  stock.  The board of  directors  has the  authority,  without vote or
action by the  stockholders,  to designate and issue  preferred  stock in one or
more series and to designate the number of shares,  and the rights,  preferences
and  privileges  of each  series,  any or all of which may be  greater  than the
rights of the common stock. It is not possible to state the actual effect of the
issuance  of any  additional  shares of  preferred  stock upon the rights of the
holders of common  stock until the board of  directors  determines  the specific
rights of the holders of the preferred stock. However, the effects might include
restricting  dividends  on the common  stock,  diluting  the voting power of the
common stock,  impairing  liquidation rights of the common stock and delaying or
preventing a change in control of the Company.

As of September 30, 2006,  there were  4,000,000  shares of Series A Convertible
Preferred Stock ssued and  outstanding.  The holders of the Series A Convertible
Preferred  Stock  have  the  following  rights  and  preferences:  the  Series A
Preferred Stock is convertible into common stock on a one-for-one basis, subject
to adjustment  for stock splits and similar  extraordinary  stock  events;  each
share of Series A  Preferred  Stock has ten (10)  votes for each share of common
stock into which the preferred  stock can be  converted;  the Series A Preferred
Stock votes with the common stock as a single class;  and the Series A Preferred
Stock is entitled to receive  dividends (1) upon the  commencement of operations
of no less than ten (10) vehicle  emissions  test centers by Smog  Centers;  (2)
800,000 shares of the Series A Preferred  Stock will be each entitled to receive
dividends as and when declared and paid on the common  stock;  (3) an additional
800,000  shares of Series A Stock will be each entitled to receive  dividends as
and when  declared  and paid on the common  stock for each  additional  ten (10)
vehicle  emissions test centers for which  operations  have  commenced,  up to a
total of fifty (50) such vehicle test centers;  and (4) the  liquidation  rights
will be subordinated to the outstanding common stock. The board of directors has
no present  plans to issue any  additional  preferred  stock in  addition to the
Series A Stock.

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,
2006 there were no stock options issued or outstanding.












                                       12
<PAGE>
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  under the Smog Check II program  adopted by the State of
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, which
are  authorized to conduct the emissions  test and are not permitted to make any
vehicle repairs.  We currently have five inspection  facilities located in Lemon
Grove, Escondido, Santee, Vista, and El Cajon, California.

California  Clean Air, Inc.  (the  "Company")  was  originally  incorporated  in
Delaware on June 2, 2000 under the name of Breakthrough  Technology  Partners I,
Inc. Mr. Stephen D. Wilson is our President,  Chief Executive  Officer and Chief
Financial  Officer.  Smog  Centers  of  California,  LLC ("Smog  Centers"),  was
organized as an Oregon limited liability company. Through Smog Centers we intend
to own and  operate  smog check  test-only  stations,  principally  in  Southern
California.  The Company is the sole member of Smog Centers, and as such we have
complete control over the business. Mr. Wilson is the manager of Smog Centers.

Our principal executive and administrative offices and those of Smog Centers are
located at 2055 Thibodo Rd, Suite B, Vista, California 92081.

OUR SMOG CHECK TEST-ONLY STATIONS

On  September  11,  2003,  Smog  Centers  opened its first smog check  test-only
facility,  located at 7310 Broadway in Lemon Grove, California.  On November 26,
2003, Smog Centers opened its second smog check test-only  facility,  located at
555 West Grand Avenue in Escondido,  California. On April 20, 2005, Smog Centers
opened its third smog check  test-only  facility,  located at 8665 Mission Gorge
Rd, Suite A-3 in Santee,  California.  On September 6, 2005 Smog Centers  opened
its fourth smog check test-only  facility,  located at 485 N. Melrose Dr, Vista,
California.  On  February  1, 2006 Smog  Centers  opened  its fifth  smog  check
test-only facility, located at 710 N. 2nd St, El Cajon, California 92021.

We  charge a total of  $60.00  for a smog test for a  vehicle  that  passes  the
emissions test, which includes $50.00 for the inspection fee, $8.25 for the smog
certificate  and  $1.75  for the  transmission  fee to the  Vehicle  Information
Database.

RESULTS OF OPERATIONS  FOR THE QUARTER ENDED  SEPTEMBER 30, 2006 COMPARED TO THE
QUARTER ENDED SEPTEMBER 30, 2005:

Sales Revenues: For the third quarter of 2006, the Company had sales revenues of
$140,762,  compared to $76,775 in sales  revenues for the third quarter of 2005.
Same  store  sales  increased  32% for the third  quarter of 2006  versus  third
quarter 2005. We opened two new stations in Vista and El Cajon.  Also same store
sales increased 32% for the third quarter of 2006 versus third quarter 2005.






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Cost of  Revenues:  Cost of  revenues  for the  third  quarter  of 2006  totaled
$99,950, as compared to $70,335 for the third quarter of 2005.

Gross Profit: Gross profit is comprised of sales revenues less cost of revenues.
Gross  profit for the third  quarter of 2006  totaled  $40,812,  as  compared to
$6,440 for the third quarter of 2005.

Operating  Costs:  Operating  costs  consist  of  the  Company's  administrative
expenses,  and  smog  station  operating  expenses  including  depreciation  and
amortization.  Operating costs totaled $183,525 for the third quarter of 2006 as
compared to $118,705 for the third quarter of 2005.

Operating  Loss: The Company's  operating loss for the third quarter of 2006 was
$142,712 as compared to $112,266 for the third quarter of 2005.

Net Loss Before Income Taxes: Net loss before income taxes represents  operating
loss plus other  (non-operating)  loss.  For the third quarter of 2006,  our net
loss was $176,285 as compared to $112,266 for the third quarter of 2005.

Liquidity  And  Capital  Resources:  During the first nine  months of 2006,  the
Company used cash in  operations  of  $450,547,  as compared to $392,894 for the
first nine months of 2005.

ITEM 3.  CONTROLS AND PROCEDURES.

Based on an evaluation of our disclosure controls and procedures as of September
30, 2006, 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 five smog check  stations  and also serves as our
Chief Financial Officer.

There was no significant change in the Company's internal control over financial
reporting that occurred during the fiscal quarter ending September 30, 2006 that
has  materially  affected,  or is reasonably  likely to materially  affect,  the
Company's internal control over financial reporting.

PART II - OTHER INFORMATION

The following documents are filed as part of this report:

Exhibits.

INDEX TO EXHIBITS:

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)






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                                   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: November 20, 2006          CALIFORNIA CLEAN AIR, INC.

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















































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