SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549

                                   FORM 10-KSB
 (Mark One)

(X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2001
                                       OR
( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

Commission File No. 0-25474

                      LUNA TECHNOLOGIES INTERNATIONAL, INC.
              ---------------------------------------------------
                 (Name of Small Business Issuer in its charter)

                Delaware                                     91-1987288
         ------------------------                      ----------------------
         (State of incorporation)                          (IRS Employer
                                                         Identification No.)

       61A Fawcett Road
       Coquitlam, British Columbia, Canada                    V3K 6V2
    -----------------------------------------------        --------------
    (Address of Principal Executive Office)                   Zip Code

Registrant's telephone number, including Area Code: (888) 955-8883 Securities
registered pursuant to Section 12(b) of the Act: None Securities registered
pursuant to Section 12(g) of the Act:

                                  Common Stock
                                (Title of Class)

Check 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.
                                  X
                                 YES       NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

The Company's revenues for the most recent fiscal year were $229,423.

The aggregate market value of the voting stock held by non-affiliates of the
Company as of March 27, 2002 was approximately $1,680,000.

As of March 27, 2002 the Company had 4,960,911 issued and outstanding shares of
common stock.

<PAGE>


ITEM 1. DESCRIPTION OF BUSINESS The Company was incorporated on March 25, 1999
in Delaware to develop, manufacture and sell 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. The Company conducts
business in Canada through its wholly-owned Canadian subsidiary, Luna
Technologies (Canada) Ltd.

      The Company's executive offices are located at 61B Fawcett Road,
Coquitlam, British Columbia, Canada V3K 6V2. The Company's telephone number is
(604) 526-5890, its facsimile number is (604) 526-8995, its email address is
info@lunaplast.com, and its web page address is www.lunaplast.com.

      From the date of its incorporation and through December 31, 2001 the
Company had cumulative losses of $(781,981). There can be no assurance that the
Company will ever earn any profits.

      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. The Company's current LUNAplast pigment material, Strontium Aluminate,
has a performance level 20 x 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.


<PAGE>

      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, presently the
chief executive officer of the Company's 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 the Company as Lunaplast, is up to 20 x 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 the Company, developed an advanced
Strontium Aluminate HPPL material which is four times brighter than the
Company's 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 the Company 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, the Company agreed to pay LTI
$90,000, without interest, on or before June 30, 2000. As of March 28, 2002 the
patent application has been placed in abeyance.

      In November 1999, the Company 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, the Company agreed to pay
Mr. Sinclair $60,000, without interest, or before November 30, 2000.

      During 2000 the Company 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.

      The Company began producing Lunaplast on a commercial basis during fiscal
2000. During the year ended December 31, 2001 the Company had sales of $229,423.
As of March 28, 2002 the Company had a backlog, representing firm orders for
delivery of Lunaplast prior to December 31, 2002, of approximately $90,000.


<PAGE>

      During the year ended December 31, 2001 one customer accounted for 40.5%
of the Company's gross revenues and another customer accounted for 21.2% of the
Company's gross revenues. The loss of either of these customers would have a
material adverse effect on the Company.

Manufacturing

      Lunaplast is a three-part laminate, consisting of one base layer of highly
reflective white material of PVC or vinyl, one mid-layer of photoluminescent PVC
or vinyl impregnated with the Company's proprietary Strontium Aluminate polymer
compound, and one top layer of clear PVC or vinyl with UV and fire-resistant
properties.

      All aspects of the Company's manufacturing process are subcontracted to
various third parties which formulate, mix and produce Lunaplast to the
Company's specifications. Once the manufacturing process is complete, Lunaplast
is sold to fabricators which use Lunaplast in a variety of end user products.
All subcontractors involved in manufacturing Lunaplast have agreed to maintain
the confidential nature of the Company's proprietary manufacturing technology.

      The Company does not have any long-term agreements with any of the third
parties involved in manufacturing Lunaplast. The Company believes that
alternative manufacturers are available which could produce Lunaplast on short
notice and without disrupting product delivery schedules.

Sales and Marketing

      World markets for photoluminescent lighting products are in the marine
(shipping and cruise lines), transportation and commuter industry, and in the
commercial, institutional and industrial retrofit and new building construction
sector, in which the need for photoluminescent emergency lighting and wayfinding
signage systems has risen sharply over the last two decades. A third primary
marker is "glow-in-the-dark" toys and novelties.

      The Company believes that the world market for HPPL lighting is
underdeveloped due largely to the low illumination delivered by zinc sulphide
products. The Company plans to build interest and sales for Lunaplast products
in established markets around the world. The Company's marketing plan includes
advertising in trade magazines, exhibiting at industry tradeshows, direct mail
campaigns, soliciting editorial coverage from naval architecture, building
design, architecture and lighting industry publications and distributing product
samples, videos and brochures to designers and developers. The Company's website
will also be used as a means to distribute product information to interested
parties quickly.

      The Company markets its products through its officers and through
independent sales representatives. As of March 28, 2002 the Company had 6
independent sales representatives which were marketing Lunaplast in North
America, and Australia.

Competition

      No single company dominates the world marketplace. Instead, a number of
small and medium-sized firms are active within regional markets in Europe, the

<PAGE>

U.S. and elsewhere. Some producers include companies such as Permalight AG of
Germany (Europe and North America), Safe T Glow (UK and U.S.), Datrex (U.S.),
Jalite (UK), Everglow (Europe) and Existalight (Europe and U.S.). It is
difficult to determine annual sales volumes and revenues for these firms, as
most are privately held.

      Although there are several manufacturers and distributors of
photoluminescent products the Company believes it has a significant advantage
over its competitors as a result of its proprietary manufacturing processes and
cost effective approach to the production of Strontium Aluminate-based HPPL
materials in commercial quantities. The Company also plans to be competitive in
the HPPL industry by developing advanced Strontium Aluminate materials,
enhancing formulation and focusing on higher volumes with a resultant lower cost
of production. During the twelve-month period ending December 31, 2002 the
Company plans to spend $25,000 on research relating to the development of
advanced strontium aluminate PL materials.

Office Space

      The Company rents on a month to month basis approximately 4,800 square
feet of executive office space at 61A and 16.B Fawcett Road, Coquitlam, British
Columbia at a monthly rental of $2,063.

Employees

    As of March 28, 2002 the Company had 4 full-time employees including Douglas
Sinclair and Kimberly Landry. See Item 9 of this report. As of March 28, 2002
the Company did not have any part time employees. Contingent upon the Company
raising sufficient capital, the Company plans to hire additional employees as
may be required by the level of the Company's operations.

ITEM  2. DESCRIPTION OF PROPERTIES

        See Item 1 of this report.

ITEM 3.  LEGAL PROCEEDINGS.

      The Company is not engaged in any litigation, and the officers and
directors presently know of no threatened or pending litigation in which it is
contemplated that the Company will be made a party.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.


      Not Applicable

ITEM 5.  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S  COMMON  EQUITY AND
         OTHER SHAREHOLDER MATTERS.


      The Company's common stock is quoted on the Over the Counter Bulletin
Board under the symbol "LTII". The following table presents the high and low
closing bid quotations for the common stock as reported by the National

<PAGE>

Quotation Bureau for each quarter beginning in April 2001 when the Company's
stock was first quoted. The prices reflect inter-dealer quotations without
adjustments for retail mark-up, markdown or commissions, and do not necessarily
represent actual transactions.

                                             Closing Bid

      Quarter Ending                      High          Low

      June 30, 2001                       $1.01         $0.51
      September 30, 2001                  $0.60         $0.45
      December 31, 2001                   $0.45         $0.45


      As of March 28, 2002 there were 97 record owners of the Company's common
stock.

      Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The Board of Directors is not
obligated to declare a dividend. The Company has not paid any dividends and the
Company does not have any current plans to pay any dividends.

      The provisions in the Company's Articles of Incorporation relating to the
Company's preferred stock would allow the Company's directors to issue preferred
stock with rights to multiple votes per share and dividends rights which would
have priority over any dividends paid with respect to the Company's common
stock. The issuance of preferred stock with such rights may make more difficult
the removal of management even if such removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if such
transactions are not favored by incumbent management.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS/ PLAN OF OPERATIONS

Results of Operations.

      Sales declined during the year ended December 31, 2001 due to a large sale
that was made in December 2000.

Liquidity and Capital Resources.

      During the year ended December 31, 2000 the Company's operations used
$160,797 in cash. During this year the Company purchased $21,720 of capital
assets and paid promissory notes totaling $150,000 which were issued in 1999 to
acquire technology rights from LTI and Douglas Sinclair. During this year the
Company satisfied its cash requirements with a loan from Kimberly Landry
($60,000), loans from an unrelated third party and proceeds from the sale of
common stock and preferred stock in private offerings.




<PAGE>


      During the period ended December 31, 2001, the Company's operations used
$207,379 in cash. During this same period the Company purchased $627 of capital
assets. During this period the Company satisfied its cash requirements with a
loan from Kimberly Landry and the agreements of Kimberly Landry and Douglas
Sinclair to defer their compensation for the year ended December 31, 2001.

      The Company anticipates that its capital needs during the year ending
December 31, 2002 will be as follows:

      $510,500 for corporate expenses, $25,000 for research relating to the
development of advanced strontium aluminate PL materials, and $ 189,679 to repay
amounts borrowed from Kimberly Landry and to pay the compensation due Kimberly
Landry ($32,667) and Douglas Sinclair ($40,000) for 2001.

      The Company does not have any available credit, bank financing or other
external sources of liquidity. Due to the operating losses of the Company during
the Company's initial year of operations, the Company's operations have not been
a source of liquidity. At December 31, 2001 the Company had a working capital
deficiency of $(306,457). The ability of the Company to continue as a going
concern is dependent on the Company raising additional capital and on future
profitable operations. To that end the Company is seeking financing to expand
its operations and for working capital purposes. There can be no assurance that
the Company will be successful in obtaining additional funding.

ITEM 7.  FINANCIAL STATEMENTS

      See the financial statements attached to this report.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

      None.

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

         The following sets forth certain information concerning the present
management of the Company:

         Name                 Age           Position with Company

     Kimberly Landry           36           President, Secretary and a Director
     Douglas Sinclair          53           Executive Vice President
     Dale Berscht              48           Chief Financial Officer
     Robert H. Humber          58           Director

     Kimberly  Landry has been the Company's  President since September 1, 2001.
Ms.  Landry has been the Secretary of the Company,  as well as a director  since
April 1999. Since December 1994 Ms. Landry has also been an officer and director
of LTI.


<PAGE>

     Douglas  Sinclair has bee the  Company's  Executive  Vice  President  since
September  1, 2001.  Mr.  Sinclair has been the Chief  Executive  Officer of the
Company's  Canadian  subsidiary since January 1, 2000.  Between 1995 and October
1999 Mr. Sinclair provided  consulting services to LTI in the areas of research,
development  and  marketing.  Prior  to 1995  Mr.  Sinclair  was an  independent
consultant  to companies  engaged in  developing,  manufacturing  and  marketing
photoluminescent products.

      Mr. Sinclair is the common law husband of Ms. Landry.

      Dale Berscht has been the Company's Chief Financial Officer since June
2001. For the seven years prior to his association with the Company, Mr. Berscht
was the controller and finance manager for Coast Spas.

      Robert Humber was the President of the Company between September 1, 2001
and April 1999. Mr. Humber has been a director of the Company since April 1999.
Between July 1996 and November 1999 Mr. Humber was the president of LTI. Prior
to July 1996 Mr. Humber worked with Douglas Sinclair and Kimberly Landry in
developing photoluminescent products. For the past twenty-three years Mr. Humber
has also been an independent investigator and security consultant providing
services to law enforcement agencies and private industry.

ITEM 10.  EXECUTIVE COMPENSATION

         The following table sets forth in summary form the compensation
received by the Company's executive officers during the fiscal years ended
December 31, 2000 and 2001.

                        Annual Compensation              Long Term Compensation
                                                            Re-
                                              Other        stric-
                                             Annual        ted
Name and                                    Compen-        Stock       Options
Principal           Fiscal Salary   Bonus     sation      Awards       Granted
Position             Year    (1)      (2)      (3)          (4)          (5)
---------           ------ -------  -------  -------     --------      -------

Kimberly Landry,    2001  $32,667     --       --           --            --
President since     2000  $36,000     --       --           --            --
September 1, 2001
and Secretary

Douglas Sinclair,   2001  $40,000     --       --           --            --
Executive Vice      2000  $40,000     --       --           --            --
President

Robert H. Humber,   2001       --     --       --           --            --
President prior to  2000  $18,000     --       --           --            --
September 1, 2001

(1)  The dollar value of base salary (cash and non-cash) received.


<PAGE>

(2)  The dollar value of bonus (cash and non-cash) received.

(3)  Any other annual compensation not properly categorized as salary or bonus,
     including perquisites and other personal benefits, securities or property.

(4)  Amounts reflect the value of the shares of the Company's common stock
     issued as compensation for services.

      The table below shows the number of shares of the Company's common stock
owned by the officers listed above, and the value of such shares as of December
31, 2001.

      Name                          Shares                  Value
      ----                          ------                  ------
      Douglas Sinclair               1,000              $      750
      Robert H. Humber             790,000              $  592,500
      Kimberly Landry            1,930,000              $1,447,500

(5)  The shares of common stock to be received upon the exercise of all stock
     options granted during the fiscal years shown in the table. No stock
     options have been granted to date.

      The Company's Canadian subsidiary has an employment agreement with
Kimberly Landry whereby the subsidiary has agreed to pay Ms. Landry a salary of
$2,800 per month during the twelve-month period ending December 31, 2002.

      The Company's Canadian subsidiary has an employment agreement with Douglas
Sinclair whereby the subsidiary has agreed to pay Mr. Sinclair a salary of
$3,000 per month during the twelve-month period ending December 31, 2002.

      The following shows the amount which the Company and its Canadian
subsidiary expect to pay to its officers during the twelve-month period ending
December 31, 2002, and the time which the Company's executive officers plan to
devote to the Company's business.

                                 Proposed               Time to be Devoted
    Name                       Compensation            To Company's Business

    Kimberly Landry              $33,600                      100%
    Douglas Sinclair             $36,000                      100%

      The Company's Board of Directors may increase the compensation paid to the
Company's officers depending upon the results of the Company's future
operations.

Long Term Incentive Plans - Awards in Last Fiscal Year

    None.



<PAGE>


Employee Pension, Profit Sharing or Other Retirement Plans

     Except as provided in the Company's employment agreements with its
executive officers, the Company does not have a defined benefit, pension plan,
profit sharing or other retirement plan, although the Company may adopt one or
more of such plans in the future.

Compensation of Directors

      Standard Arrangements. At present the Company does not pay its directors
for attending meetings of the Board of Directors, although the Company may adopt
a director compensation policy in the future. The Company has no standard
arrangement pursuant to which directors of the Company are compensated for any
services provided as a director or for committee participation or special
assignments.

      Other Arrangements. During the year ended December 31, 2001, and except as
disclosed elsewhere in this registration statement, no director of the Company
received any form of compensation from the Company.

Stock Option and Bonus Plans

      The Company has an Incentive Stock Option Plan, a Non-Qualified Stock
Option Plan and a Stock Bonus Plan. A summary description of each Plan follows.
In some cases these three Plans are collectively referred to as the "Plans".

      Incentive Stock Option Plan. The Incentive Stock Option Plan authorizes
the issuance of options to purchase up to 200,000 shares of the Company's Common
Stock, less the number of shares already optioned under both this Plan and the
Non-Qualified Stock Option Plan. Only officers, directors and key employees of
the Company may be granted options pursuant to the Incentive Stock Option Plan.

      In order to qualify for incentive stock option treatment under the
Internal Revenue Code, the following requirements must be complied with:

      1.  Options granted pursuant to the Plan must be exercised no later than:

            (a) The expiration of thirty (30) days after the date on which an
option holder's employment by the Company is terminated.

            (b) The expiration of one year after the date on which an option
holder's employment by the Company is terminated, if such termination is due to
the Employee's disability or death.

      2. In the event of an option holder's death while in the employ of the
Company, his legatees or distributees may exercise (prior to the option's
expiration) the option as to any of the shares not previously exercised.


<PAGE>

      3. The total fair market value of the shares of Common Stock (determined
at the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.

      4. Options may not be exercised until one year following the date of
grant. Options granted to an employee then owning more than 10% of the Common
Stock of the Company may not be exercisable by its terms after five years from
the date of grant.

      5. The purchase price per share of Common Stock purchasable under an
option is determined by the Committee but cannot be less than the fair market
value of the Common Stock on the date of the grant of the option (or 110% of the
fair market value in the case of a person owning the Company's stock which
represents more than 10% of the total combined voting power of all classes of
stock).

Non-Qualified Stock Option Plan.

     The  Non-Qualified  Stock Option Plan authorizes the issuance of options to
purchase up to 600,000  shares of the Company's  Common Stock less the number of
shares  already  optioned  under both this Plan and the  Incentive  Stock Option
Plan. The Company's employees, directors, officers, consultants and advisors are
eligible to be granted options pursuant to the Plan,  provided however that bona
fide services must be rendered by such consultants or advisors and such services
must  not  be  in  connection  with  the  offer  or  sale  of  securities  in  a
capital-raising  transaction.  The option  exercise  price is  determined by the
Committee but cannot be less than the market price of the Company's Common Stock
on the date the option is granted.

      Options granted pursuant to the Plan not previously exercised terminate
upon the date specified when the option was granted.

Stock Bonus Plan.

     Up to 200,000  shares of Common Stock may be granted  under the Stock Bonus
Plan.  Such shares may consist,  in whole or in part, of authorized but unissued
shares, or treasury shares. Under the Stock Bonus Plan, the Company's employees,
directors, officers, consultants and advisors are eligible to receive a grant of
the  Company's  shares;  provided,  however,  that  bona fide  services  must be
rendered by  consultants or advisors and such services must not be in connection
with the offer or sale of securities in a capital-raising transaction.

Other Information Regarding the Plans.

     The Plans are  administered by the Company's Board of Directors.  The Board
of Directors  has the  authority to interpret  the  provisions  of the Plans and
supervise the  administration of the Plans. In addition,  the Board of Directors
is  empowered  to select  those  persons  to whom  shares or  options  are to be
granted,  to  determine  the  number of shares  subject to each grant of a stock
bonus or an option and to determine  when, and upon what  conditions,  shares or
options  granted under the Plans will vest or otherwise be subject to forfeiture
and cancellation.

      In the discretion of the Board of Directors, any option granted pursuant
to the Plans may include installment exercise terms such that the option becomes
fully exercisable in a series of cumulating portions. The Board of Directors may
also accelerate the date upon which any option (or any part of any options) is

<PAGE>


first exercisable. Any shares issued pursuant to the Stock Bonus Plan and any
options granted pursuant to the Incentive Stock Option Plan or the Non-Qualified
Stock Option Plan will be forfeited if the "vesting" schedule established by the
Board of Directors at the time of the grant is not met. For this purpose,
vesting means the period during which the employee must remain an employee of
the Company or the period of time a non-employee must provide services to the
Company. At the time an employee ceases working for the Company (or at the time
a non-employee ceases to perform services for the Company), any shares or
options not fully vested will be forfeited and cancelled. In the discretion of
the Board of Directors payment for the shares of Common Stock underlying options
may be paid through the delivery of shares of the Company's Common Stock having
an aggregate fair market value equal to the option price, provided such shares
have been owned by the option holder for at least one year prior to such
exercise. A combination of cash and shares of Common Stock may also be permitted
at the discretion of the Board of Directors.

      Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Board of Directors when the shares were issued.

      The Board of Directors of the Company may at any time, and from time to
time, amend, terminate, or suspend one or more of the Plans in any manner it
deems appropriate, provided that such amendment, termination or suspension
cannot adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the case of a
reclassification of the Company's capital stock or a consolidation or merger of
the Company; reduce the minimum option price per share; extend the period for
granting options; or materially increase in any other way the benefits accruing
to employees who are eligible to participate in the Plans.

      The Plans are not qualified under Section 401(a) of the Internal Revenue
Code, nor are they subject to any provisions of the Employee Retirement Income
Security Act of 1974.

      Summary. The following sets forth certain information as of March 28,
2002, concerning the stock options and stock bonuses granted by the Company.
Each option represents the right to purchase one share of the Company's Common
Stock.

                               Total        Shares                  Remaining
                               Shares    Reserved for     Shares     Options/
                              Reserved   Outstanding   Issued As       Shares
Name of Plan                 Under Plan    Options    Stock Bonus   Under Plan
------------                 ----------  ------------ -----------   ----------

Incentive Stock Option Plan  200,000          --          N/A       200,000
Non-Qualified Stock Option
  Plan                       600,000          --          N/A       600,000
Stock Bonus Plan             200,000         N/A           --       200,000



<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth the number of and percentage of outstanding
shares of common stock owned by the Company's officers, directors and those
shareholders owning more than 5% of the Company's common stock as of March 28,
2002.

                                      Shares of
Name and Address                    Common Stock              Percent of Class
----------------                    -------------           --------------------

Kimberly Landry                     1,930,000                    41.1%
1653 Plateau Crescent
Coquitlam, British Columbia
Canada V3B 3E3

Douglas Sinclair                        1,000 (1)                    *
1653 Plateau Crescent
Coquitlam, British Columbia
Canada V3B 3E3

Dale Berscht                               --                       --
61A Fawcett Road
Coquitlam, British Columbia
Canada   V3K 6V2

Robert H. Humber                      790,000                    16.8%
130581/239th Ave., N.E
Seattle, WA  98125-4614

William Donovan                       438,000                     9.3%
37 Saratoga Drive
Dartmouth, Nova Scotia
Canada  B2X 5P9

All Officers and Directors
  as a Group (4 persons)            2,721,000                    58.0%

*   Less than 1%

(1)  Mr.  Sinclair is the common law  husband of Ms.  Landry.  As a result,  Mr.
     Sinclair  may be deemed the  beneficial  owner of the  shares  owned by Ms.
     Landry.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      In April 1999 the Company issued shares of its common stock to the
persons, in the amounts, and for the consideration set forth below:




<PAGE>


                                 Number
   Name                        of Shares             Consideration

Robert H. Humber                800,000                  $   800
Kimberly Landry               1,580,000                   $1,580
Douglas Sinclair                     --                       --
Other third parties           2,120,000                   $2,120

     Mr. Sinclair may be deemed the beneficial  owner of the shares owned by Ms.
Landry by virtue of his common law relationship with Ms. Landry.

      In April 1999 the Company acquired from LTI, a corporation formed by Ms.
Landry in December 1994, the rights to the Company's patent application and
related technology. The patent application and related technology were assigned
to LTI by Mr. Sinclair and Ms. Landry in November 1997. In consideration for the
assignment of these rights, the Company paid LTI $90,000 during the year ended
December 31, 2000. As of March 20, 2001 the patent application assigned to the
Company was pending before the U.S. Patent and Trademark Office.

      In November 1999, the Company 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, the Company paid Mr.
Sinclair $60,000 during the year ended December 31, 2000.

      In the opinion of the Company's management, the transactions between the
Company and its officers, directors, and related parties were on terms as
favorable to the Company as those which could have been obtained from unrelated
third parties.

      On December 15, 1999 Mr. Sinclair acquired 1,000 shares of the Company's
common stock from Brian Sims, a principal shareholder of the Company.

      During the year ended December 31, 2000 the Company borrowed $60,000 from
Kimberly Landry. The loan is unsecured, bears interest at 10% per year and is
payable on October 1, 2002.

      In January 2001 the Company acquired from LTI office and production
equipment, as well as the rights to certain tradenames used by the Company. In
consideration for these assets the Company agreed to pay LTI $41,142 prior to
June 30, 2001. The maturity date on this loan has been extended January 1, 2003.

      In May 2001 the Company issued 350,000 shares of its common stock to
Kimberly Landry, an officer and director of the Company, in payment of $137,072
advanced to the Company by Ms. Landry.



<PAGE>


Item 13.  Exhibits and Reports on Form 8-K

Exhibit
Number      Exhibit Name                                            Page Number

Exhibit 3   Articles of Incorporation and Bylaws                          *
                                                                        -----
Exhibit 4   Instruments Defining the Rights of Security Holders

  Exhibit 4.1   Incentive Stock Option Plan                               *
                                                                        -----

  Exhibit 4.2   Non-Qualified Stock Option Plan                           *
                                                                        -----

  Exhibit 4.3   Stock Bonus Plan                                          *
                                                                        -----

Exhibit 10    Material Contracts

  Exhibit 10.1  Agreement relating to purchase of patent rights           *
                                                                        -----

  Exhibit 10.2  Assignment of patent rights                               *
                                                                        -----
  Exhibit 10.3  Agreement relating to purchase of proprietary
                technology and trademarks                                 *
                                                                        -----

  Exhibit 10.4  Assignment of trademarks                                  *
                                                                        -----

  Exhibit 10.5  Non-Compete Agreement                                     *
                                                                        -----

*    Incorporated by reference to the same exhibit filed as part of the
     Company's Registration Statement on Form 10-SB.

8-K Reports

      During the quarter ending December 31, 2001 the Company did not file any
reports on Form 8-K.




<PAGE>

















                      LUNA TECHNOLOGIES INTERNATIONAL, INC.


                        CONSOLIDATED FINANCIAL STATEMENTS


                           DECEMBER 31, 2001 AND 2000







AUDITORS' REPORT

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       F-1


<PAGE>



                                                  1205 - 1095 West Pender Street
                                                  Vancouver, BC
                                                  Canada V6E 2M6
                                                  Telephone (604) 682-2778
                                                  Facsimile (604) 689-2778
                                                  Email: rjl@labonteco.com









                                AUDITORS' REPORT
  ---------------------------------------------------------------------------


To the Stockholders and Board of Directors of Luna Technologies International,
Inc.

We have audited the consolidated balance sheets of Luna Technologies
International, Inc. as at December 31, 2001 and 2000 and the consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2001
and 2000 and the results of its operations and the changes in stockholders'
equity and cash flows for the years then ended in accordance with generally
accepted accounting principles in the United States.



                                                       "LaBonte & Co."

                                                      CHARTERED ACCOUNTANTS

Vancouver, B.C.
February 25, 2002


COMMENTS BY AUDITORS FOR U.S.READERS ON CANADA-UNITED STATES REPORTING
DIFFERENCES
-------------------------------------------------------------------------------

In the United States, reporting standards for auditors' would require the
addition of an explanatory paragraph following the opinion paragraph when the
financial statements are affected by conditions and events that cast substantial
doubt on the Company's ability to continue as a going concern, such as those
described in Note 1. Our report to the Stockholders and Board of Directors dated
February 25, 2002 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such conditions and events in the auditors'
report when these are adequately disclosed in the financial statements.


                                                          "LaBonte & Co."

                                                        CHARTERED ACCOUNTANTS

Vancouver, B.C.
February 25, 2002

                                       F-2


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                           CONSOLIDATED BALANCE SHEETS

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

CURRENT ASSETS
  Cash                                                $     893     $    13,812
     Accounts receivable                                 20,609           2,000
     Prepaid expenses                                     3,997           6,173
     Inventory                                           34,134           3,134
-------------------------------------------------------------------------------
                                                         59,633          25,119

FURNITURE AND EQUIPMENT,
     net of depreciation of $31,937 (2000 - $10,555)     34,056          20,639
-------------------------------------------------------------------------------
                                                    $    93,689     $    45,758
===============================================================================

            LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)

CURRENT LIABILITIES
  Accounts payable and accrued liabilities          $   159,687     $   102,582
     Refundable deposits                                 84,411          68,263
     Loans payable (Note 3)                              81,262          82,634
  Notes payable (Note 4)                                 40,730               -
-------------------------------------------------------------------------------

                                                        366,090         253,479
DUE TO RELATED PARTIES (Note 4)                         167,681         115,074
-------------------------------------------------------------------------------

                                                        533,771        368,553
-------------------------------------------------------------------------------
CONTINGENCIES (Note 1)

STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
  Capital stock  (Note 5)
   Common stock, $0.0001 par value, 30,000,000
   shares authorized 4,960,911 (2000 - 4,610,911)
   shares issued and outstanding                            496            461

   Convertible preferred stock, $0.0001 par value,
   5,000,000 shares authorized NIL issued and
   outstanding                                                -              -
  Additional paid-in capital                            332,126        195,089
  Deficit                                              (781,981)      (522,214)
     Accumulated other comprehensive income               9,277          3,869
-------------------------------------------------------------------------------
                                                       (440,082)      (322,795)
-------------------------------------------------------------------------------
                                                     $   93,689      $  45,758
===============================================================================


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



                                       F-3

<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                        Year Ended December 31,
                                                       2001              2000
-------------------------------------------------------------------------------

SALES                                              $  229,423      $  403,580
COST OF SALES                                         137,170         280,985
-------------------------------------------------------------------------------

GROSS MARGIN                                           92,253         122,595
------------------------------------------------------------------------------

GENERAL AND ADMINISTRATIVE EXPENSES
  Consulting                                           83,601          94,716
  Depreciation                                         21,382           9,549
     Interest                                          12,450          11,630
     Management fees                                   57,186          94,000
  Office and general                                   81,768         110,426
  Professional fees                                    30,546          85,972
     Rent                                              23,994          20,256
     Research and development, net of recoveries       18,744           2,076
  Wages and benefits                                   32,255          23,222
     Gain on settlement of accrued interest (Note 3)   (9,906)              -
-------------------------------------------------------------------------------
                                                      352,020         451,847
-------------------------------------------------------------------------------

NET LOSS FOR THE YEAR                              $ (259,767)     $ (329,252)
=============================================================================

BASIC NET LOSS PER SHARE                            $   (0.05)     $    (0.07)
=============================================================================

WEIGHTED AVERAGE COMMON
    SHARES OUTSTANDING                              4,822,605       4,550,809
===============================================================================









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

                                       F-4



<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                  FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<S>                               <C>       <C>         <C>         <C>          <C>          <C>          <C>             <C>
                                                                                                       Accumulated
                                                                             Additional                   other
                                Preferred Stock          Common Stock          Paid In                  Comprehensive
                               Number               Number of                 Capital       Deficit       Income           Total
                             of shares    Amount      shares       Amount                                 (loss)
-----------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999    34,475     $     3    4,500,000   $   450     $  72,997     $ (192,962)    $   (358)     $ (119,870)

Preferred stock issued        36,050           4           -          -        72,096              -            -          72,100
for cash

Conversion of preferred
stock into common stock      (70,525)         (7)     77,578          8            (1)             -            -               -

Common stock issued for            -           -      33,333          3        49,997              -            -          50,000
cash

Net loss for the year              -           -           -          -             -       (329,252)           -        (329,252)

Currency translation               -           -           -          -             -               -       4,227           4,227
adjustment
-----------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2000         -           -   4,610,911        461       195,089        (522,214)      3,869        (322,795)

Common stock issued on
settlement related party
advances                           -           -     350,000         35       137,037               -           -         137,072


Net loss for the year              -           -           -          -             -        (259,767)          -        (259,767)

Currency translation               -           -           -          -             -               -       5,408           5,408
adjustment
-----------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2001         -      $    -    4,960,911    $   496    $ 332,126      $ (781,981)    $ 9,277       $(440,082)
===================================================================================================================================
</TABLE>




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

                                       F-5


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS



                                                         Year Ended December 31,
                                                             2001          2000
------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss for the year                                $ (259,767)  $ (329,252)
  Adjustments to reconcile net loss to net cash from
operating activities:
  - depreciation                                           21,382        9,549
   - accrued interest                                       8,522        7,634
   - gain on settlement of  accrued interest               (9,906)           -
   - accounts receivable                                  (18,609)      (2,000)
   - inventory                                            (24,430)      (3,134)
   - prepaid expenses                                       2,176       (6,173)
   - accounts payable                                      57,105       94,316
   - refundable deposits                                   16,148       68,263
==============================================================================

NET CASH USED IN OPERATING ACTIVITIES                    (207,379)    (160,797)
-------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of capital assets                                 (627)     (21,720)
------------------------------------------------------------------------------

NET CASH USED IN INVESTING ACTIVITIES                        (627)     (21,720)
-------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds on sale of common stock                             -       50,000
   Proceeds on sale of preferred stock                          -       72,100
   Loans payable                                                -       75,000
   Repayment of notes payable                                   -     (150,000)
   Advances from related parties                          189,679      123,193
-------------------------------------------------------------------------------

NET CASH FLOWS FROM FINANCING ACTIVITIES                  189,679      170,293
-------------------------------------------------------------------------------

EFFECT OF EXCHANGE RATE CHANGES                             5,408        4,227
------------------------------------------------------------------------------

DECREASE IN CASH                                          (12,919)      (7,997)

CASH, BEGINNING OF YEAR                                    13,812       21,809
-------------------------------------------------------------------------------

CASH, END OF YEAR                                        $    893   $   13,812
===============================================================================

 Non-cash activities:

     During 2001 the Company issued $40,730 of notes payable in connection  with
     the  acquisition of certain  inventory and fixed assets from LTBC (Refer to
     Note 3).

     During 2001 the Company issued 350,000 shares of common stock in settlement
     of advances received from a director of the Company totalling $137,072.

     During 2001 the Company  settled  accrued  interest on certain of its loans
     payable resulting in a gain on settlement of $9,906 (Refer to Note 3).


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

                                       F-6

<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000
-----------------------------------------------------------------------------

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" from Douglas Sinclair, an officer and
employee of LTBC, 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 company completed a Form 10SB registration with the United States Securities
and Exchange Commission effective May 15, 2000 and during the yea received
clearance to have its stock quoted on the OTC Bulletin Board.

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. At December 31, 2001 the Company
has a working capital deficiency of $306,457 (2000 - $228,360) 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. In addition, during the year 61% of the
Company's sales were made to two customers representing 40% and 21%
respectively.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The financial statements include the accounts of the Company and its
wholly-owned subsidiary Luna Technologies (Canada) Ltd. ("LTC"), a company
incorporated June 9, 1999 in the province of British Columbia. LTC was
incorporated to conduct all future business activities in Canada. All
significant intercompany balances and transactions are eliminated on
consolidation.

Use of Estimates and Assumptions

Preparation of the Company's financial statements in conformity with United
States generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

Inventory

Inventory is carried at the lower of cost and net realizable value.

Furniture and Equipment

Furniture and equipment are stated at cost. Depreciation is computed by the
straight-line method on estimated useful lives of two to five years.

Revenue recognition

The Company recognizes revenue when products have been shipped.

Research and development costs

Ongoing product and technology research and development costs are expensed as
incurred net of contributions made by third parties toward research projects.


                                       F-7

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Foreign Currency Translation

The financial statements are presented in United States dollars. In accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation", foreign denominated monetary assets and liabilities are translated
to their United States dollar equivalents using foreign exchange rates which
prevailed at the balance sheet date. Revenue and expenses are translated at
average rates of exchange during the year. Related translation adjustments are
reported as a separate component of stockholders' equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.

Fair Value of Financial Instruments

In accordance with the requirements of SFAS No. 107, the Company has determined
of the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of financial
instruments classified as current assets or liabilities including cash and cash
equivalents and notes and accounts payable approximate carrying value due to the
short-term maturity of the instruments.

Net Loss per Common Share

Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings per share reflects the potential
dilution of securities that could share in the earnings of the Company. Because
the Company does not have any potentially dilutive securities outstanding, the
accompanying presentation is only of basic loss per share.

Stock-based Compensation

The Company accounts for stock-based compensation using the intrinsic value
based method in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB No.25"). APB No. 25 requires that
compensation cost be recorded for the excess, if any, of the quoted market price
of the common stock over the exercise price at the date the options are granted.
In addition, as required by SFAS No. 123, the company provides pro-forma
disclosure of the impact of applying the fair value method of SFAS No. 123.

Income taxes

The Company follows the liability method of accounting for income taxes. Under
this method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Future tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment.

Recent accounting pronouncements

On March 31, 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No.44, Accounting for Certain Transactions Involving Stock
Compensation - An Interpretation of APB Opinion No. 25 ("FIN 44"), which
provides guidance as to certain applications of APB 25. FIN 44 is generally
effective July 1, 2000 with the exception of certain events occurring after
December 15, 1998. The Company has determined that the implementation of this
standard does not have a material effect on its financial statements.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"), which establishes accounting and reporting standards for derivative
instruments, including instruments embedded in other contracts, and hedging
activities. It requires that an entity recognize all derivatives; as either
assets or liabilities and measure those instruments at fair value. SFAS 133 is
effective for financial statements for fiscal years beginning after June 15,
1999. As the Company does not currently use derivative instruments, the adoption
of SFAS 133 is not expected to have a significant effect on the Company's
results of operations or its financial position.


                                       F-8


<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations",
which eliminates the pooling method of accounting for business combinations
initiated after June 30, 2001. In addition, SFAS 141 addresses the accounting
for intangible assets and goodwill acquired in a business combination. This
portion of SFAS 141 is effective for business combinations completed after June
30, 2001. The adoption of SFAS 141 is not expected to have a material impact on
the Company's financial position or results of operations.

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS 142"), "Goodwill and Intangible Assets", which revises the accounting
for purchased goodwill and intangible assets. Under SFAS 142, goodwill and
intangible assets with indefinite lives will no longer be amortized and will be
tested for impairment annually. SFAS 142 is effective for fiscal years beginning
after December 15, 2001, with earlier adoption permitted. The adoption of SFAS
142 is not expected to have a material impact on the Company's financial
position or results of operations.

NOTE 3 - LOANS PAYABLE

During 2000 a director of the Company loaned $60,000 to the Company. This amount
is secured by a promissory note, bears interest at 10% and had and original due
date of October 1, 2001 which has been amended to October 1, 2002. At December
31, 2001 $6,262 (2000 - $262) of accrued interest has been recorded in
connection with this loan.

Also during 2000 the Company borrowed $60,000 to satisfy working capital
requirements and as at December 31, 2001, has a loan payable, net of previous
principal repayments, of $15,000 originally due June 1, 2001 which has been
extended to December 31, 2001 and subsequent to year end, further extended to
June 15, 2002. The note originally bore interest at a rate of 30% per annum,
however, during 2001, the note holder agreed to forgive all previously accrued
interest and waive all future interest until the amended due date resulting in a
gain on settlement in the year of $9,906.

NOTE 4 - RELATED PARTY TRANSACTIONS

During the year the Company had transactions with directors, a relative of a
director, and LTBC as follows: expenses paid on behalf of and advances made to
the Company - $298,009 (2000 - $482,773); management fees incurred by the
Company - $57,186 (2000 - $94,000); and payments and reimbursements made by the
Company - $165,516 (2000 - $453,580). Also during the year $137,072 due to a
director was settled through the issuance of 350,000 shares of common stock.
Amounts due to related parties are non-interest bearing and have no specific
terms of repayment.

By agreements dated January 1, 2001, the Company and LTC acquired certain
inventory and fixed assets from LTBC. In consideration for these acquisitions,
the Company and LTC issued non-interest-bearing promissory notes totalling
$40,730 originally due on or before June 30, 2001. The due dates on these notes
have been amended to January 1, 2002. Subsequent to year end, the due dates on
these notes were further extended to January 1, 2003.

Refer to Notes 3 and 5.

NOTE 5 - CAPITAL STOCK

During 1999 and 2000 the Company issued 70,525 shares of preferred stock at
$2.00 per share for proceeds of $141,050, pursuant to Regulation 504 of the
Securities Act of 1933. Each share of preferred stock is voting, is entitled to
non-cumulative cash dividends at the rate of $0.20 per share per year, and may
be converted into 1.10 shares of common stock at any time prior to May 31, 2000.
During 2000 these 70,525 preferred shares were converted into 77,578 common
shares leaving no preferred shares outstanding.

Effective October 25, 2000 the Company completed a private placement of 33,333
restricted shares of common stock at a price of $1.50 per share for total
proceeds of $50,000.

                                       F-9


<PAGE>

NOTE 5 - CAPITAL STOCK (cont'd)

During 2001 the Company issued 350,000 shares of common stock in settlement of
certain advances from a director of the Company totalling $137,072.

Stock option plans

During 2000 the Company adopted plans allowing for the granting of stock options
and awarding of shares of common stock as follows:

Incentive Stock Option Plan

Effective March 15, 2000 the Company adopted an Incentive Stock Option Plan
authorizing the issuance of options to purchase up to 300,000 (subsequently
amended to 200,000) shares of common stock less the number of options previously
granted under this plan and the Non-Qualified Stock Option Plan. 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.

Non-Qualified Stock Option Plan

Effective March 15, 2000 the Company adopted a Non-Qualified Stock Option Plan
authorizing the issuance of options to purchase up to 400,000 (subsequently
amended to 600,000) shares of common stock less the number of options previously
granted under this plan and the Incentive Stock Option Plan. 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 be exercised at any time following the date of
grant. This plan is available to officers, directors, employees, consultants and
advisors of the Company.

Stock Bonus Plan

Effective March 15, 2000 the Company adopted a Stock Bonus Plan authorizing the
awarding of up to 400,000 (subsequently amended to 200,000) shares of common
stock. This plan is available to officers, directors, employees, consultants and
advisors of the Company.

As at December 31, 2001, no stock-based compensation cost has been recorded for
any period and no stock options or awards have been issued under any of these
plans.

NOTE 6 - INCOME TAXES

There were no temporary differences between the Company's tax and financial
bases, except for the Company's net operating loss carryforwards amounting to
approximately $632,000 at December 31, 2001. 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 valuation allowance has been recorded which offsets the
deferred tax assets at the end of the year.





Luna Fins Final 3-28-02



                                      F-10







<PAGE>


                                  SIGNATURES


    In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 28th day of March, 2002.

                                  LUNA TECHNOLOGIES INTERNATIONAL INC.


                                  By  /s/ Kimberly Landry
                                     -----------------------------------------
                                     Kimberly Landry, President


                                  By  /s/ Dale Berscht
                                      ----------------------------------
                                      Dale Berscht, Principal Accounting and
                                      Financial Officer




         In accordance with the Exchange Act, this Report has been signed by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.

Signature                            Title                    Date


 /s/ Kimberly Landry
-------------------------
Kimberly Landry                     Director              March 28, 2002



 /s/ Robert H. Humber
-------------------------
Robert H. Humber                    Director              March 28, 2002







Luna 10-KSB Dec 01 Final March-02