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, 2002
                                       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 $332,285.

The aggregate market value of the voting stock held by non-affiliates of the
Company as of March 31, 2003 was approximately $1,340,000.

As of March 31, 2003 the Company had 5,455,166 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, 2002 the
Company had cumulative losses of $(1,123,898). 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, 2002 the Company had sales of $332,285.
As of March 28, 2003 the Company had a backlog, representing firm orders for
delivery of Lunaplast prior to December 31, 2003, of $1,304.

<PAGE>

      During the year ended December 31, 2002 one customer accounted for 73% of
the Company's gross revenues. The Company is of the opinion that the loss of
this customer would not 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, 2003 the Company had 5
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
U.S. and elsewhere. Some producers include companies such as Permalight AG of

<PAGE>

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, 2003 the Company had 8 full-time employees including Douglas
Sinclair and Kimberly Landry. See Item 9 of this report. As of March 28, 2003
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 prices for the common stock as reported by the NASD for each quarter
beginning in April 2001 when the Company's stock was first quoted. The prices

<PAGE>

reflect inter-dealer quotations without adjustments for retail mark-up, markdown
or commissions, and do not necessarily represent actual transactions.


      Quarter Ending                      High          Low

           6/30/01                        $1.01         $0.51
           9/30/01                        $0.60         $0.45
          12/31/01                        $0.45         $0.45

           3/31/02                        $0.71         $0.41
           6/30/02                        $1.10         $0.75
           9/30/02                        $0.87         $0.35
          12/31/02                        $0.48         $0.25

      As of March 28, 2003 there were 102 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

      Sales during the year ended December 31, 2002 were $332,285, an increase
of $102,862 or 45% from the previous year. Sales to a single customer amounted
to 73% of total sales during 2002.

      During the year ended December 31, 2002 the Company received payments
totaling $50,000 from customers in connection with pricing agreements.

      General and administrative expenses for the year ended December 31, 2002
increased primarily as the result of expensing the fair value ($96,910) of
110,000 common shares issued during the year for services provided to the
Company.

      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

<PAGE>

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.

      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.

      During the year ended December 31, 2002, the Company's operations used
$234,775 in cash and the Company purchased $18,651 of equipment. During this
period the Company satisfied its cash requirements through sales of common stock
in private placements, a loan, described below, from the Company's principal
customer, and the agreement of Kimberly Landry and Douglas Sinclair to defer
their compensation for the year ended December 31, 2002. The compensation due
Ms. Landry and Mr. Sinclair for 2002 ($63,200 in total) was offset against
payments and reimbursements made by the Company to Ms. Landry and Mr. Sinclair,
resulting in a net increase of $36,781 in Advances From Related Parties for the
year.

      Between December 2002 and January 2003 the Company borrowed $120,000 from
a third party. Loan proceeds of $60,000 were received in December 2002 and the
remaining $60,000 was received in January 2003. The loan is secured by all of
the Company's assets and bears interest at a rate of 8% per year. The loan is to
be repaid in 30 monthly principal payments of $3,333, commencing June 21, 2003,
with a final principal payment of $20,010 due on December 21, 2005. Interest on
the outstanding principal balance is payable monthly commencing June 21, 2003.
The unpaid balance of the loan and interest may be converted at any time into
restricted shares of the Company's common stock at a price of $0.60 per share
during 2003, $0.90 per share during 2004 and $1.20 per share during 2005.

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

      $700,000 for corporate expenses, $25,000 for research relating to the
development of advanced strontium aluminate PL materials, $94,000 to repay
amounts borrowed from Kimberly Landry and $63,200 to pay the compensation due
Kimberly Landry ($19,200) and Douglas Sinclair ($44,000) for 2002.

      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, 2002 the Company had a working capital
deficiency of approximately $(300,000). 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.

<PAGE>


Recent Accounting Pronouncements

See Note 2 to the Company's financial statements.

Critical Accounting Policies And Estimates

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. On an on-going
basis, management evaluates its estimates and judgments, including those related
to revenue recognition, intangible assets, financing operations, and
contingencies and litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. These accounting policies
are described in the notes to the consolidated financial statements for the
fiscal year ended December 31, 2002 which are included as part of this report.

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     37          President, Secretary and a Director
   Douglas Sinclair    54          Executive  Vice  President  and  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.

      Douglas Sinclair has been the Company's Executive Vice President since
September 1, 2001. Mr. Sinclair has been the Company's Chief Financial Officer
since July 1, 2002. Mr. Sinclair has been the Chief Executive Officer of the

<PAGE>

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.

      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, 2001, and 2002.

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

Kimberly Landry,    2002  $20,000     --       --           --            --
President since     2001  $32,667     --       --           --            --
September 1, 2001   2000  $36,000     --       --           --            --
and Secretary

Douglas Sinclair,   2002  $50,000     --       --           --            --
Executive Vice      2001  $40,000     --       --           --            --
President           2000  $40,000     --       --           --            --


(1)  The dollar value of base salary (cash and non-cash) received.
(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, 2002.

<PAGE>

      Name                          Shares                  Value
      ----                          ------                  ------

      Kimberly Landry            1,930,000                $752,700
      Douglas Sinclair               1,000               $  39,999

(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.

      The Company's Canadian subsidiary has an employment agreement with
Kimberly Landry whereby the subsidiary has agreed to pay Ms. Landry a salary of
$3,333 per month during the twelve-month period ending December 31, 2003.

      The Company's Canadian subsidiary has an employment agreement with Douglas
Sinclair whereby the subsidiary has agreed to pay Mr. Sinclair a salary of
$5,000 per month during the twelve-month period ending December 31, 2003.

      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.

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".
None of the plans have been approved by the Company's shareholders.

<PAGE>


      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.

      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 par
value of the Company's Common Stock on the date the option is granted.

<PAGE>

      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
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

<PAGE>

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 31,
2003, 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. The options granted pursuant to the Company's Non-Qualified Stock Option
Plan were granted subsequent to December 31, 2002.

                                   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      80,000          N/A     490,000 (1)
Stock Bonus Plan                200,000         N/A       91,000     109,000

(1)  Options for the purchase of 30,000 shares of common stock at a price of
     $0.40 per share were exercised on February 14, 2003.

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 31,
2003.

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

Kimberly Landry                      1,930,000                     35%
1653 Plateau Crescent
Coquitlam, British Columbia
Canada V3B 3E3

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

Robert H. Humber                       790,000                     14%
130581/239th Ave., N.E
Seattle, WA  98125-4614

<PAGE>


William Donovan                        438,000                      8%
37 Saratoga Drive
Dartmouth, Nova Scotia
Canada  B2X 5P9

All Officers and Directors
  as a Group (3 persons)             2,721,000                     50%

*   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:

                                 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.

<PAGE>


      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, 2003.

      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 to January 1,
2004.

      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.

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, 2002 the Company did not file any
reports on Form 8-K.

<PAGE>


ITEM 14.    CONTROLS AND PROCEDURES

      Kim Landry, the Company's Chief Executive Officer and Douglas Sinclair,
the Company's Chief Financial Officer, have evaluated the effectiveness of the
Company's disclosure controls and procedures as of a date within 90 days prior
to the filing date of this annual report (the "Evaluation Date") and in their
opinion the Company's disclosure controls and procedures ensure that material
information relating to the Company, including the Company's consolidated
subsidiaries, is made known to them by others within those entities,
particularly during the period in which this report is being prepared, so as to
allow timely decisions regarding required disclosure. To the knowledge of Ms.
Landry and Mr. Sinclair there have been no significant changes in the Company's
internal controls or in other factors that could significantly affect the
Company's internal controls subsequent to the Evaluation Date. As a result, no
corrective actions with regard to significant deficiencies or material weakness
in the Company's internal controls were required.




<PAGE>






















                      LUNA TECHNOLOGIES INTERNATIONAL, INC.


                        CONSOLIDATED FINANCIAL STATEMENTS


                           DECEMBER 31, 2002 AND 2001





















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>



               LABONTE & CO.                           610 - 938 Howe Street
-----------------------------------------              Vancouver, BC  Canada
C H A R T E R E D   A C C O U N T A N T S              V6Z  1N9
                                                       Telephone (604) 682-2778
                                                       Facsimile (604) 689-2778
                                                       Email: info@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, 2002 and 2001 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, 2002
and 2001 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.
March 7, 2003


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
March 7, 2003 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.
March 7, 2003


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                           CONSOLIDATED BALANCE SHEETS

                                                          December     December
                                                          31, 2002     31, 2001
--------------------------------------------------------------------------------

                                     ASSETS

CURRENT ASSETS
  Cash                                                   $      -     $     893
     Accounts receivable                                    42,693       20,609
     Prepaid expenses                                        2,197        3,997
     Inventory (Note 7)                                     21,058       34,134
--------------------------------------------------------------------------------
                                                            65,948       59,633

FURNITURE AND EQUIPMENT,
   net of depreciation of $50,654 (2001 - $31,937)          33,990       34,056
--------------------------------------------------------------------------------
                                                        $   99,938   $   93,689
================================================================================

            LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)

CURRENT LIABILITIES
  Bank overdraft                                        $    2,339     $      -
  Accounts payable and accrued liabilities                 236,771      159,687
  Refundable deposits                                            -       84,411
  Current portion of convertible debenture (Note 5)         11,666            -
  Loans payable (Note 3)                                    76,812       81,262
  Notes payable (Note 4)                                    40,730       40,730
--------------------------------------------------------------------------------
                                                           368,318      366,090
CONVERTIBLE DEBENTURE (Note 5)                              48,334            -
DUE TO RELATED PARTIES (Note 4)                            204,462      167,681
--------------------------------------------------------------------------------
                                                           621,114      533,771
--------------------------------------------------------------------------------

CONTINGENCIES (Notes 1 and 7)

STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
 Capital stock  (Note 6)
  Common stock, $0.0001 par value, 30,000,000 shares
  authorized 5,415,166 (2001 - 4,960,911) shares
  issued and outstanding                                       542          496

  Convertible preferred stock, $0.0001 par value,
  5,000,000 shares authorized NIL issued and outstanding         -            -
  Additional paid-in capital                               605,150      332,126
  Deficit                                               (1,123,898)    (781,981)
     Accumulated other comprehensive income (loss)          (2,970)       9,277
--------------------------------------------------------------------------------
                                                          (521,176)    (440,082)
--------------------------------------------------------------------------------
                                                        $   99,938   $   93,689
================================================================================


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


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        Year Ended December 31,
                                                           2002         2001
-------------------------------------------------------------------------------

SALES                                                 $   332,285   $   229,423
COST OF SALES                                             217,469       137,170
-------------------------------------------------------------------------------

GROSS MARGIN                                              114,816        92,253
OTHER INCOME                                               50,000             -
-------------------------------------------------------------------------------
                                                          164,816        92,253
-------------------------------------------------------------------------------

GENERAL AND ADMINISTRATIVE EXPENSES
  Consulting                                               78,344        83,601
  Consulting - stock based (Note 6)                        96,910             -
  Depreciation                                             18,717        21,382
    Interest                                               12,916        12,450
    Management fees                                        63,049        57,186
  Office and general                                      103,738        81,768
  Professional fees                                        59,437        30,546
    Rent                                                   25,910        23,994
    Research and development                                7,426        18,744
  Wages and benefits                                       40,286        32,255
    Gain on settlement of accrued interest                      -        (9,906)
--------------------------------------------------------------------------------
                                                          506,733       352,020
--------------------------------------------------------------------------------

NET LOSS FOR THE YEAR                                  $ (341,917)   $ (259,767)
================================================================================

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

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING              5,257,852     4,822,605
================================================================================










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



<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.
                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<S>                                                     <C>       <C>         <C>         <C>          <C>         <C>



                                                                                                   Accumulated
                                                                                                      other
                                                        Common Stock       Additional              Comprehensive
                                                    Number of                Paid In                  Income
                                                     shares      Amount      Capital     Deficit      (loss)      Total
---------------------------------------------------------------------------------------------------------------------------

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 adjustment                              -           -           -           -      5,408        5,408
---------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2001                           4,960,911         496     332,126    (781,981)     9,277     (440,082)

Issued for cash at - $0.50 per share                   200,000          20      99,980           -          -      100,000
                   - $0.55 per share                    15,455           2       8,498           -          -        8,500
                   - $0.60 per share                    75,000           7      44,993           -          -       45,000
                   - $0.70 per share                     4,800           1       3,359           -          -        3,360
                   - $0.75 per share                     4,000           1       2,999           -          -        3,000
                   - $0.80 per share                    15,000           1      11,999           -          -       12,000

Issued for consulting services                          34,000           3      13,597           -          -       13,600

Issued pursuant to stock bonus plan                     76,000           8      55,902           -          -       55,910

Stock-based compensation                                     -           -      28,700           -          -       28,700

Issued on exercise of options at                        30,000           3       2,997           -          -        3,000
$0.10 per share

Net loss for the year                                        -           -           -    (341,917)         -     (341,917)

Currency translation                                         -           -           -           -    (12,247)     (12,247)
adjustment
---------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2002                           5,415,166   $     542  $  605,150 $(1,123,898) $  (2,970) $  (521,176)
===========================================================================================================================

</TABLE>


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


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                                                        Year Ended December 31,
                                                           2002         2001
--------------------------------------------------------------------------------

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
  Net loss for the year                                $ (259,767)  $ (341,917)
  Adjustments to reconcile net loss to net cash
   from operating activities:
   - depreciation                                          18,717       21,382
   - stock-based compensation                              83,310            -
   - non-cash consulting expense                           13,600            -
   - accrued interest expense                               6,050        8,522
   - gain on settlement of  accrued interest                    -       (9,906)
   - accounts receivable                                  (22,084)     (18,609)
   - inventory                                            (44,571)     (24,430)
   - prepaid expenses                                       1,800        2,176
   - accounts payable                                      70,311       57,105
   - refundable deposits                                  (19,991)      16,148
--------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                    (234,775)    (207,379)
--------------------------------------------------------------------------------

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
  Purchase of furniture and equipment                     (18,651)        (627)
--------------------------------------------------------------------------------

NET CASH USED IN INVESTING ACTIVITIES                     (18,651)        (627)
--------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Bank overdraft                                           2,339            -
   Loan repayments                                        (10,500)           -
  Issuance of common shares                               176,160            -
   Convertible debenture                                   60,000            -
  Advances from related parties                            36,781      189,679
--------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES                  264,780      189,679
--------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES                           (12,247)       5,408
--------------------------------------------------------------------------------

DECREASE IN CASH                                             (893)     (12,919)

CASH, BEGINNING OF YEAR                                       893       13,812
--------------------------------------------------------------------------------

CASH, END OF YEAR                                       $       -    $     893
================================================================================

 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
   4)
  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. (Refer
   to Note 4)
  During 2002 the Company issued 76,000 shares of common stock under the Stock
   Bonus Plan with a fair value of $55,910. (Refer to Note 6)
  During 2002 the Company issued 34,000 shares of common stock in payment of
   consulting services with a fair value of $13,600. (Refer to Note 6)

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

<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

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 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, 2002 the Company
has a working capital deficiency of $295,597 (2001 - $302,370) 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 2002 73% of the
Company's sales were made to a single customer who also provided financing to
the Company in connection with the Convertible Debenture as described in Note 5.

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 recorded 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 and collection is
reasonably assured. The Company also generates revenues from fees in connection
with Supply Agreements. These revenues are recognized as other income upon
execution of the agreements and collection is reasonably assured.

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.




<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

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. Management has also determined that the
fair value of the convertible debenture approximates its carrying value as at
December 31, 2002.

Net Loss per Common Share
Basic loss 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. Share
purchase warrants were not included in the calculation of weighted average
number of shares outstanding because the effect would be anti-dilutive.

Stock-based Compensation
In December  2002, the Financial  Accounting  Standards  Board issued  Financial
Accounting  Standard  No.  148,  "Accounting  for  Stock-Based   Compensation  -
Transition  and  Disclosure"   ("SFAS  No.  148"),  an  amendment  of  Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No.
123").  The  purpose of SFAS No. 148 is to: (1) provide  alternative  methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based  employee  compensation,  (2) amend the disclosure
provisions  to require  prominent  disclosure  about the effects on reported net
income of an entity's  accounting  policy  decisions with respect to stock-based
employee compensation, and (3) to require disclosure of those effects in interim
financial information.  The disclosure provisions of SFAS No. 148 were effective
for the Company for the year ended December 31, 2002.

The Company has elected to continue to account for stock options granted to
employees and officers using the intrinsic value based method in accordance with
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", ("APB No. 25") and comply with the disclosure
provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. Under
APB No. 25, compensation expense is recognized based on the difference, if any,
on the date of grant between the estimated fair value of the Company's stock and
the amount an employee must pay to acquire the stock. Compensation expense is
recognized immediately for past services and pro-rata for future services over
the option-vesting period. In addition, with respect to stock options granted to
employees, the Company provides pro-forma information as required by SFAS No.
123 showing the results of applying the fair value method using the
Black-Scholes option pricing model.

In accordance with SFAS No. 123, the Company applies the fair value method using
the Black-Scholes option-pricing model in accounting for options granted to
consultants.

The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

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

The Company has also adopted the provisions of the Financial Accounting
Standards Board 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.

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
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 has not had 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 or whenever events or circumstances indicate that
the estimated fair value is less than the related carrying value as determined
on a reporting unit basis. SFAS 142 is effective for fiscal years beginning
after December 15, 2001, with earlier adoption permitted. The adoption of SFAS
142 has not had 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 an original due
date of October 1, 2001 which has been extended to October 1, 2003. At December
31, 2002 $12,312 (December 31, 2001 - $6,262) 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, had a loan payable, net of previous
principal repayments, of $15,000 originally due June 1, 2001 which was 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. During the
year the Company repaid $10,500 of this loan, however, as at December 31, 2002
$4,500 remains outstanding.


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 - $129,505 (2001 - $273,972); management fees incurred by the
Company - $63,049 (2001 - $47,829); and payments and reimbursements made by the
Company - $155,773 (2001 - $141,113). Also during 2001 $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.


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

NOTE 4 - RELATED PARTY TRANSACTIONS (cont'd)

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 extended to January 1, 2004.

Effective July 1, 2002 a director of the Company and the CEO of LTC signed one
year employment agreements with LTC subject to automatic one year renewals. In
connection with these agreements, the director and CEO will receive CAN$5,000
and CAN$7,500 per month respectively.

Refer to Note 3.

NOTE 5 - CONVERTIBLE DEBENTURE

Effective December 21, 2002 the Company issued a $120,000 Secured Convertible
Debenture (the "Debenture"). The Debenture is secured by a first floating charge
on all of the property, assets and undertakings of the Company and bears
interest at a rate of 8% per annum. The Company is required to make fixed
monthly principal payments of $3,333 for a period of 30 months commencing June
21, 2003 and a final principal payment of $20,010 due December 21, 2005.
Interest is calculated on the outstanding principal balance and is payable
monthly commencing June 21, 2003.

The total unpaid balance of principal and interest may be converted at any time
into restricted shares of the Company's common stock at a price of $0.60 per
share during 2003, $0.90 per share during 2004 and $1.20 per share during 2005.

As at December 31, 2002 the Company had received $60,000 of the proceeds from
this debenture and the remaining $60,000 was received subsequently. This
Debenture was issued to the Company's major customer as described in Note 1.

NOTE 6 - CAPITAL STOCK

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.

During 2002 the Company issued 200,000 units at a price of $0.50 per unit for
proceeds of $100,000. Each unit consist of one common share and one share
purchase warrant entitling the holder to purchase one additional common share of
the Company at a price of $1.00 per share until March 1, 2004.

During 2002 the Company issued 15,455 units at a price of $0.55 per unit for
proceeds of $8,500. Each unit consist of one common share and one share purchase
warrant entitling the holder to purchase one additional common share of the
Company at a price of $1.00 per share until March 1, 2004.

During 2002 the Company issued 75,000 units at a price of $0.60 per unit for
proceeds of $45,000. Each unit consist of one common share and one share
purchase warrant entitling the holder to purchase one additional common share of
the Company at a price of $1.25 per share until September 15, 2003.

During 2002 the Company issued 4,800 units at a price of $0.70 per unit for
proceeds of $3,360. Each unit consist of one common share and one share purchase
warrant entitling the holder to purchase one additional common share of the
Company at a price of $1.00 per share until March 1, 2004.

During 2002 the Company issued 4,000 units at a price of $0.75 per unit for
proceeds of $3,000. Each unit consist of one common share and one share purchase
warrant entitling the holder to purchase one additional common share of the
Company at a price of $1.00 per share until March 1, 2004.


<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

NOTE 6 - CAPITAL STOCK (cont'd)

During 2002 the Company issued 15,000 units at a price of $0.80 per unit for
proceeds of $12,000. Each unit consist of one common share and one share
purchase warrant entitling the holder to purchase one additional common share of
the Company at a price of $1.25 per share until March 1, 2004.

As at December 31, 2002 share purchase warrants are outstanding to purchase
224,255 shares at a price of $1.00 to March 1, 2004; 15,000 shares at a price of
$1.25 to March 1, 2004 and 75,000 shares at a price of $1.25 to September 15,
2003.

Stock option plans
As approved by the directors effective February 6, 2002, the Company has adopted
plans allowing for the granting of stock options and awarding of shares of
common stock as follows:

   Incentive Stock Option Plan
   The Company adopted an Incentive Stock Option Plan authorizing the issuance
   of options to purchase up to 200,000 shares of common stock of the Company.
   Options granted under this plan will have a price and term to be determined
   at the time of grant, but shall not be granted at less than the then fair
   market value of the Company's common stock and can not be exercised until one
   year following the date of grant. This plan is available to officers,
   directors and key employees of the Company.

   Non-Qualified Stock Option Plan
   The Company adopted a Non-Qualified Stock Option Plan authorizing the
   issuance of options to purchase up to 600,000 shares of common of the
   Company. Options granted under this plan will have a price and term to be
   determined at the time of grant, but shall not be granted at less than the
   then par value of the Company's common stock and can be exercised at any time
   following the date of grant. This plan is available to officers, directors,
   employees, consultants and advisors of the Company.

   Stock Bonus Plan
   The Company adopted a Stock Bonus Plan authorizing the awarding of up to
   200,000 shares of common stock of the Company solely at the discretion of the
   board of directors. This plan is available to officers, directors, employees,
   consultants and advisors of the Company.

Effective February 14, 2002 the Company filed a Form S-8 Registration Statement
in connection with the shares authorized under the Incentive Stock Option Plan,
the Non-Qualified Stock Option Plan and the Stock Bonus Plan.

During 2002 the Company awarded 76,000 shares of common stock under the Stock
Bonus Plan with a fair value of $55,910. The Company recorded a consulting
expense in the year of $54,610 being the fair value of the shares awarded less
reimbursements received totalling $1,300. As at December 31, 2002 124,000 shares
remain available for awards under the Stock Bonus Plan.

During 2002 the Company issued 34,000 restricted shares of common stock in
payment of consulting services with a fair value of $13,600.

Also during 2002, the Company granted 30,000 options to a consultant under the
Company's Non-Qualified Stock Option Plan allowing for the acquisition of 30,000
shares of the Company's common stock at a price of $0.10 for a period of one
year. The fair value of these non-qualified stock options was recorded as a
consulting expense in the year. The fair value of these stock options at the
date of grant of $28,700 was estimated using the Black-Scholes option pricing
model with an expected life of one year, a risk-free interest rate of 4% and an
expected volatility of 113%. During the year the Company issued 30,000 shares
for proceeds of $3,000 on the exercise of these stock options.



<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

NOTE 6 - CAPITAL STOCK (cont'd)

As at December 31, 2002, no awards have been granted under the Incentive Stock
Option Plan and no stock options were outstanding under either the Incentive
Stock Option Plan or the Non-Qualified Stock Option Plan.

Refer to Note 9.


NOTE 7 - CONTINGENCY

During the year a creditor of the Company improperly seized inventory from the
Company with a carrying value of $57,647 in an attempt to secure payment of
certain refundable deposits and other accrued liabilities totalling $111,012.
The Company is currently attempting to resolve this dispute. Management believes
that the full carrying value of this inventory will ultimately be realized upon
resolution of this dispute. As at December 31, 2002 the creditor is still in
possession of the inventory and to date has not initiated any action in an
attempt to receive payment of the refundable deposits and accrued liabilities.
Accordingly, as at December 31, 2002 the net carrying amount of the inventory,
refundable deposits and accrued liabilities under dispute has been recorded as
accrued liabilities of $53,365.


NOTE 8 - 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 $960,000 at December 31, 2002. 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.


NOTE 9 - SUBSEQUENT EVENTS

The Company awarded an additional 15,000 shares of common stock under the Stock
Bonus Plan.

The Company granted 50,000 options to acquire shares of the Company's common
stock at a price of $0.50 per share and 30,000 options to acquire shares of the
Company's common stock at a price of $0.40 per share for a period of one year
under the Non-Qualified Stock Option Plan. The Company issued 30,000 shares of
common stock on the exercise of stock options at a price of $0.40 per share.




<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 31st day of March, 2003.

                                  LUNA TECHNOLOGIES INTERNATIONAL INC.


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


                                  By /s/ Douglas Sinclair
                                     ------------------------------
                                        Douglas Sinclair, Principal 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                 Director              March 31, 2003
-------------------------
Kimberly Landry

/s/ Robert H. Humber                Director              March 31, 2003
-------------------------
Robert H. Humber


                                  CERTIFICATION

           In connection with the year end report of Luna Technologies
International, Inc. (the "Company") on Form 10-KSB for the period ending
December 31, 2002 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Kimberly Landry, President of the Company, and I,
Douglas Sinclair, Principal Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)  The Report fully complies with the  requirements  of section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects the financial condition and results of the Company.

Date:  March 31, 2003              /s/ Kimberly Landry
                                   -------------------------------------------
                                   Kimberly Landry, Chief Executive Officer


                                   /s/ Douglas Sinclair
                                   -------------------------------------------
                                   Douglas Sinclair, Principal Financial Officer



<PAGE>


                          CERTIFICATION PURSUANT TO THE
                               SARBANES-OXLEY ACT

I,  Kimberly  Landry,   the  Chief  Executive   Officer  of  Luna   Technologies
International, Inc., certify that:

1. I have reviewed this year end report on Form 10-KSB of Luna Technologies
International, Inc.;

2. Based on my knowledge, this year end report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this year end
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this year end report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this year end report;

4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:

   a) designed such disclosure controls and procedures to ensure that material
      information relating to the registrant, including its consolidated
      subsidiaries, is made known to me by others within those entities,
      particularly during the period in which this year end report is being
      prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      year end report (the "Evaluation Date"); and

   c) presented in this year end report my conclusions about the effectiveness
      of the disclosure controls and procedures based on my evaluation as of the
      Evaluation Date;

5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):

   a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. I have indicated in this year end report whether there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.


Date:  March 31, 2003                /s/ Kimberly Landry
                                     ------------------------------------
                                     Kimberly Landry, Chief Executive Officer






<PAGE>


                          CERTIFICATION PURSUANT TO THE
                               SARBANES-OXLEY ACT

I,  Douglas  Sinclair,  the  Principal  Financial  Officer of Luna  Technologies
International, Inc., certify that:

1. I have reviewed this year end report on Form 10-KSB of Luna Technologies
International, Inc.;

2. Based on my knowledge, this year end report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this year end
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this year end report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this year end report;

4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:

   a) designed such disclosure controls and procedures to ensure that material
      information relating to the registrant, including its consolidated
      subsidiaries, is made known to me by others within those entities,
      particularly during the period in which this year end report is being
      prepared;

   b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      year end report (the "Evaluation Date"); and

   c) presented in this year end report my conclusions about the effectiveness
      of the disclosure controls and procedures based on my evaluation as of the
      Evaluation Date;

5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):

   a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

   b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. I have indicated in this year end report whether there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.



Date:  March 31, 2003             /s/ Douglas Sinclair
                                  ---------------------------------------
                                  Douglas Sinclair, Principal Financial Officer