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, 2003
                                       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 $481,721.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company as of March 30, 2004 was approximately $4,038,000.

As of March 30, 2004 the Company had 6,837,836 issued and outstanding  shares of
common stock.



                                       1
<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 site is www.lunaplast.com.

     From  the date of its  incorporation  and  through  December  31,  2003 the
Company had cumulative  losses of  $(1,735,410).  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.


                                       2
<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.  Subsequent to June 30,
2000,  the  Company  paid this debt in full.  As of March  30,  2004 the  patent
application had 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 paid Mr.
Sinclair $60,000.

     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.



                                       3
<PAGE>


     The Company began producing  Lunaplast on a commercial  basis during fiscal
2000. During the year ended December 31, 2003 the Company had sales of $381,721.

     During the year ended  December 31, 2003 one customer  accounted for 64% 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.



                                       4
<PAGE>


     The  Company  markets  its  products   through  its  officers  and  through
independent  sales  representatives.  As of March  30,  2004 the  Company  had 7
independent  sales  representatives  which  were  marketing  Lunaplast  in North
America, Latin America, Korea 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
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, 2004 the
Company  plans to spend  $75,000 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 CDN$3,185.

Employees

     As of March  30,  2004 the  Company  had 9  full-time  employees  including
Douglas Sinclair and Kimberly Landry. See Item 9 of this report. As of March 30,
2004 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.


                                       5
<PAGE>


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

      Not Applicable

ITEM 5.  MARKET FOR COMMON EQUITY AND OTHER RELATED  STOCK- HOLDER 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  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

      3/31/03                             $0.51         $0.30
      6/30/03                             $0.55         $0.40
      9/30/03                             $0.76         $0.35
      12/31/03                            $0.76         $0.55

     As of March 30, 2004 there were 106 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 therefore 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.


                                       6
<PAGE>


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

     Sales during the year ended December 31, 2003 were $381,721, an increase of
$49,436 or 15% from the previous year. Gross margin increased 4% to 39% over the
same period in 2002 due to the Company's  improvement in  productivity  and cost
controls.  Sales to a single customer amounted to 81% of total sales in 2002 and
64% of total sales during 2003.

     During the year ended  December  31,  2003 the  Company  received  payments
totaling $100,000 from customers in connection with pricing agreements.

     General and  administrative  expenses for the year ended  December 31, 2003
increased  with the  addition  of  management,  staff  and  overhead  needed  to
facilitate the Company's growth and ongoing product development. During the year
ended December 31, 2003,  stock-based  compensation  of $131,400 was expensed as
consulting fees representing the fair value of stock options granted and $62,100
was expensed as consulting  fees  representing  the fair value of 124,000 common
shares issued pursuant to the Company's stock bonus plan.

     During the year ended  December 31, 2003,  the  Company's  operations  used
$434,788  in cash and the Company  purchased  $6,473 of  equipment.  During this
period the Company satisfied its cash requirements through sales of common stock
in private placements and a convertible debenture. The Company repaid $24,113 in
advances made by related parties in the previous 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 $0.90 per share
during 2004 and $1.20 per share during 2005.

     The  Company  anticipates  that its  capital  needs  during the year ending
December 31, 2004 will be as follows:

     $600,000  for  corporate  expenses,  $75,000 for  research  relating to the
development of advanced strontium  aluminate PL materials,  $449,226 for current
liabilities and $39,996 for convertible debenture payments.

     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, 2003 the Company had a working  capital
deficiency of approximately  $348,000. The ability of the Company to continue as
a going concern is dependent on the Company  raising  additional  capital and on


                                       7
<PAGE>


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.

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, 2003 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 8A.    CONTROLS AND PROCEDURES

     Kim Landry,  the Company's Chief Executive  Officer and Brian Fiddler,  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. Fiddler there have been no  significant  changes in the Company's
internal  controls  or in other  factors  that  could  significantly  affect the


                                       8
<PAGE>


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.

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           38        President, Secretary and a Director
     Douglas Sinclair          55        Executive Vice President
     Brian Fiddler             42        Chief Financial Officer and a Director
     Robert H. Humber          59        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 Chief  Executive  Officer of the
Company's  Canadian  subsidiary since January 1, 2000.  Between 1995 and October
1999 Mr. Sinclair provided  consulting services to LTI in the areas of research,
development  and  marketing.  Prior  to 1995  Mr.  Sinclair  was an  independent
consultant  to companies  engaged in  developing,  manufacturing  and  marketing
photoluminescent products.

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

     Brian Fiddler has been the Company's Chief Financial and Accounting Officer
since January  2003.  Between  November 2002 and January 2003 Mr.  Fiddler was a
consultant to the Company. In April 2003 Mr. Fiddler was appointed a director of
the Company.  Since 1992 Mr. Fiddler has had his own public  accounting firm and
has been a member of the Certified  General  Accountants  Association of British
Columbia.

     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.

     The Company does not have a compensation committee.  The Company's Board of
Directors serves as the Company's Audit Committee. Brian Fiddler is the director
serving as the Company's  financial expert.  Since Mr. Fiddler is an officer and


                                       9
<PAGE>

director of the Company,  Mr. Fiddler is not independent as that term is defined
Section 121(A) of the Listing  Standards of the American Stock  Exchange.  Since
1992 Mr. Fiddler has had his own public accounting firm and has been a member of
the Certified General Accountants Association of British Columbia.

     The  Company  has  adopted  a Code of  Ethics  which is  applicable  to the
Company's principal  executive,  financial,  and accounting officers and persons
performing similar  functions.  The Code of Ethics is available on the Company's
website located at www.lunaplast.com.

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,
2001, 2002, and 2003.

                          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,    2003   $45,120     --       --            --            --
President since     2002   $20,000     --       --            --            --
September 1, 2001   2001   $32,667     --       --            --            --
and Secretary

Douglas Sinclair,   2003   $67,680     --       --            --            --
Executive Vice      2002   $50,000     --       --            --            --
President           2001   $40,000     --       --            --            --

Brian Fiddler,      2003   $25,687                       $10,980       160,000
Chief Financial
Officer

(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, 2003.


                                       10
<PAGE>


      Name                          Shares                  Value

      Kimberly Landry            1,930,000              $1,061,500
      Douglas Sinclair               1,000              $      550
      Brian Fiddler                 78,000              $   42,900

(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 CDN$5,000
per month during the twelve-month period ending December 31, 2004.

     The Company's Canadian subsidiary has an employment  agreement with Douglas
Sinclair  whereby  the  subsidiary  has  agreed to pay Mr.  Sinclair a salary of
CDN$7,500 per month during the twelve-month period ending December 31, 2004.

     The Company's  Canadian  subsidiary has an employment  agreement with Brian
Fiddler  whereby  the  subsidiary  has  agreed to pay Mr.  Sinclair  a salary of
CDN$4,000 per month during the twelve-month period ending December 31, 2004.

     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.


                                       11
<PAGE>

     Other Arrangements.  During the year ended December 31, 2003, and except as
disclosed elsewhere in this registration  statement,  no director of the Company
received any form of compensation from the Company.

Stock Options

     The following tables set forth  information  concerning the options granted
during the year ended December 2003, to the persons named below,  and the fiscal
year-end value of all unexercised  options  (regardless of when granted) held by
these persons.

                      Options Granted During Year Ended December 31, 2003
                      ----------------------------------------------------
                                    % of Total
                                     Options
                                     Granted to     Exercise
                       Options     Employees in     Price Per    Expiration
 Name                Granted (#)    Fiscal Year      Share          Date
----------------     ----------    ------------     ---------    ----------

Kimberly Landry           --             --             --           --
Douglas Sinclair          --             --             --           --
Brian Fiddler        160,000            100%       $0.10-$0.60    August 2008
Robert H. Humber          --             --             --           --

                        Option Exercises and Year-End Option Values
                       ---------------------------------------------
                                                               Value (in $) of
                                                                 Unexercised
                                                Number of        In-the-Money
                                               Unexercised    Options at Fiscal
                     Shares                   Options (3)        Year-End (4)
                   Acquired On      Value     Exercisable/       Exercisable/
Name               Exercise (1)  Realized (2) Unexercisable      Unexercisable
------------       -----------   -----------  -------------    ----------------
Kimberly Landry           --           --           --               --
Douglas Sinclair          --           --           --               --
Brian Fiddler         60,000      $29,000      60,000/40,000   $33,000/$22,000
Robert H. Humber          --           --           --               --

(1)  The number of shares  received  upon  exercise  of options  during the year
     ended December 31, 2003.

(2)  With respect to options  exercised during the Company's year ended December
     31, 2003,  the dollar value of the difference  between the option  exercise
     price and the market  value of the option  shares  purchased on the date of
     the exercise of the options.

(3)  The total  number of  unexercised  options  held as of December  31,  2003,
     separated  between  those options that were  exercisable  and those options
     that were not exercisable.

(4)  For all unexercised  options held as of December 31, 2003, the market value
     of the stock underlying those options as of December 31, 2003.


                                       12
<PAGE>

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.

     Incentive Stock Option Plan. The Incentive Stock Option Plan authorizes the
issuance  of shares of the  Company's  common  stock to  persons  that  exercise
options granted pursuant to the 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 shares of the Company's  common stock to persons that
exercise  options  granted  pursuant  to  the  Plan.  The  Company's  employees,
directors, officers, consultants and advisors are eligible to be granted options


                                       13
<PAGE>

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.

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

     Stock Bonus Plan. The Company's Stock Bonus Plan allows for the issuance of
shares  of  common  stock  to  the  Company's  employees,  directors,  officers,
consultants  and advisors;  provided,  however,  that bona fide services must be
rendered by  consultants  or advisors and such  services must not be provided in
connection  with  promoting  the  Company's  common  stock or 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


                                       14
<PAGE>

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

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

Summary.

     The  following  sets  forth  certain  information  as of  March  30,  2004,
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.
Subsequent to December 31, 2003 options for 110,000 shares were granted pursuant
to the Company's  Non-Qualified  Stock Option Plan. These options were exercised
prior to March 30, 2004.

                                 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     750,000           --         N/A     745,000
Non-Qualified Stock Option
   Plan                       1,350,000      185,000         N/A     672,330
Stock Bonus Plan              1,000,000          N/A     200,000     800,000

     The  following  table  shows the  weighted  average  exercise  price of the
outstanding   options   granted   pursuant  to  the   Company's   Incentive  and
Non-Qualified  Stock  Option  Plans  as of  December  31,  2003.  The  Company's
Incentive  and  Non-Qualified  Stock  Option  Plans  were  not  approved  by the
Company's shareholders.

                                                           Number of Securities
                                                           Remaining Available
                            Number                         For Future Issuance
                         of Securities      Weighted-          Under Equity
                         to be Issued       Average          Compensation Plans
                        Upon Exercise    Exercise Price    (Excluding Securities
                        of Outstanding   of Outstanding        Reflected in
Plan Category            Options  [a]       Options             Column (a))
--------------          --------------   -------------      -------------------

Incentive Stock                 --              --                745,000 (1)
   Option Plan

Non-Qualified Stock        185,000           $0.32                782,330 (1)
  Option Plan



                                       15
<PAGE>

(1)  Reflects amendment to Plan in January 2004 which increased number of shares
     issuable upon exercise of options granted pursuant to the Plan.

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 30,
2004.

                                       Shares of
Name and Address                    Common Stock (1)          Percent of Class
------------------                  ----------------          ----------------

Kimberly Landry                      1,930,000                     29%
1653 Plateau Crescent
Coquitlam, British Columbia
Canada V3B 3E3

Douglas Sinclair                         1,000 (2)                   *
1653 Plateau Crescent
Coquitlam, British Columbia
Canada V3B 3E3

Brian Fiddler                           78,000                      1%
61 A Fawcett Road
Coquitlam, British Columbia
Canada V3K 6V2

Robert H. Humber                       790,000                     12%
130581/239th Ave., N.E
Seattle, WA  98125-4614

All Officers and Directors
  as a Group (3 persons)             2,799,000                     41%

*   Less than 1%

(1)  Excludes  shares  issuable upon the exercise of options or warrants held by
     the following persons:




                                       16
<PAGE>

                                             Shares Issuable Upon Exercise of
            Name                              Options or Warrants Exercisable

         Kimberly Landry                                       --
         Douglas Sinclair                                 412,500
         Brian Fiddler                                    100,000
         Robert H. Humber                                      --
         William Donovan                                       --

(2)  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.


                                       17
<PAGE>

     During the year ended December 31, 2000 the Company  borrowed  $60,000 from
Kimberly  Landry.  During the year ended  December  31, 2003 the Company  issued
225,000 shares of its common stock to Ms. Landry in payment of this debt.

     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,
2005.

     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.

     During  the year  ended  December  31,  2003 the  Company  granted  Douglas
Sinclair the right to convert $123,750 in past due  compensation  into shares of
the  Company's  common  stock.  The number of shares  which may be issued to Mr.
Sinclair is equal to the amount to be converted divided by $0.30.

Inject-a-Light Corporation

     At the annual meeting of the Company's  shareholders,  scheduled to be held
in 2004, the Company's shareholders will be requested to approve the issuance of
1,250,000 shares of the Company's common stock to Inject a Light Corporation for
the assignment of the patents and  technology  described  below.  Inject a Light
Corporation is controlled by Kimberly Landry and Douglas Sinclair.

Emergency Pathmarking System

     In June 2003 Inject a Light Corporation agreed to assign to the Company the
rights to a provisional  patent  application  and proprietary  technology  which
relate  to a new  emergency  path  marking  system.  In  consideration  for  the
assignment of these rights,  the Company  agreed to issue 750,000  shares of its
common stock to Inject a Light.

     The path  marking  technology  uses  the  Company's  proprietary  Lunaplast
Photoluminescent  material to form words, symbols or path markings on a clear or
nearly clear background. Lunaplast stores light from any external radiant energy
source such as visible light, ultraviolet light, or infrared radiation and other
illumination  sources and then emits  light  which is visible  for several  days
after all other illumination sources are extinguished.

     Many  building  codes  and  regulations  for  ships,  vehicles,   passenger
transportation  systems,  mines and other spaces require path marking systems to
show exit routes when normal  lighting  fails.  To maximize  the amount of light
emitted from the sign or path marking,  traditional  photometric  signs and path
marking  systems  are  designed  with  legends  seen  in  silhouette  against  a


                                       18
<PAGE>

photoluminescent  background.  Traditional  path  marking  systems  usually have
backup power sources to ensure  operation when power fails.  However,  all these
systems  suffer  from the same  disadvantages  in that  they  are  expensive  to
purchase,  install and maintain. In addition,  backup power sources can fail due
to fire, battery failure or other causes.

     Effective emergency path markings must have conspicuous legends.  Balancing
this  objective  is the need for the signs and  markings to not detract from the
aesthetic  features  of the  space  when  not in  use.  Conventional  electrical
emergency  exit  signs  tend to be bulky and  unattractive.  During  the past 10
years,  electric exit signs with transparent  backgrounds have developed.  These
signs,  commonly called  edge-lighted  signs,  require continuous electric light
that  illuminates the sign through its edge.  Words or symbols are seen as masks
or etchings  that are applied to the sign face.  Although  these signs have high
aesthetic appeal because their backgrounds do not detract from the architectural
space, they nevertheless  require a continuous electric light source with backup
electrical supply.

     The Company's  proprietary path marking technology  combines the advantages
of the edge-lit signs with the advantage of  photoluminescent  signs. A solution
impregnated  with Lunaplast is either poured or inserted in a cavity or a recess
formed or carved in the shape of the required words,  symbols, or path markings.
This technique  reduces the amount of  photoluminescent  pigment used, and hence
the cost, by confining the luminance to the words,  symbols or path markings and
not the  background  as in  traditional  photoluminescent  signs or path marking
systems. The process of mixing Lunaplast in a liquid solution also increases the
density  of the  photoluminescent  pigment  and the  resulting  light  which  is
generated by the path marking system.

     The  Company's   path  marking  system  is  non  invasive  to  the  general
surroundings,  yet is clearly  visible in emergency  situations when there is an
electrical  power  outage.  Unlike  battery-powered  path  marking  systems,  no
replacement, maintenance or systematic checking of the batteries is required for
systems using the Company's technology.

     Applications  for this new technology  include exit and  directional  signs
(both  overhead and floor level),  and linear path marking  systems which do not
consume  electrical  energy and which require  conspicuous words or symbols with
inconspicuous  backgrounds that are aesthetically appealing in any architectural
space.

     On June 9, 2003 Kimberly  Landry and Douglas  Sinclair  filed a provisional
patent  application  for the  path  marking  system  with the  U.S.  Patent  and
Trademark Office. The provisional patent application and technology for the path
marking system were assigned to Inject a Light by Ms. Landry and Mr. Sinclair on
June 26,  2003.  As of March 30, 2004 the  provisional  patent  application  was
pending.

Light Cover

     In June 2003 Inject a Light Corporation agreed to assign to the Company the
rights to a provisional  patent  application  and proprietary  technology  which
relate to a photoluminescent light cover. In consideration for the assignment of
these rights,  the Company agreed to issue 500,000 shares of its common stock to
Inject a Light.


                                       19
<PAGE>

     The light cover fits over an electric lamp so that radiant  energy from the
electrical  lamp is stored in the light cover  during  normal  operation  of the
lamp.  As a result,  the light cover is able to  generate  light for an extended
period  after the  electric  lamp is  extinguished.  The  light  cover is nearly
transparent  and is  extruded  or  injection  molded  from  clear  thermoplastic
materials  containing  the  Company's  proprietary  Lunaplast   photoluminescent
material.  The light  cover  can be  designed  to fit  almost  any  fluorescent,
incandescent, or metal halide lamp.

     Building   codes   and   regulations   for   ships,   vehicles,   passenger
transportation  systems,  mines and other  spaces  require  that exit  routes be
lighted  continuously  during  occupation  to permit  safe  egress at all times.
Backup power  sources  such as batteries  and  petroleum-fueled  generators  are
usually  employed to ensure these  requirements are met when normal power to the
lighting  fails.  However,  traditional  backup power systems do not necessarily
ensure that  occupants will be able to locate the exit routes after normal power
is interrupted.  For example,  fire can damage a centrally located power source,
related distribution and transfer systems, and fuel storage.  Batteries can fail
as they expire over a period of time. In addition,  emergency  lighting  systems
are  expensive to purchase,  install and to maintain.  When  emergency  lighting
systems fail,  evacuation can be impaired which can lead to panic,  physical and
psychological injury and loss of life.

     Applications  for this new technology  include  emergency  lighting systems
(both overhead and floor level),  as well as general and  supplemental  lighting
systems. Unlike battery-powered emergency lighting systems, the light cover does
not require replacement, maintenance or systematic checking of batteries.

     The provisional  patent application and technology for the light cover were
assigned to Inject a Light by Kimberly  Landry on June 26, 2003. On November 25,
2003 the Company  filed a patent  application  for the light cover with the U.S.
Patent and Trademark  Office.  As of March 30, 2004 the patent  application  was
pending.

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                                           **


                                       20
<PAGE>

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                                      *

Exhibit 23  Accountants' Consent                                       _____

Exhibit 31  Rule 13a-14(a)/15d-14(a) certifications                    _____

Exhibit 32  Section 1350 certifications                                _____


*    Incorporated  by  reference  to the  same  exhibit  filed  as  part  of the
     Company's Registration Statement on Form 10-SB.
**   Incorporated  by  reference  to the  same  exhibit  filed  as  part  of the
     Company's   Registration   Statement  on  Form  S-8   (Commission   File  #
     333-112647).

8-K Reports

     During the quarter  ending  December  31, 2003 the Company did not file any
reports on Form 8-K.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Labonte & Co. served as the Company's independent public accountants during
the fiscal years ended  December 31, 2003 and 2002.  Effective  January 1, 2004,
LaBonte & Co. merged with Dale Matheson Carr-Hilton Chartered  Accountants.  The
name of the  Company's  principal  independent  accountant  is now Dale Matheson
Carr-Hilton LaBonte.

     The following table sets forth the aggregate fees billed to the Company for
the years ended December 31, 2002 and 2003 by Dale Matheson Carr-Hilton LaBonte.


                                       21
<PAGE>

                                    2002         2003

Audit Fees                      $ 12,954       $17,600
Audit-Related Fees                    --            --
Financial Information Systems         --            --
Design and Implementation Fees        --            --
Tax Fees                              --            --
All Other Fees                        --            --


     Audit fees represent amounts billed for professional  services rendered for
the audit of the Company's  annual  financial  statements and the reviews of the
financial  statements  included in the Company's Forms 10-Q for the fiscal year.
Before Dale  Matheson  Carr-Hilton  LaBonte was engaged by the Company to render
audit services, the engagement was approved by the Company's Board of Directors.



                                       22
<PAGE>










                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2003














INDEPENDENT AUDITORS' REPORT

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




<PAGE>




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


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

We have audited the balance sheets of Luna Technologies  International,  Inc. as
at  December  31, 2003 and 2002 and the  statements  of  operations,  changes in
stockholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audits in  accordance  with 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  financial  statements  present  fairly,  in all material
respects, the financial position of the Company as at December 31, 2003 and 2002
and  the  results  of  its   operations  and  cash  flows  and  the  changes  in
stockholders'  equity  for the years  then ended in  accordance  with  generally
accepted accounting principles in the United States.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company  has a working  capital  deficiency  and has
incurred losses since inception  raising  substantial  doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 1. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

                                         "Dale Matheson Carr-Hilton LaBonte"

                                         CHARTERED ACCOUNTANTS

Vancouver, B.C.
March 24, 2004




<PAGE>


                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                           CONSOLIDATED BALANCE SHEETS

                                                     December 31,   December 31,
                                                        2003            2002
--------------------------------------------------------------------------------

                                        ASSETS

CURRENT ASSETS
  Accounts receivable                              $   49,127   $   42,693
  Prepaid expenses                                      3,960        2,197
  Inventory (Note 7)                                   88,247       21,058
--------------------------------------------------------------------------------

                                                      141,334       65,948

FIXED ASSETS,
  net of depreciation of $70,340 (2002 - $50,654)      20,777       33,990
--------------------------------------------------------------------------------

                                                   $  162,111   $   99,938
================================================================================


               LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)

CURRENT LIABILITIES
  Bank overdraft                                   $   11,252   $    2,339
   Accounts payable and accrued liabilities           229,738      236,771
   Current portion of convertible debenture (Note 5)   39,996       11,666
   Loans payable (Note 3)                                   -       76,812
   Notes payable (Note 4)                              40,730       40,730
  Due to related parties (Note 4)                     167,506      204,462
--------------------------------------------------------------------------------

                                                      489,222      572,780
CONVERTIBLE DEBENTURE (Note 5)                         56,885       48,334
--------------------------------------------------------------------------------
                                                      546,107      621,114
--------------------------------------------------------------------------------

CONTINGENCIES (Note 1 and 7)

STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
  Capital stock (Note 6)
    Common stock, $0.0001 par value, 30,000,000
     shares authorized 6,727,836 (2002 - 5,415,166)
     shares issued and outstanding                        673          542
    Convertible preferred stock, $0.0001 par value,
     5,000,000 shares authorized NIL issued and
     outstanding                                            -            -
  Additional paid-in capital                        1,347,003      605,150
  Warrants                                             74,000            -
  Deficit                                          (1,735,410)  (1,123,898)
   Accumulated other comprehensive income (loss)      (65,262)      (2,970)
--------------------------------------------------------------------------------
                                                     (383,996)    (521,176)
--------------------------------------------------------------------------------
                                                  $   162,111   $   99,938
================================================================================


     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,
                                                        2003              2002
--------------------------------------------------------------------------------

SALES                                              $  381,721        $  332,285
COST OF SALES                                         232,759           217,469
--------------------------------------------------------------------------------

GROSS PROFIT                                          148,962           114,816
OTHER INCOME                                          100,000            50,000
--------------------------------------------------------------------------------
                                                      248,962           164,816
--------------------------------------------------------------------------------

GENERAL AND ADMINISTRATIVE EXPENSES
  Consulting                                           86,958            78,344
  Consulting - stock based (Note 6)                   193,500            96,910
  Depreciation                                         19,686            18,717
  Interest                                             58,532            12,916
  Management fees                                     145,558            63,049
  Office and general                                  127,336           103,738
  Professional fees                                    54,718            59,437
  Rent                                                 27,303            25,910
  Research and development, net of recoveries          46,925             7,426
  Wages and benefits                                   99,958            40,286
--------------------------------------------------------------------------------
                                                      860,474           506,733
--------------------------------------------------------------------------------

NET LOSS FOR THE YEAR                             $  (611,512)      $  (341,917)
================================================================================


BASIC NET LOSS PER SHARE                          $     (0.10)      $     (0.07)
================================================================================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING          6,067,002         5,257,852
================================================================================






     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, 2003 AND 2002


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

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 adjustment                -         -           -        -            -         (12,247)    (12,247)
---------------------------------------------------------------------------------------------------------------------------

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

Issued for cash at - $0.50 per share     200,000        20      79,980   20,000            -                     100,000
            - $0.60 per share            250,000        25     119,975   30,000            -                     150,000
            - $0.80 per share            150,000        15      89,985   24,000            -                     120,000

Issued for consulting services             6,000         1       2,999        -            -                       3,000


</TABLE>

     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, 2003 AND 2002

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

Issued for debt settlement               225,000  $    23   $  86,877    $     -    $      -        $      -  $   86,900

Issued  on   exercise  of  options  -     25,000        3       1,247          -           -               -       1,250
$0.05 per share
                    - $0.10 per share     50,000        5       4,995          -           -               -       5,000
                    - $0.18 per share     20,000        2       3,598          -           -               -       3,600
                    - $0.38 per share     34,000        3      12,917          -           -               -      12,920
                    - $0.40 per share    205,000       20      81,980          -           -               -      82,000
                    - $0.50 per share     23,670        2      11,812          -           -               -      11,814

Issued pursuant to stock bonus plan      124,000       12      62,088          -           -               -      62,100

Beneficial   conversion   feature  of          -        -      41,000          -           -               -      41,000
conversion option

Stock based compensation                       -        -     131,400          -           -               -      131,400

Net loss for the year                          -        -           -          -    (611,512)                    (604,012)

Currency translation adjustment                -        -           -          -           -         (62,292)     (62,292)
---------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2003             6,727,836  $   673  $1,347,003  $  74,000 $(1,735,410)      $ (65,262)  $ (383,995)

===========================================================================================================================

</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,
                                                        2003              2002
--------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss for the year                            $  (611,512)     $  (341,917)
  Adjustments to reconcile net loss to net
    cash from operating activities:
  - depreciation                                        19,686           18,717
  - stock-based compensation                           193,500           83,310
  - beneficial conversion feature                       41,000                -
  - non-cash consulting expense                              -           13,600
  - accrued interest expense                             1,957            6,050
  - accounts receivable                                 (6,434)         (22,084)
  - inventory                                          (67,189)         (44,571)
  - prepaid expenses                                    (1,763)           1,800
  - accounts payable                                    (4,033)          70,311
  - refundable deposits                                      -          (19,991)
--------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                 (434,788)        (234,775)
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of fixed assets                              (6,473)         (18,651)
--------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                   (6,473)         (18,651)
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Bank overdraft                                         8,913            2,339
  Loan repayment                                        (4,500)         (10,500)
  Issuance of common shares                            486,584          176,160
  Convertible debenture advances, net of repayments     36,669           60,000
  Advances (to) from related parties                   (24,113)          36,781
--------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES               503,553          264,780
--------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES                        (62,292)         (12,247)
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH                                  -             (893)

CASH, BEGINNING OF YEAR                                      -              893
--------------------------------------------------------------------------------

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


 Non-cash activities:

  Refer to Notes 3, 4 and 6.


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

<PAGE>




                      LUNA TECHNOLOGIES INTERNATIONAL, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------


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, 2003 the Company
has a working capital  deficiency of $347,888 (2002 - $506,832) and has incurred
losses since inception raising  substantial doubt as to the Company's ability to
continue as a going  concern.  The ability of the Company and its  subsidiary to
continue as a going  concern is dependent on raising  additional  capital and on
generating future  profitable  operations.  In addition,  during the fiscal year
2003, 64% of the Company's  total income was derived from a single  customer who
also  provided  financing  to the  Company in  connection  with the  Convertible
Debenture as described in Note 5.

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

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 other income from one-time fees
charged in connection with territorial Supply Agreements.  As the Company has no
future  obligations  in  connection  with  these  agreements,   these  fees  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>


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,  management has determined
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, 2003.

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 and the  following  table
illustrates  the pro forma effect on net income (loss) and net income (loss) per
share  as if  the  Company  had  accounted  for  its  for  stock-based  employee
compensation  using  the  fair  value  provisions  of SFAS  No.  123  using  the
assumptions as described in Note 6:

                                                For the year ended
                                                   December 31,
                                                 2003        2002
                                             -------------------------

        Net loss for the year as reported    $  (611,512)  $  (341,917)
        Additional  SFAS  123   compensation     (18,700)            -
        expense
                                             -------------------------

        Pro-forma net loss for the period    $  (630,212)  $  (341,917)
                                             =========================

        Pro-forma basic net loss per share    $    (0.10)  $     (0.07)
                                             =========================

The  Company  has  elected to  continue  to  account  for  stock-based  employee
compensation  arrangements  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. In addition, 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. 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.

<PAGE>

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

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,  "Accounting  for  Equity  Instruments  That Are  Issued  to  Other  Than
Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF
96-18").  Costs  are  measured  at  the  estimated  fair  market  value  of  the
consideration  received or the  estimated  fair value of the equity  instruments
issued,  whichever is more reliably measurable.  The value of equity instruments
issued for  consideration  other than  employee  services is  determined  on the
earlier of a performance commitment or completion of performance by the provider
of goods or services as defined by EITF 96-18.

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.

Income taxes
The Company follows the liability  method of accounting for income taxes.  Under
this method,  deferred 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.  Deferred 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  deferred  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  November  2002,  the FASB issued FASB  Interpretation  No. 45,  "Guarantor's
Accounting  for  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others,  an  interpretation of FASB Statements No.
5, 57 and 107 and  rescission  of FASB  Interpretation  No.  34,  Disclosure  of
Indirect  Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 clarifies the
requirements  for a  guarantor's  accounting  for, and  disclosure  of,  certain
guarantees issued and outstanding. It also requires a guarantor to recognize, at
the inception of a guarantee,  a liability for the fair value of the  obligation
undertaken  in issuing the  guarantee.  This  interpretation  also  incorporates
without  reconsideration  the guidance in FASB  Interpretation  No. 34, which is
being  superseded.  The adoption of FIN 45 did not have a material effect on the
Company's financial position and results of operation..

In January 2003, the FASB issued FASB  Interpretation  No. 46,  Consolidation of
Variable Interest Entities,  an interpretation of Accounting  Research Bulletins
("ARB") No. 51,  Consolidated  Financial  Statements  ("FIN 46"). Fin 46 applies
immediately to variable interest entitles created after January 31, 2003, and in
the first interim  period  beginning  after June 15, 2003 for variable  interest
entities created prior to January 31, 2003. The  interpretation  explains how to
identify variable interest entities and how an enterprise  assesses its interest
in a variable interest entity to decide whether to consolidate that entity.  The
interpretation requires existing unconsolidated variable interest entities to be
consolidated by their primary  beneficiaries  if the entities do not effectively
disperse  risks  among  parties   involved.   Variable  interest  entities  that
effectively  disperse risks will not be consolidated unless a single party holds
an interest or combination of interests that  effectively  recombines risks that
were previously dispersed. The adoption of FIN 46 did not have a material effect
on the Company's financial position and results of operation..

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145,  "Rescission  of FASB  Statements  No.  4, 44,  and 64,  Amendment  of FASB
Statement No. 13, and Technical Corrections." Such standard requires any gain or
loss on  extinguishments  of debt to be presented  as a component of  continuing
operations  (unless specific  criteria are met) whereas SFAS No. 4 required that
such gains and losses be classified as an extraordinary  item in determining net
income.  Upon  adoption  of SFAS  No.  145,  the  Company  will  reclassify  any
extraordinary  gains and losses on the extinguishments of debt recorded in prior
periods  to  continuing  operations.  The  adoption  of SFAS  145 did not have a
material effect on the Company's financial position or results of operations.

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

<PAGE>


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

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." Such standard requires costs associated with
exit or disposal activities (including restructurings) to be recognized when the
costs are  incurred,  rather than at a date of commitment to an exit or disposal
plan.  SFAS No. 146 nullifies EITF Issue No. 94-3,  "Liability  Recognition  for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(including  Certain Costs Incurred in a  Restructuring)."  Under SFAS No. 146, a
liability  related to an exit or disposal  activity is not recognized until such
liability  has  actually  been  incurred  whereas  under EITF  Issue No.  94-3 a
liability  was  recognized  at the time of a  commitment  to an exit or disposal
plan.  The  provisions  of this  standard  are  effective  for exit or  disposal
activities  initiated  after December 31, 2002. The adoption of SFAS 146 did not
have a  material  effect on the  Company's  financial  position  or  results  of
operations.

In May, 2003,  SFAS 150,  "Accounting  for Certain  Financial  Instruments  with
Characteristics  of both  Liabilities  and Equity",  was issued.  This Statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Many of those  instruments
were previously classified as equity. Generally, a financial instrument, whether
in the form of shares or otherwise,  that is mandatorily  redeemable,  i.e. that
embodies  an  unconditional  obligation  requiring  the  issuer  to redeem it by
transferring its shares or assets at a specified or determinable date (or dates)
or upon an event that is certain to occur, must be classified as a liability (or
asset in some  circumstances).  In some cases,  a financial  instrument  that is
conditionally  redeemable  may  also be  subject  to the  same  treatment.  This
Statement does not apply to features that are embedded in a financial instrument
that is not a derivative (as defined) in its entirety. For public entities, this
Statement is effective for financial  instruments entered into or modified after
May 31,  2003.  The  adoption of SFAS 150 did not have a material  effect 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
was secured by a promissory  note,  bearing  interest at 10% and had an original
due date of  October 1, 2001 which was  extended  to October 1, 2003.  Effective
April 14,  2003 the total  principal  and accrued  interest  of  $74,057,  which
totalled  $72,312 as at December  31, 2002,  was assigned by this  director to a
creditor of this director along with an additional  $12,843 of unsecured amounts
owing to this  director for a total  assignment  of $86,900.  During  2003,  the
Company  settled this $86,900 note through this  issuance of 225,000  restricted
shares of the Company's  common stock. As at December 31, 2003 no amount is owed
in connection with this loan.

Also  during  2000 the Company  borrowed  $60,000  from a third party 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 2002 the Company  repaid $10,500 of this loan, and during 2003 the
Company repaid the remaining $4,500.

NOTE 4 - RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

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

During  2003 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 - $44,332 (2002 - $117,930); management fees incurred by the Company
- $145,558 (2002 - $19,110); and payments and reimbursements made by the Company
- $180,959  (2002 -  $55,209).  In  addition,  during the year a director of the
Company  assigned  $12,843 to a creditor of a director which was settled through
the issuance of restricted  shares of the Company's  common stock and the CEO of
LTC assigned  $33,580 to this creditor which was assigned back to the Company as
partial  consideration  for the issuance of shares of the Company's common stock
on exercise of stock options by the creditor.

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

<PAGE>


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 and  subsequent  to year end were further
extended to January 1, 2005.

During the year LTC and the  Company  executed  a  guarantee  of certain  unpaid
management  fees owing to the CEO of LTC totalling  $123,750  (CAN$165,000).  In
connection with this guarantee,  the CEO was granted the right to convert any or
all of the unpaid amount into restricted shares of the Company's common stock at
a price of $0.30 per  share.  During  the year the  Company  recorded  a $41,000
non-cash  interest  expense  representing  the  beneficial   conversion  feature
embedded in this  conversion  option.  This  beneficial  conversion  feature was
valued using the intrinsic value method.

Effective  June 26,  2003 the Company  entered  into two  agreements  to acquire
certain proprietary technology and patent application rights from Inject A Light
Corporation Inc. ("Inject A Light"), a private Delaware  corporation  controlled
by a director  of the  Company and the CEO of LTC who is also a relative of this
director.  This proprietary  technology and these patent application rights were
originally  acquired by Inject A Light from the inventors  being the director of
the Company and the CEO of LTC. Under the terms of the  agreements,  the Company
will  pay  consideration  of a  total  of  1,250,000  restricted  shares  of the
Company's common stock. These agreements are subject to shareholder  approval at
the Company's Annual General Meeting which will be held in May 2004. To date the
Company has not taken  possession of the  proprietary  technology and the shares
have not been issued.

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

Refer to Notes 3 and 6

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. During the year the Company made principal and
interest  payments  totalling $32,214 and as at December 31, 2003 a further $212
of interest has been accrued.  This Debenture was issued to the Company's  major
customer as described in Note 1.

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 $0.90 per
share during 2004 and $1.20 per share during 2005.

NOTE 6 - CAPITAL STOCK
--------------------------------------------------------------------------------

During 2003 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 $0.75 per share until December 15, 2004. The estimated
fair value of the warrants of $20,000 has been recorded as a separate  component
of stockholders' equity.

During 2003 the Company  issued  250,000  units at a price of $0.60 per unit for
proceeds  of  $150,000.  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 $0.75 per share until August 15, 2005.  The  estimated
fair value of the warrants of $30,000 has been recorded as a separate  component
of stockholders' equity.

<PAGE>

--------------------------------------------------------------------------------
NOTE 6 - CAPITAL STOCK (cont'd)

During 2003 the Company  issued  150,000  units at a price of $0.80 per unit for
proceeds  of  $120,000.  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 June 30,  2006.  The  estimated
fair value of the warrants of $24,000 has been recorded as a separate  component
of stockholders' equity.

During 2003 the Company  issued  6,000 shares of common stock at $0.50 per share
in settlement of $3,000 of accounts  payable and 225,000  shares of common stock
in  settlement  of a total of  $86,900 of  amounts  previously  owing to related
parties which were assigned to a third party during the year (refer to Note 3).

During the year the Company  issued a 357,670 shares of common stock on exercise
of stock options for total consideration of $116,584.

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 2003 the Company  awarded  124,000 (2002 - 76,000) shares of common stock
under the Stock Bonus Plan with a fair value of $62,100. As at December 31, 2003
no shares remain available for awards under the Stock Bonus Plan.

During  2003 the  Company  granted  377,670  options  to  consultants  under the
Company's Non-Qualified Stock Option Plan and 5,000 options to consultants under
the  Company's  Incentive  Stock Option Plan allowing for the  acquisition  of a
total of 382,670  shares of the  Company's  common stock at prices  ranging from
$0.05 to $0.50.  The fair value of these options was recorded as consulting fees
of $84,400  during the year. The fair value of these stock options was estimated
using the  Black-Scholes  option pricing model  assuming  expected lives ranging
from 0.7  years to 1.6  years,  a  risk-free  interest  rate of 3% and  expected
volatilities ranging from 67% to 82%.

<PAGE>


NOTE 6 - CAPITAL STOCK cont'd
--------------------------------------------------------------------------------

During  2003 the  Company  granted  160,000  options  to a  director  under  the
Company's  Non-Qualified  Stock Option Plan  allowing for the  acquisition  of a
total of 160,000  shares of the  Company's  common stock at prices  ranging from
$0.10 to  $0.60.  Of  these  options,  120,000  vested  during  the year and the
remaining  40,000  options  will vest  between  March 1, 2004 and June 1,  2004.
During the year the Company  recorded a director  consulting  expense of $47,000
representing the intrinsic value of the vested options.  Also in connection with
the vested options, pro-forma disclosures were provided in Note 2 to reflect the
fair value of these options as calculated using the Black-Scholes option pricing
model assuming expected lives of 5 years, a risk-free interest rate of 3% and an
expected  volatility of 112%. In connection  with the non-vested  options,  upon
vesting  the  Company  will  record  a  total   consulting   expense  of  $4,400
representing  the intrinsic  value of the options and will  disclose  additional
pro-forma fair value of the options  totalling  $15,700 as calculated  using the
Black-Scholes  option  pricing  model  assuming  expected  lives of 5  years,  a
risk-free interest rate of 3% and an expected volatility of 112%.

As at December  31, 2003,  5,000  shares have been granted and no stock  options
were outstanding  under the Incentive Stock Option Plan and 185,000 options were
outstanding under the Non-Qualified  Stock Option Plan,  details are as follows;
20,000 shares of the Company's  common stock at a price of $0.60,  20,000 shares
of the  Company's  common  stock  at a price  of  $0.50,  20,000  shares  of the
Company's  common  stock at a price of $0.40,  105,000  shares of the  Company's
common stock at a price of $0.25, 20,000 shares of the Company's common stock at
a price of $0.18.

Refer to Note 9.

NOTE 7 - CONTINGENCY
--------------------------------------------------------------------------------

During 2002 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, 2003 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, 2003 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  $1,400,000 at December 31, 2003. 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
--------------------------------------------------------------------------------

Subsequent  to year end,  the  Company  signed two supply  agreements  for total
consideration of $90,000 of which $45,000 has been received.

Under the Non Qualified  Stock Option Plan,  the Company  granted  110,000 stock
options at $0.10 to a consultant of the Company who  exercised  these options in
full.

Subsequent to year end the Company  completed a Form S-8 Registration  Statement
registering  3,100,000  shares of the  Company's  common  stock and  amended the
Company's  stock option and bonus plans  allowing for maximum awards as follows:
Incentive  Stock  Option  Plan  (750,000);   Non-Qualified   Stock  Option  Plan
(1,350,000); Stock Bonus Plan (1,000,000).




<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 30th day of March 2004.


                                  LUNA TECHNOLOGIES INTERNATIONAL INC.


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


                                  By /s/ Brian Fiddler
                                     ---------------------------
                                     Brian Fiddler, 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 30, 2004
---------------------
Kimberly Landry

/s/ Brian Fiddler                   Director              March 30, 2004
---------------------
Brian Fiddler

---------------------               Director
Robert H. Humber


<PAGE>




                      LUNA TECHNOLOGIES INTERNATIONAL INC.

                                   FORM 10-KSB

                                    EXHIBITS