U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 000-31507

MARMION INDUSTRIES CORP.

(Name of small business issuer in its charter)

Nevada (State or other jurisdiction of incorporation or organization)	06-1588136 (I.R.S. Employer Identification No.)
9103 Emmott Road, Building 6, Suite A Houston, Texas 77040 (Address of principal executive offices)	77040 (Zip Code)

(713) 466-6585

(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

As of November 7, 2006, the issuer had 35,569,990 shares of its common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes o No x 

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements.

MARMION INDUSTRIES CORPORATION

BALANCE SHEETS

SEPTEMBER 30, 2006

(UNAUDITED)

ASSETS
Current Assets:
Cash	$	9,663
Accounts receivable, net of allowance for doubtful accounts of $31,367		893,820
Costs and estimated earnings in excess of billings on uncompleted contracts		79,657
Inventory		376,130
Prepaid Expenses		13,602
Total Current Assets		1,372,871
Property and equipment, net of $113,561 accumulated depreciation		115,327
Total Assets	$	1,488,198
LIABILITIES AND STOCKHOLER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts Payable	$	786,427
Accrued Expenses		108,947
Accrued Salaries - Officers		344,592
Notes Payable - Related Parties		524,056
Notes Payable		82,737
Factor Payable		218,077
Current Portion of LTD		9,767
Billings in excess of costs and estimated earnings on uncompleted contracts		5,347
Total Current Liabilities		2,079,950
Notes Payable, net of current maturities		36,190
Total Liabilities		2,116,140
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIT):
Series A preferred stock, $.001 par value, 500,000,000 shares designated
9,500,000 shares issued and outstanding	$	9,500
Series B preferred stock, $.001 par value, 30,000,000 shares designated
30,000,000 shares issued and outstanding		30,000
Common stock, $.001 par value, 50,000,000,000 shares authorized,
35,569,990 shares issued and outstanding		35,570
Additonal paid-in capital		12,253,288
Deficit accumulated during the development stage		(12,956,300	)
Total Stockholder's Equity (Deficit)		(627,942	)
Total Liabilities and Stockholder'a Equity (Deficit)	$	1,488,198

1

MARMION INDUSTRIES CORPORATION

STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
REVENUES	$	2,093,224		$	505,908		$	3,134,400		$	1,955,853
COSTS OF SALES		1,696,301			514,943			2,455,777			1,614,183
GROSS MARGIN		396,923			(9,035	)		678,623			341,670
COSTS AND EXPENSES:
Salaries and employee benefits		127,126			883,125			436,346			1,086,059
General and administrative		145,058			101,988			389,374			260,469
Equity Based Compensation Expense		263,150			758,402			876,850			1,089,306
Depreciation and amortization		5,645			7,908			16,780			23,647
TOTAL COSTS AND EXPENSE		540,979			1,751,423			1,719,350			2,459,481
LOSS FROM OPERATIONS		(144,056	)		(1,760,458	)		(1,040,727	)		(2,117,811	)
OTHER INCOME:
Interest Expense		(7,785	)		-			(11,832	)		-
Interest Expense - equity based		(1,245,222	)		-			(5,791,637	)		-
Other Income		135			1,814			538			1,814
NET LOSS	$	(1,396,928	)	$	(1,758,644	)	$	(6,843,658	)	$	(2,115,997	)
Net loss per share:
Basic and diluted net loss per share	$	(0.06	)	$	(2.69	)	$	(0.48	)	$	(8.49	)
Weighted average shares outstanding:
Basic and diluted		23,967,303			654,591			14,115,803			249,233

2

MARMION INDUSTRIES CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	September 30,
	2006			2005
OPERATING ACTIVITIES:
Net Loss	$	(6,843,658	)	$	(2,115,997	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of fixed assets		-			(1,814	)
Deprecation and amortization		16,780			23,646
Common Stock issued for services		876,850			1,064,710
Common Stock issued for equity based compensation		5,791,637			-
Preferred Stock issued for services		-			6,000
Changes in assets and liabilities:
Accounts Receivable		(552,371	)		(128,287	)
Inventory		(115,187	)		(44,932	)
Prepaid expenses		7,878			(4,119	)
Costs and estimated earnings in excess of billings		(79,657	)		-
Accounts payable		499,174			(87,791	)
Accrued Expenses		55,292			44,609
Billings in excess of costs and estimated earnings		5,347			-
Net cash used in operation activities		(337,915	)		(1,243,975	)
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment		-			18,500
Purchase of property and equipment		(7,413	)		(37,762	)
Net cash used in investing activities		(7,413	)		(19,262	)
FINANCING ACTIVITIES:
Proceeds from exercise of common stock warrants		-			1,278,053
Proceeds from notes payable - Related Party		372,412			13,000
Repayment from notes payable - Related Party		(50,000	)		(57,000	)
Proceeds from factor payable		12,226	)		-
Proceeds from notes payable		-			22,292
Repayments of notes payable		(2,421	)		(16,324	)
Net cash provided by financing activities		332,217			1,240,021
NET CHANGE IN CASH		(13,111	)		(23,216	)
CASH, beginning of period		22,774			25,592
CASH, end of period	$	9,663		$	2,376
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	5,713		$	10,153
Income taxes paid	$	-		$	-
NON CASH FINANCING ACTIVITIES:
Conversion of preferred stock	$	250			-
Conversion of debt to equity	$	76,000			-

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MARMION INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited financial statements of Marmion Industries Corp., (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Operating results expected for the nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2005.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered from recurring losses from operations, and has a negative working capital and shareholder deficiency as of December 31, 2005 and September 30, 2006. These factors raise substantial doubt as to the Company's ability to continue as a going concern. Management expects to incur additional losses in the foreseeable future and recognizes the need to raise debt or capital to achieve their business plans. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE 2 - STOCK BASED COMPENSATION

We previously accounted for stock-based compensation issued to our employees under Accounting Principles Board Opinion 25, (APB 25). Accordingly, no compensation costs for stock options issued to employees, which was measured as the excess, if any, of the fair value of our common stock at the date of grant over the exercise price of the options. The pro forma net earnings per share amounts as if the fair value method had been used are presented below for the three and nine months ended September 30, 2006, in accordance with the Company’s adoption of SFAS 123(R).

For purposes of the following disclosures during the transition period of the adoption of SFAS 123(R), the weighted average fair value of options has been estimated on the date of grant using the Black-Scholes options pricing model. Marmion Air did not grant options to purchase common stock to employees in the nine months ending September 30, 2006.

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The following table illustrates the effect on net loss and net loss per share if Marmion Air had applied the fair value provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	Three months ended			Nine months ended
	September 30, 2005			September 30, 2005
Net income (loss) available to common stockholders, as reported	$	( 1,758,644	)	$	(2,115,997	)
Add: stock based compensation determined under intrinsic value based method		827,085			849,162
Less: stock based compensation determined under fair value based method		( 655,414	)		( 849,162	)
Pro forma net loss	$	(1,586,973	)	$	( 2,115,997	)
Basic and diluted net income (loss) per share:
As reported	$	(2.69	)	$	( 8.49	)
Pro forma	$	(2.42	)	$	(8.49	)

  

Reverse Stock Split

On January 25, 2006, the Board of Directors of the Company authorized a reverse stock split of 1 share for every 100 shares outstanding. As a result all share and per share data have been adjusted retroactively to give effect to this 1 for 100 reverse stock split.

NOTE 3 - CONVERTIBLE DEBT

On March 28, 2006, $24,263 of the related party note plus accrued interest approximating $3,315 was sold to an unrelated third party. The Company reconfirmed this note and issued a guarantee for the payment of such note and accrued interest. The Company did not receive any new monies as a result of this transaction. The note and accrued interest is convertible at will by the holder into common stock at the rate of $.005 per share. As of March 31, 2006, $14,000 of the debt was converted to 2.8 million shares. The Company recorded a $496,415 charge recorded as a form of compensation expense for such debt due on demand, based on the conversion of such debt into 6,000,000 shares of common stock. The expense recorded relates to the intrinsic value of the conversion price of $.005 per share as compared to the then market price of $.095 per share. During the second quarter, the remainder of the convertible debt of was converted into 3.2 million shares of common stock.

On May 2, 2006, $90,000 of the related party note including accrued interest approximating $8,000 was sold to an unrelated third party. The Company reconfirmed this note and issued a guarantee for the payment of such note and accrued interest. The Company did not receive any new monies as a result of this transaction. The note and accrued interest is convertible at will by the holder into common stock at the rate of $.005 per share. As of June 30, 2006, none of the debt was converted. The Company recorded a $4,050,000 charge recorded as a form of compensation expense for such debt due on demand, based on the conversion of such debt into 18,000,000 shares of common stock. The expense recorded relates to the intrinsic value of the conversion price of $.005 per share as compared to the then market price of $.23 per share. A portion of the $90,000 has been converted into shares during July and August.

5

On August 2, 2006, $55,949 of the related party note plus accrued interest approximating $13,230 was sold to an unrelated third party. The Company reconfirmed this note and issued a guarantee for the payment of such note and accrued interest. The Company did not receive any new monies as a result of this transaction. The note and accrued interest is convertible at will by the holder into common stock at the rate of $.005 per share. As of September 30, 2006, none of the debt was converted. The Company recorded a $1,245,222 charge recorded as a form of compensation expense for such debt due on demand, based on the conversion of such debt into 13,835,800 shares of common stock. The expense recorded relates to the intrinsic value of the conversion price of $.005 per share as compared to the then market price of $.095 share.

The accounting for these three convertible debt securities with beneficial conversion features was provided for under the interpretative guidance of EITF 98-5, EITF 00-27 and SFAS No. 133 as the effective dilution to the common shareholders as of September 30, 2006, including the pro-forma effects providing for second re-issuance of debt to have been fully converted, would be to have issued 99% of the outstanding shares of common stock to these debt holders for the conversion of $160,000 in debt, at the option of the holder of such debt.

NOTE 4 - RELATED PARTY TRANSACTIONS

ADVANCES - STOCKHOLDER

Marmion Air has received net advances from its Series A preferred stockholder of $88,222 during the quarter ended September 30, 2006 to increase such advances outstanding to such stockholder to be $524,056 as of September 30, 2006. The advances are unsecured and are due upon demand. Interest on these new advances is being accrued at 6% per annum. Accrued interest as of September 30, 2006 for the stockholder advances is $24,661.

NOTE 5 - EQUITY TRANSACTIONS

On September 5, 2006, the Series A preferred stockholder elected to convert 250,000 shares of his Series A shares to 10 million shares of common stock.

NOTE 6 - NEW ACCOUNTING PRINCIPLES

In September 2006, the FASB issued FASB Statement No. 157. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is a relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practices. This Statement is effective for financial statements for fiscal years beginning after November 15, 2007. Earlier application is permitted provided that the reporting entity has not yet issued financial statements for that fiscal year. Management believes this Statement will have no impact on the financial statements of the Company once adopted.

6

Item 2.Management’s Discussion and Analysis or Plan of Operations.

Much of the discussion in this Item is “forward looking” as that term is used in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Actual operations and results may materially differ from present plans and projections due to changes in economic conditions, new business opportunities, changed business conditions, and other developments. Other factors that could cause results to differ materially are described in our filings with the Securities and Exchange Commission.

There are several factors that could cause actual results or events to differ materially from those anticipated, and include, but are not limited to general economic, financial and business conditions, changes in and compliance with governmental laws and regulations, including various state and federal environmental regulations, our ability to obtain additional financing from outside investors and/or bank and mezzanine lenders and our ability to generate sufficient revenues to cover operating losses and position us to achieve positive cash flow.

Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-QSB to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of its public disclosure practices.

Additionally, the following discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and related notes contained in Item 1 of Part I of this Form 10-QSB, as well as the financial statements in Item 7 of Part II of our Form 10-KSB for the fiscal year ended December 31, 2005.

Management’s Plan of Operation

General

Beginning in the second quarter of 2004, we have entered the business of manufacturing and marketing of the explosion proof air conditioners, refrigeration systems, chemical filtration systems and building pressurizers. This entry was effected by Mr. Wilbert H. Marmion’s, our key officer and director, contribution to us of his controlling interest in Marmion Investments, Inc., (d/b/a Marmion Air Service), a Texas corporation. The explosion-proof market encompasses industries including: oil and gas exploration and production, chemical plants, granaries and fuel storage depots. We believe there is significant demand for these systems in any area where sensitive computer systems and analysis equipment is located. We also provide residential and commercial HVAC service in Texas, as well as specialty service to Fortune 500 clients.

Current Business Plan

We manufacture and modify heating, ventilation and air conditioning (HVAC) equipment for the petrochemical industry specifically for hazardous location applications. We custom engineer special systems for strategic industrial environments. Additionally we perform new commercial HVAC construction services currently in the Houston, Texas area.

We currently target refinery and chemical plants service companies that build analyzer shelters, controls centers and computer rooms in corrosive or hazardous locations on our industrial side. Commercially we are emerging into the new HVAC construction market to take advantage of the constant new development taking place in the Houston area.

With the demand for oil and the price constantly in today's market, our position in this industry is poised to take advantage of the increasing boom in petroleum expansion taking place both here in the national market as well as the international markets emerging in Mexico, the Middle East and South America. We foresee the next cycle of renovation and new construction in the commercial market, and population expansion currently taking place in the gulf-coast area to continue long into the future.

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In November of 2004 our State of Texas Air Conditioning Contractor’s License for Marmion Air Service (TACLA019367C) was upgraded to ”A” status allows us to sell air conditioners to unlimited tonnages, as opposed to the “B” license which limited us to sell equipment up to 20 tons. In October 2005, we received our Mechanical and Sheet Metal Contractor License in the State of Louisiana (Lic. No. 44001) allowing us to perform projects in that State.

Marmion Industries Corp. began seven years ago as a HVAC company in Beaumont, Texas. We then moved to Houston to take advantage of the accessibility to a larger market in and around the Houston area. Marmion Industries Corp. has always been owned and operated by W. H. Marmion and Ellen Raidl Marmion, who are husband and wife. In the first few years we acquired an agreement with Nextel Corporation to provide service and replacement of HVAC machines across southern Texas. This enabled Marmion to grow at a rapid pace as we completed Nextel's 3-G upgrade in 2000 and generated $1.1 million in gross revenues. In early 2001 Marmion began building industrial grade machines and providing them to petrochemical customers in the Houston area. At that time Nextel began tightening their services budgets due to the low price of their stock and approached us to reduce our pricing to a rate below our cost factor. As a result, we terminated our contract with Nextel and made a strategic decision to concentrate on the Industrial markets and develop our line of explosion-proof machines as our core business. We developed and refined our product line and continued to market to a growing list of customers primarily in the Houston area. Our alliance with a major wall mount air conditioner manufacturer Marvair, a subsidiary of AHI Holding, Inc., allowed us to gain a substantial market share in the industrial market as a reseller of Marvair products to two large national building manufacturers.

We believe that diversification is a key factor to maintain market share in the industrial and commercial markets. Accordingly, in 2004 we began making plans to open a commercial division and hired personnel to bid and supervise commercial projects. We have opened our commercial division and have completed our first project for the Houston Independent School District. As of the end of the 1^st quarter of 2006, we have been awarded additional school projects as well as other commercial projects. Until 2003 we operated as an S corporation and in 2003 converted to C corp. in anticipation of accessing the public markets to enable us to raise capital to grow our business. Today Marmion has ten full time employees and depending on the commercial projects undertaken as many or more subcontractors to accomplish our business objectives.

One of our challenges continues to be our ability to attract and keep excellent employees to accomplish our business objectives. This challenge is highlighted due to the fact that we do not offer any type of benefits program to our employees. Cash flow has and remains a major challenge due to the fact that we are outgrowing our receivables and increasing our growth rate beyond 30 percent annually. Our customers normally pay on 45 to 60 day intervals and our suppliers bill us on 30 day terms. We need larger facilities and equipment to increase profitability and meet increasing demand. We have generally outsourced 5% of our manufacturing. We have recently acquired several pieces metal manufacturing equipment in November 2005 which has allowed us to reduce our outsourcing needs, which should allow us to recognize increased profitability in the months ahead. Additionally, new equipment would allow us to take on a diversified work load, which could also add to our profitability.

Our long-term plans for growth include expanding our industrial base into Louisiana and abroad through new licensing and business contacts from ongoing marketing. We have recently started servicing the commercial market in the Houston area and have obtained the necessary licenses in Louisiana and have begun bidding on commercial projects in that area as well. We believe that, with right personnel and growth capital, we can grow our industrial and commercial division over the next two years.

We have acquired third party certification (ETL Certification) for the wallmount line for our products and have begun the process of getting our hazardous location package units as well as our pressurizers certified as well. These third parties certify our hazardous location equipment, saying it is indeed explosion-proof on our industrial line of equipment which will enable us to bid on new jobs and we believe the certification will allow us to be successful on our bids\. Because of third party certification, we will now be able to be listed as an “approved supplier/provider” for large multi-national petrochemical company’s specifications, as some large oil companies will spec in the company A/C’s they want. Normally they will require a UL/CSA listing or another third party certification from their suppliers/providers This will allow us to increase our profit margin on the certified equipment. We are currently educating engineering companies in Houston of the options now available to them and their customers.

8

By attracting and keeping better employees and retaining our current ones we believe that we can maintain our current growth rate over the next 3-5 years.

Recent Developments

Amendment to our Certificate of Incorporation

On August 24, 2006, our Board of Directors approved an amendment to our certificate of incorporation (the “Charter Amendment”) to increase our authorized common stock from 50,000,000 shares to 500,000,000 shares: A majority of our stockholders approved the Charter Amendment by written consent on August 29, 2006. A notice of shareholder action by written consent was mailed to all stockholders of record as of August 29, 2006 informing them of this action on September 14, 2006. The Charter Amendment was filed with the Nevada Secretary of State on October 5, 2006.

Results of Operations

Basis of Presentation

The results of operations set forth below for the periods ended September 30, 2006 and September 30, 2005 are those of the continuing operations of Marmion Industries Corp.

The following table sets forth, for the periods indicated, certain selected financial data from continuing operations:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Revenues	$	2,093,224		$	505,908		$	3,134,400		$	1,955,853
Cost of Sales		1,696,301			514,943			2,455,777			1,614,183
Gross Margin		396,923			(9,035	)		678,623			341,670
Salaries and employee benefits		127,126			883,125			436,346			1,086,059
General and administrative		145,048			101,988			389,374			260,469
Equity Based Compensation Expense		263,150			758,402			876,850			1,089,306
Depreciation and amortization		5,645			7,908			16,780			23,647
Loss from Operations	$	(144,056	)	$	(1,760,458	)	$	(1,040,727	)	$	(2,117,811	)

Comparison of the Three Months Ended September 30, 2006 and September 30, 2005

Revenues. Our revenues increased to $2,093,224, or an increase of over 300%, for the three months ended September 30, 2006, from $505,908 for the three months ended September 30, 2005. The increase is primarily attributable to the award of several large commercial projects.

Cost of Sales. Cost of sales for continued operations increased to $1,696,301, or approximately 230%, for the three months ended September 30, 2006, from $514,943 for the three months ended September 30, 2005. As a percentage of revenues, cost of sales decreased to approximately 81% of revenues for the quarter ended September 30, 2006 versus approximately 101% of revenues for the quarter ended September 30, 2005. The decrease in cost of sales as a percentage of revenues resulted primarily due to new controls implemented by us with specific attention to quality control and purchasing controls. As a result, the company generated a gross margin of $396,923 with a gross profit margin of approximately 19% for the quarter ended September 30, 2006.

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Salaries and employee benefits. Salaries and employee benefits decreased to $127,126, or a decrease of approximately 86% for the three months ended September 30, 2006 from $883,125 for the three months ended September 30, 2005. This decrease is attributable primarily to a lack of compensatory stock grants to employees in the three months ended September 30, 2006.

General and administrative. General and administrative expenses increased to $145,058, or an increase of approximately 42%, for the three months ended September 30, 2006, from $101,988 for the three months ended September 30, 2005. As a percentage of revenues, general and administrative expenses were approximately 7% for the quarter ended September 30, 2006, as compared to approximately 20% for the comparable period in 2005. The increase in general and administrative expenses primarily results from expansion of operations which required additional corresponding expenses and normal economic increases.

Equity Based Compensation Expense. Our equity based compensation expense decreased to $263,150, or approximately 65%, for the three month period ended September 30, 2006, from $758,402 for the three months ended September 30, 2005. This decrease was primarily attributable to a reduction in stock issued to consultants in connection with our research and business development activities.

Depreciation and Amortization. Depreciation and amortization expense decreased to $5,645 for the three months ended September 30, 2006, from $7,908 for the three months ended September 30, 2005. This decrease was primarily due to asset dispositions.

Loss from operations. We incurred an operating loss of $144,056 for the three months ended September 30, 2006, compared to an operating loss of $1,760,458 for the three months ended September 30, 2005. The company had lower operating losses in the three months ended September 30, 2006 compared to the prior year primarily due to our decreased equity based compensation expenses during the period.

Comparison of the Nine months ended September 30, 2006 and September 30, 2005

Revenues. Our revenues increased to $3,134,400, or an increase of approximately 60%, for the nine months ended September 30, 2006, from $1,955,853 for the nine months ended September 30, 2005. This increase is primarily attributable to the award of several large commercial projects.

Cost of Sales. Cost of sales for continued operations increased to $2,455,777 or approximately 52%, for the nine months ended September 30, 2006, from $1,614,183 for the nine months ended September 30, 2005. As a percentage of revenues, cost of sales decreased to approximately 78% of revenues for the nine months ended September 30, 2006 versus approximately 82% of revenues for the nine months ended September 30, 2005. The decrease in cost of sales as a percentage of revenues resulted primarily due to new controls implemented by us with specific attention to quality control and purchasing controls. As a result, the company generated a gross margin of $678,623 with a gross profit margin of approximately 22% for the nine months ended September 30, 2006.

Salaries and employee benefits. Salaries and employee benefits decreased to $436,346, or a decrease of approximately 60% for the nine months ended September 30, 2006 from $1,086,059 for the nine months ended September 30, 2005. This decrease is attributable primarily to a lack of compensatory stock grants to employees in the nine months ended September 30, 2006.

General and administrative. General and administrative expenses increased to $389,374 for the nine months ended September 30, 2006, from $260,469 for the nine months ended September 30, 2005. As a percentage of revenues, general and administrative expenses were approximately 12% for the nine months ended September 30, 2006, as compared to approximately 13% for the comparable period in 2005. The increase in general and administrative expenses primarily results from expansion of operations which required additional corresponding expenses and normal economic increases.

Equity Based Compensation Expense. Our equity based compensation expense decreased to $876,850, or approximately 20%, for the nine month period ended September 30, 2006, from $1,089,306 for the nine months ended September 30, 2005. This decrease was primarily attributable to a reduction in stock issued to consultants in connection with our research and business development activities.

10

.

Depreciation and Amortization. Depreciation and amortization expense decreased to $16,780 for the nine months ended September 30, 2006, from $23,647 for the nine months ended September 30, 2005. This decrease was primarily due to asset dispositions.

Loss from operations. We incurred an operating loss of $1,040,727 for the nine months ended September 30, 2006, compared to an operating loss of $2,117,811 for the nine months ended September 30, 2005. The company had lower operating losses in the nine months ended September 30, 2006 compared to the prior year primarily due to reductions in salaries, administrative expenses, and equity based compensation expenses.

Liquidity and Capital Resources

We have financed our operations, acquisitions, debt service, and capital requirements through cash flows generated from operations, debt financing, and issuance of securities. Our working capital deficit at September 30, 2006 was $707,079 and at December 31, 2005 it was $613,149. We had cash of $9,663 at September 30, 2006, compared to having cash of $2,376 at September 30, 2005.

Our operating activities used $337,915 for the nine months ended September 30, 2006 compared to using $1,243,975 in the nine months ended September 30, 2005.

Net cash flows used in investing activities was $7,413 for the nine months ended September 30, 2006, compared to investments of $19,262 in the nine months ended September 30, 2005. These cash flows were related to the purchase of property and equipment.

Net cash flows provided by financing activities were $332,217 for the nine months ended September 30, 2006, compared to net cash provided by financing activities of $1,240,021 in the nine months ended September 30, 2005.

We anticipate that we will need approximately $2 million to finance our proposed growth over the next 12 months. We are currently looking to raise such amount via a private placement of our debt and/or equity securities. There are no assurances that we will be able to raise the requisite funds. If we are unable to secure financing we may need to curtail our growth plans. Our working capital is not sufficient to meet our obligations. These factors raise substantial doubt about our ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and

assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments.

STOCK-BASED COMPENSATION

In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based Compensation - Transition and Disclosure. This statement amends SFAS No. 123 - Accounting for Stock-Based Compensation, providing alternative methods of voluntarily transitioning to the fair market value based method of accounting for stock based employee compensation. SFAS 148 also requires disclosure of the method used to account for stock-based employee compensation and the effect of the method in both the annual and interim financial statements. The provisions of this statement related to transition methods are effective for fiscal years ending after December 15, 2002, while provisions related to disclosure requirements are effective in financial reports for interim periods beginning after December 31, 2002.

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In December 2004, the FASB issued SFAS No. 123 (Revised 2004) "Share-Based Payment" ("SFAS No. 123R"). SFAS No. 123R addresses all forms of share-based payment ("SBP") awards, including shares issued under certain employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS No. 123R will require the Company to expense SBP awards with compensation cost for SBP transactions measured at fair value. The FASB originally stated a preference for a lattice model because it believed that a lattice model more fully captures the unique characteristics of employee stock options in the estimate of fair value, as compared to the Black-Scholes model which the Company currently uses for its footnote disclosure. The FASB decided to remove its explicit preference for a lattice model and not require a particular valuation methodology. SFAS No. 123R requires us to adopt the new accounting provisions beginning in our first quarter of 2006. We do not expect a material impact on our consolidated results of operations as we do not intend to issue employee stock options in the near future.

ACCOUNTING FOR INCOME TAXES

As part of the process of preparing our financial statements we are required to estimate our income taxes. Management judgment is required in determining our provision of our deferred tax asset. We recorded a valuation for the full deferred tax asset from our net operating losses carried forward due to the Company not demonstrating any consistent profitable operations. In the event that the actual results differ from these estimates or we adjust these estimates in future periods we may need to adjust such valuation recorded.

GOING CONCERN

The financial statements of the Company have been prepared assuming that the Company will continue as a going concern. The Company has had negative working capital for each of the least two years ended December 31, 2005 and 2004. The Company has incurred significant losses for these years and has a negative working capital position. Those conditions raise substantial doubt about the abilities to continue as a going concern. The financial statements of the Company do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

RECENT ACCOUNTING PRONOUNCEMENTS

FASB 154 --Accounting Changes and Error Corrections

In May 2005, the FASB issued FASB Statement No. 154, which replaces APB Opinion No.20 and FASB No. 3. This Statement provides guidance on the reporting of accounting changes and error corrections. It established, unless impracticable retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements to a newly adopted accounting principle. The Statement also provides guidance when the retrospective application for reporting of a change in accounting principle is impracticable. The reporting of a correction of an error by restating previously issued financial statements is also addressed by this Statement. This Statement is effective for financial statements for fiscal years beginning after December 15, 2005. Earlier application is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date of this Statement is issued. Management believes this Statement will have no impact on the financial statements of the Company once adopted.

FASB 155 - Accounting for Certain Hybrid Financial Instruments

In February 2006, the FASB issued FASB Statement No. 155, which is an amendment of FASB Statements No. 133 and 140. This Statement; a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, b) clarifies which interest-only strip and principal-only strip are not subject to the requirements of Statement 133, c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, e) amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This Statement is effective for financial statements for fiscal years beginning after September 15, 2006. Earlier adoption of this Statement is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued any financial statements for that fiscal year. Management believes this Statement will have no impact on the financial statements of the Company once adopted.

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FASB 156 - Accounting for Servicing of Financial Assets

In March 2006, the FASB issued FASB Statement No. 156, which amends FASB Statement No. 140. This Statement establishes, among other things, the accounting for all separately recognized servicing assets and servicing liabilities. This Statement amends Statement 140 to require that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. This Statement permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. An entity that uses derivative instruments to mitigate the risks inherent in servicing assets and servicing liabilities is required to account for those derivative instruments at fair value. Under this Statement, an entity can elect subsequent fair value measurement to account for its separately recognized.

FASB 157—Measuring Fair Value

In September 2006, the FASB issued FASB Statement No. 157. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is a relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practices. This Statement is effective for financial statements for fiscal years beginning after November 15, 2007. Earlier application is permitted provided that the reporting entity has not yet issued financial statements for that fiscal year. Management believes this Statement will have no impact on the financial statements of the Company once adopted.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3.Controls and Procedures.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure and Controls and Procedures. As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our chief executive officer and treasurer, the sole officers and directors of the Company, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Controls Over Financial Reporting. There was no change in our internal controls, which are included within disclosure controls and procedures, during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls.

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PART II - OTHER INFORMATION

Item 1.Legal Proceedings.

We are not currently a party to any legal proceedings required to be described in response to Item 103 of Regulation S-B.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

1. In May 2006, our wholly owned subsidiary, Marmion Investments, Inc. amended and restated a promissory note in the principal amount of $72,788  (plus $8,000 accrued interest) held by an accredited investor. The amended and restated note is convertible into our common stock at a rate of $.005 per share and is guaranteed by us. This note has been partially converted as of the date of this report. The amendment and restatement of the note and the conversion of the note into common stock were exempt pursuant to Section 3 (a)(9) and 4(2) of the Securities Act.

2. On September 5, 2006, the holder of all of our series A preferred stock converted 250,000 shares of his series A preferred stock upon which he received 10 million shares of our common stock. The issuance was exempt under Section 3(a)(9) of the Securities Act of 1933, as amended.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Submission of Matters to a Vote of Security Holders.

None.

Item 5.Other Information.

On August 24, 2006, our Board of Directors approved an amendment to our certificate of incorporation (the “Charter Amendment”) to increase our authorized common stock from 50,000,000 shares to 500,000,000 shares: A majority of our stockholders approved the Charter Amendment by written consent on August 29, 2006. A notice of shareholder action by written consent was mailed to all stockholders of record as of August 29, 2006 informing them of this action on September 14, 2006. The Charter Amendment was filed with the Nevada Secretary of State on October 5, 2006.

Item 6.Exhibits.

EXHIBIT
NO.	IDENTIFICATION OF EXHIBIT
3.1*	Articles of Incorporation.
3.2*	Articles of Amendment to the Articles of Incorporation, filed effective June 3, 2004.
3.3*	Certificate of Designation establishing Series A Preferred Stock, filed effective May 25, 2004.
3.4*	Articles of Merger
3.5*	Certificate of Amendment to the Certificate of Designation for the Series A preferred stock, filed effective July 15, 2004.
3.6*	Certificate of Amendment to the Articles of Incorporation, filed effective November 16, 2004.
3.7*	Certificate of Designation establishing Series B Preferred Stock, filed effective January 26, 2005.
3.8*	Certificate of Amendment to the Articles of Incorporation, filed effective January 25, 2006
3.9*	Certificate of Amendment to the Articles of Incorporation, filed effective October 5, 2006.
3.10*	By-laws.
4.1*	International Trust & Financial Services, Inc. Employee Stock Option Plan for the Year 2004

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4.2*	International Trust & Financial Services, Inc. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2004
4.3*	International Trust & Financial Services, Inc. Employee Stock Option Plan for the Year 2004 No.2
4.4*	International Trust & Financial Services, Inc. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2004 No. 2
4.5*	Marmion Industries Corp. Amended Employee Stock Incentive Plan for the Year 2004 No. 2
4.6*	Marmion Industries Corp. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2004 No. 2
4.7*	Marmion Industries Corp. Amended Employee Stock Incentive Plan for the Year 2004 No. 3
4.8*	Marmion Industries Corp. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2004 No. 3
4.9*	Marmion Industries Corp. Amended Employee Stock Incentive Plan for the Year 2004 No. 4
4.10*	Marmion Industries Corp. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2004 No. 4
4.11*	Marmion Industries Corp. Amended Employee Stock Incentive Plan for the Year 2004 No. 5
4.12*	Marmion Industries Corp. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2004 No. 5
4.13*	Marmion Industries Corp. Amended Employee Stock Incentive Plan for the Year 2005
4.14*	Marmion Industries Corp. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2005
4.15*	Marmion Industries Corp. Amended Employee Stock Incentive Plan for the Year 2005 No. 2
4.16*	Marmion Industries Corp. Non-Employee Directors & Consultants Retainer Stock Plan for the Year 2005 No. 2
10.1*	Plan and Agreement of Merger.
10.2*	Purchase and Escrow Agreement.
10.3*	M/S Al Dunia Contract
10.4*	DT Construction Contract
31.1 **	Certification of Wilbert H. Marmion, President and Chief Executive Officer of Marmion Industries Corp., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
31.2 **	Certification of Ellen Raidl, Treasurer of Marmion Industries Corp., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
32.1 **	Certification of Wilbert H. Marmion, President and Chief Executive Officer of Marmion Industries Corp., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.
32.2 **	Certification of Ellen Raidl, Treasurer of Marmion Industries Corp., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.

*Previously Filed

**Filed Herewith

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SIGNATURES

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

	MARMION INDUSTRIES CORP.
Dated November 16, 2006
	By:	/s/ Wilbert H. Marmion
		Wilbert H. Marmion
		President and Chief Executive Officer

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