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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-KSB

(Mark One)

[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO __________

COMMISSION FILE NUMBER: 000-31639

RACINO ROYALE, INC.

(FORMERLY K-TRONIK INTERNATIONAL CORP.)(Exact name of
small business issuer in its charter)

|NEVADA                                           | 88-0436364                       
|------------------------------------------------ | ---------------------------------
|(State or other jurisdiction of incorporation or | (IRS Employer Identification No.)
|organization)                                    |                                  

144 Front Street West, Suite 700, Toronto, Ontario, Canada
M5J 2L7(Address of principal executive offices)

(416) 216-8659(Registrants telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.00001 Par Value

1

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Check mark whether the issuer (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
  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 [ ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of 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]

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

The issuer had revenues of $115,936 for the fiscal year ended
September 30, 2006.

Of the 28,223,886 shares of voting stock of the registrant issued
  and outstanding as of December 28, 2006, 7,150,000 shares are held by non-affiliates.
  Because of the absence of an established trading market for the voting stock,
  the registrant is unable to calculate the aggregate market value of the voting
  stock held by non-affiliates as of a specified date within the past 60 days.

Transitional Small Business Disclosure Format (check one) Yes [
] No [x]

2

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FORM 10-KSB ANNUAL REPORTFOR THE YEAR ENDED
SEPTEMBER 30, 2006RACINO ROYALE, INC.

TABLE OF CONTENTS

|PART I   |   
|-------- | --
|         |   
|Item     |   
|Item     | 1 
|Item     | 2 
|Item     | 3 
|Item     | 4 
|         |   
|PART II  |   
|         |   
|Item     | 5 
|Item     | 6 
|Item     | 7 
|Item     | 8 
|Item     | 8A
|         |   
|PART III |   
|         |   
|Item     | 9 
|Item     | 10
|Item     | 11
|Item     | 12
|Item     | 13
|Item     | 14

3

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PART I

|Item 1. | Description of Business
|------- | -----------------------

Company History and Business

The Company was incorporated on September 2, 1999 in the State
of Nevada as LMC Capital Corp. and was organized for the purpose of creating a
corporate vehicle to locate and acquire an operating business. On December 12,
2001 the Company changed its name to K-Tronik International Corp. (KTI). On
September 28, 2000, KTI completed a Form 10-SB registration with the United
States Securities and Exchange Commission and as a result is subject to the
regulations governing reporting issuers in the United States.

By agreement dated November 29, 2001 and approved by the board
of directors effective December 12, 2001, KTI issued 14,285,714 shares of
restricted common stock to the shareholders of K-Tronik Intl Corporation, a
Nevada corporation, in exchange for 100% of the issued and outstanding shares of
K-Tronik Intl Corporation which, at the time of the transaction, owned a 100%
interest in K-Tronik Asia Corporation (KTA), a Korean corporation. In
connection with this transaction, K-Tronik Intl Corporation changed its name
effective December 12, 2001 to K-Tronik N.A. Inc. (KTNA). As a condition of
this acquisition, KTI also issued 3,788,172 shares of restricted common stock to
ETIFF Holdings Inc. (ETIFF) in settlement of $3,788,172 owed to ETIFF by KTNA.
ETIFF, a wholly owned subsidiary of Eiger Technologies, Inc. (Eiger), a
Toronto Stock Exchange listed company, owned 53% of the issued and outstanding
shares of KTNA. Also in connection with this transaction, Eiger was granted an
option, which was exercised, to acquire an additional 3,000,000 shares of KTI
from the original shareholders of KTI.

The acquisition resulted in the former shareholders of KTNA
acquiring 93.4% of KTI representing 21,073,886 of the 22,573,886 total issued
and outstanding shares of KTI. This acquisition was accounted for as a reverse
acquisition with KTNA being treated as the accounting parent and KTI, the legal
parent, being treated as the accounting subsidiary.

KTI designed, marketed and distributed electronic stabilizers
and illuminator ballasts for florescent lighting fixtures primarily in the
United States from its premises in Hackensack, New Jersey and minimally in Asia.
A ballast is a device in lighting systems that operates fluorescent lights. The
ballast provides the necessary starting voltages, frequency and wattage to a
fluorescent light while limiting and regulating the current during the lights
operation.

KTIs ballasts and ballasts components were sourced through
either South Korean manufacturers or manufacturers in mainland China.

In December of 2004, KTI entered into agreements to sell its
electronic stabilizer and illuminator ballast business by way of its sale of its
K-Tronik N.A. and the fixed assets of K-Tronik (Asia) subsidiaries. KTI is no
longer engaged in the business of manufacturing, distributing or selling
electronic ballasts.

On June 13, 2006, KTI announced it would implement a new
corporate strategy focusing on horseracing track development opportunities. An
agreement was signed on June 19, 2006 to buy exclusive rights for a racetrack
and casino (racino) development opportunity in Saskatchewan. On July 5, 2006,
KTI changed its

4

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name to Racino Royale, Inc. (RR or the Company) to reflect
its intention to engage in the business of owning or leasing race-courses and/or
conduct horse-races.

Products and Markets

The Company presently has no products and markets.

Employees

The Company presently has no full-time or part-time employees.

|Item 2. | Description of Property
|------- | -----------------------

The Company does not have any physical property. Its limited
operations are conducted through the offices of its parent, Eiger Technology,
Inc., a Toronto Stock Exchange listed company, in Toronto, Canada.

|Item 3. | Legal Proceedings
|------- | -----------------

The Company is not a party to any litigation and has no
knowledge of any threatened or pending litigation against it.

|Item 4. | Submission of Matters To A Vote of Security
      Holders
|------- | ---------------------------------------------------------

No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year ended September 30, 2006.

PART II

|Item 5. | Market for Common Equity and Related
      Stockholder Matters
|------- | --------------------------------------------------------------

Market for Common Stock

Our common stock commenced trading on the NASDs OTC Bulletin
Board on January 21, 2004 as symbol KTRK. Our current trading symbol is
RCNR. Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.

The following table summarizes the high and low bid prices for
our common stock for the periods indicated as reported by the OTC Bulletin
Board:

|2006           | HIGH  | LOW  
|-------------- | ----- | -----
|First Quarter  | $0.35 | $0.05
|Second Quarter | $0.07 | $0.07
|Third Quarter  | $0.29 | $0.06
|Fourth Quarter | $0.85 | $0.29

Holders of Common Stock

5

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On September 30, 2006, there were approximately 45 holders of
record of our common stock and 28,223,886 shares outstanding. Some shareholders
have deposited their shares to brokerage accounts and, as a result, their shares
are reflected on the Companys registered shareholder list as being registered
to intermediaries such as Cede & Co. or CDS. The Company cannot, as a
result, reliably determine the number of persons who hold such shares.

There are no outstanding options to purchase, or securities convertible
  into our common stock although the shareholders at a meeting held on November
  12, 2001 approved an Incentive Stock Option Plan (under which no options have
  yet been granted) which would allow us to grant up to 1,000,000 incentive stock
  options to directors and employees at the board of directors discretion.

Dividends

We have not declared or paid a cash dividend to stockholders
since our incorporation. The Board of Directors presently intends to retain any
earnings to finance company operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of cash dividends in the future
will depend upon our earnings, capital requirements and other factors.

Recent Sales of Unregistered Securities

We have registered for resale a total of 8,288,172 shares of
common stock by way of an SB-2 registration statement declared effective by the
SEC November 14, 2003. The Companys remaining issued and outstanding shares of
common stock have not been registered and will not be available for sale in the
open market without separate registration or reliance upon Rule 144 under the
Securities Act of 1933. In general, under Rule 144 a person (or persons whose
shares are aggregated) who has beneficially owned shares acquired in a
non-public transaction for at least one year, including persons who may be
deemed affiliates of the company (as that term is defined under that rule) would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of 1% of the then outstanding shares of common stock, or
the average weekly reported trading volume during the four calendar weeks
preceding such sale, provided that certain current public information is then
available. Most of the Companys issued and outstanding shares were issued over
two years ago.

|Item 6. | Managements Discussion and Analysis or Plan
      of Operation
|------- | ---------------------------------------------------------------

The following discussion should be read in conjunction with the
Companys consolidated financial statements and the notes thereto. The
discussion of results, causes and trends should not be construed to imply any
conclusion that such results or trends will necessarily continue in the future.

Critical Accounting Policies

We believe that the estimates, assumptions and judgments
involved in the accounting policies described below have the greatest potential
impact on our financial statements, so we consider these to be our critical
accounting policies. Because of the uncertainty inherent in these matters,
actual results could differ from the estimates we used in applying the critical
accounting policies. Within the context of these critical accounting policies,
we are not currently aware of any reasonably likely event that would result in
materially different amounts being reported.

The accounting assumptions and policies used in the preparation
of our financial statements are explained in the notes attached thereto and
appearing later in this Report on Form 10KSB.

6

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Results of Operation:

The year ended September 30, 2006 (the 2006 period) compared
to the year ended September 30, 2005 (2005 period).

Net Sales

The Company reported net sales of $115,936 for the 2006 period.
There were nil sales for the 2005 period, as the Company did not have an active
business, due to the sale of the previous ballast business. Sales during the
2005 period of active business are presented as discontinued operations.

Gross Profit

The Companys gross profit was $43,220 in the 2006 period.
There was nil gross profit in the 2005 period as a result of the above factors
that resulted in nil sales.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses
increased to $117,726 in the 2006 period, versus the prior year total of
$19,011. The increase of $98,715 is primarily due to the costs incurred
associated with horseracing held in Saskatchewan from July to September, 2006.
The expenses during the 2005 period of active business are presented as
discontinued operations. The Companys limited administrative operations have
been moved to its parent companys Toronto, Canada offices.

Operating Loss

The loss from continuing operations increased to $74,506 in the
2006 period from $19,011 in the 2005 period due directly to the increased costs
relating to horseracing discussed above.

Interest and Other Expenses

The Company reported interest and other expenses of nil for the
2006 and 2005 periods, as they are minor and as such, have been combined with
SG&A. Interest and other expenses during the 2005 period of active business
are presented as discontinued operations.

Net Income

For the reasons stated above the Company reported net loss of
$59,998 for the 2006 period compared to income of $490,546 for the prior period.
The 2005 net income was primarily attributable to a gain on disposal of assets
of discontinued operations of $574,383.

Liquidity and Capital Resources

At September 30, 2006, the Company had working capital deficit
of $155,525, and cash and cash equivalents of $27,059 as compared to working
capital deficit of $83,837 and cash and cash equivalents of $0 at September 30,
2005. The decrease in working capital was primarily attributed to the advances
made by the parent company on behalf of the Company.

7

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Net cash provided by continuing operating activities was $24,241
  for the 2006 period as compared to negative $64,826 during the 2005 period.
  The increase was primarily due to the effects of discontinued operations reported
  in the 2005 period.

Net cash used in investing activities was negative $23,727 for
  the 2006 period as compared to nil for the 2005 period. The Company has no plans
  for significant equipment purchases during the fiscal year ended September 30,
  2007.

The Company's continuation as a going concern is uncertain and
dependant on successfully bringing its services to market, achieving future
profitable operations and obtaining additional sources of financing to sustain
its operations, the outcome of which cannot be predicted at this time. In the
event the Company does not generate positive cash flow from future operations or
cannot obtain the necessary funds, it will be necessary to delay, curtail or
cancel the business operations.

New Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board
("FASB") issued SFAS No. 155, "Accounting for Certain Hybrid Financial
Instrumentsan amendment of FASB Statements No. 133 and 140 (SFAS No. 155).
This statement permits fair value of remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation; clarifies which interest only strips and principal only strips are
not subject to the requirements of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities"; 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; clarifies that concentrations of
credit risk in the form of subordination are not embedded derivatives; and
amended SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities", 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. SFAS No. 155 is effective for all financial instruments acquired,
issued, or subject to a remeasurement (new basis) event occurring after the
beginning of an entitys first fiscal year that begins after September 15, 2006.
The Company is currently reviewing the effect, if any, the proposed guidance
will have on its financial position.

In March 2006, FASB issued SFAS No. 156, "Accounting for Servicing
  of Financial Assets", which amends SFAS No. 140, Accounting for Transfers and
  Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS
  No. 156). In a significant change to current guidance, SFAS No. 156 permits
  an entity to choose either of the following subsequent measurement methods for
  each class of separately recognized servicing assets and servicing liabilities:
  (1) Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156 is
  effective as of the beginning of an entitys first fiscal year that begins
  after September 15, 2006. The Company is currently reviewing the effect, if
  any, the proposed guidance will have on its financial position.

In June 2006 FASB issued Financial Accounting Standards Interpretation
  No. 48, Accounting for Uncertainty in Income Taxes (FIN 48).
  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
  an enterprises financial statements in accordance with SFAS No. 109, Accounting
  for Income Taxes ("SFAS No. 109"). FIN 48 prescribes a recognition threshold
  and measurement attributable for the financial statement recognition and measurement
  of a tax position taken or expected to be taken in a tax return. FIN 48 also
  provides guidance on derecognition, classification, interest and penalties,
  accounting in interim periods, disclosures

8

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and transitions. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The Company is currently reviewing the effect, if any,
FIN 48 will have on its financial position.

In September 2006, the SEC staff issued Staff Accounting
Bulletin No. 108 (SAB No. 108), Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements In Current Year Financial
Statements, SAB No. 108 was issued to provide consistency in how registrants
quantify financial statement misstatements. The Company is required to and will
initially apply SAB No. 108 in connection with the preparation of its annual
financial statements for the year ending September 30, 2007. The Company does
not expect the application of SAB No. 108 to have a material effect on its
financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements ("SFAS No. 157"), which is effective for calendar year companies
on January 1, 2008. The statement defines fair value, establishes a framework
for measuring fair value in accordance with generally accepted accounting
principles, and expands disclosures about fair value measurements. The statement
codifies the definition of fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The standard clarifies the
principle that fair value should be based on the assumptions market participants
would use when pricing the asset or liability and establishes a fair value
hierarchy that prioritizes the information used to develop those assumptions.
The Company is currently assessing the potential impacts of implementing this
standard.

In September 2006, the FASB issued SFAS No. 158, Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans an
amendment of FASB Statements No. 87, 88, 106 and 132 (R) ("SFAS No. 158"). SFAS
No. 158 requires an employer to recognize the funded status of a defined benefit
postretirement plan as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income. The funded status of a benefit plan
is defined as the difference between the fair value of the plan assets and the
plans benefit obligation. For a pension plan the benefit obligation is the
projected benefit obligation and for any other postretirement benefit plan, such
as a retiree health care plan, the benefit obligation is the accumulated
postretirement benefit obligation. SFAS No. 158 requires an employer to
recognize as a component of other comprehensive income, net of tax, the gains
and losses and prior service costs or credits that arise during the period but
that are not recognized as components of net periodic benefit costs pursuant to
SFAS No. 87 Employers Accounting for Pensions. SFAS No. 158 also requires an
employer to measure the funded status of a plan as of the date of its year end.
Additional footnote disclosure is also required about certain effects on net
periodic benefit cost for the next year that arise from the delayed recognition
of gains or losses, prior service costs or credits, and transition asset or
obligation. Except for the year end measurement requirement, SFAS No. 158 is
effective for the year ending December 31, 2006. The Company does not anticipate
that the adoption of this statement will have a material effect on its financial
condition or operations.

Inflation

Management does not believe that inflation had a material
adverse affect on the financial statements for the periods presented.

Qualitative and Quantitative Disclosure About Market Risk

9

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The Company cannot presently foresee its future operational
program. As a result, no quantification of its market risk can be made at this
time.

|Item 7. | Financial Statements
|------- | --------------------

The audited Consolidated Financial Statements are included in
this Form 10-KSB following the signature page.

|Item 8. | Changes in and Disagreements With
      Accountants on Accounting and Financial **Disclosure**
|------- | ----------------------------------------------------------------------------------------------

During the Companys two most recent fiscal years and to the
date of change in certifying accountant, there were no disagreements with the
Companys accountants on any matter of accounting principle or practices,
financial statement disclosure or auditing scope or procedure. In addition,
there were no reportable events as described in Item 304(a)(1)(iv)(B)1 through 3
of Regulation S-B that occurred within the Companys two most recent fiscal
years and the subsequent interim periods.

Effective on February 22, 2005, the independent accountants who
  were previously engaged as the principal accountants to audit the Companys
  financial statements, BDO Seidman LLP, were replaced by SF Partnership, LLP
  to serve as the new principal accountant to certify the Companys financial
  statements. The accountant's reports on the financial statements for the fiscal
  year ended September 30, 2006 neither contained an adverse opinion or a disclaimer
  of opinion, nor was it qualified or modified as to uncertainty, audit scope
  or accounting principles.

The change in principal accountants was disclosed on Form 8K
filed with EDGAR and dated February 28, 2005.

|Item 8A. | Controls and Procedures
|-------- | -----------------------

The Company maintains a system of disclosure controls and
procedures that are designed for the purposes of ensuring that information
required to be disclosed in the Company's Securities Exchange Act of 1934
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including the Chief Executive
Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Chief Executive Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Securities Exchange Act of 1934 Rules 13a-14(c) and
15d-14(c). Based upon that evaluation, the Chief Executive Officer concluded
that the Company's disclosure controls and procedures are effective in
connection with the filing of this annual report on Form 10-KSB for the fiscal
year ended September 30, 2006.

There have been no significant changes in the Company's
internal controls over financial reporting during the fiscal year ended
September 30, 2006 that have materially affected or are reasonably likely to
materially affect, our internal controls over financial reporting.

10

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The Company presently has two executive officers, who act as
President and CEO, John Simmonds, and as CFO, Jason Moretto. Mr. Simmonds and
Mr. Moretto are also officers of the Companys parent company, Eiger Technology,
Inc.

PART III

|Item 9. | Directors, Executive Officers, Promoters and
      Control Persons; Compliance **with Section 16(a) of the Exchange
      Act**
|------- | -------------------------------------------------------------------------------------------------------------------------------

The following discussion contains disclosure concerning the
directors, officers and control persons of the Company. There are no persons
which have acted as a promoter, controlling person, or significant employee of
the Company other than as disclosed below.

Name
    Position
    Age
    Date Elected as Director*1*2Gerry Racicot
    Chairman
    56
    December 12, 2001 to presentJohn Simmonds
    Director, President and CEO
    56
    June 13, 2006 to presentJason Moretto
    Director, Chief Financial Officer
    37
    June 13, 2006 to present


|1. | Directors, whether appointed at a meeting of stockholders
      or by the remaining directors, are appointed until the next annual meeting
      of stockholders.                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                     
|2. | The President, Secretary and Treasurer do not have a set
      term of office. They serve at the pleasure of the Directors and can be
      removed at any time by the Directors under the Articles and Bylaws of the
      Company.

John Simmonds, Director, President and Chief Executive
Officer

John Simmonds, in addition to being director and CEO of the
Company, is also director and COO of Racinos parent Eiger Technology, Inc.
(Eiger). Mr. Simmonds is an entrepreneur with a 35-year track record of
building teams, operating systems, and distribution networks. He has been
involved in the horseracing business for 20 years and has had a number of
successes with both harness and thoroughbred breeds. Previous roles have
included serving as Chairman of Trackpower Inc., a public company with stakes in
racing properties in upstate New York, Tioga and Vernon Downs; Chairman of
Wireless Age Communications Inc., a consolidation of retail, wholesale and
engineering businesses within the wireless products and services industry;
Chairman of Circuit World; Director of Glenayre Electronics; Director and CEO of
Intek Global Corporation (a Nasdaq-listed company reaching a market
capitalization in excess of $500 million that was subsequently merged in a $250
million transaction); founder of merchant bank Simmonds Capital Limited; and
many other executive positions. He has also served on the board of several other
public and private companies.

Jason Moretto, Director, Chief Financial Officer

Jason Moretto, in addition to being director and CFO of the
Company, is also director and CFO of Eiger, Racinos parent company. Mr. Moretto
was previously employed by BMO Nesbitt Burns (now BMO Capital Markets), a full
service investment dealer based in Toronto, Canada from September of 1997 to
February of 2003. From 1995 to 1997, Mr. Moretto was National Accounting Manager
for Universal Concerts Canada (now House of Blues Entertainment), Canadas
largest promoter of live music and entertainment and operator of the Molson
Amphitheatre in Toronto. Prior to that, he practiced as an accountant in public
practice. He also presently serves as a Member of the Ontario Securities
Commission's Small Business Advisory

11

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Committee. Mr. Moretto holds a Bachelor of Commerce degree from
the University of Toronto, and is a Certified General Accountant and Chartered
Financial Analyst.

Gerry Racicot, Chairman

Gerry Racicot, in addition to being chairman of the Company, is
director and President of Eiger, parent company to Racino. Eiger previously
controlled KTI, a diverse manufacturer and distributor of a number of products
in the technology and commercial lighting industries. Eiger is listed for
trading on the Toronto Stock Exchange and its shares are also posted for trading
through the facilities of the NASDs OTCBB. Mr. Racicot was, from 1988 to 2001,
President of ADH Custom Metal Fabricators Inc., which manufactured and
distributed various lighting and other products. ADH Custom Metal Fabricators
Inc. listed on the TSX Venture Exchange as Newlook Industries Corp in May of
2002. Newlook currently owns Onlinetel Corp., a VoIP-based telecommunications
service provider.

|Item 10. | Executive Compensation
|-------- | ----------------------

Summary Compensation Table

Name and principal position
      (a)
    Year
      (b)
      Annual Compensation
      Long-term compensation
    All other Compe
      nsation ($) (i)Salary ($)
      (c)
    Bonus ($)
      (d)
    Other Annual Compe
      nsation ($) (e)
      Awards
    PayoutsRestricted Stock Award(s) ($)
      (f)
    Securities Underlying options/
      SARs (#) (g)
    LTIP payouts ($)
      (h)John Simmonds, Director, Pres. & CEO
    2006 2005 2004
    $0 $0 $0
    0 0 0
    0 0 0
    0 0 0
    0 0 0
    0 0 0
    0 0 0Jason Moretto, Director & CFO
    2006 2005 2004
    $0 $0 $0
    0 0 0
    0 0 0
    0 0 0
    0 0 0
    0 0 0
    0 0 0


|Item 11. | Security Ownership of Certain Beneficial
      Owners and Management
|-------- | --------------------------------------------------------------------

The following table sets forth information regarding the
beneficial ownership of shares of the Companys common stock as of September 30,
2006 (28,223,886 issued and outstanding) by (i) all stockholders known to the
Company to be beneficial owners of more than 5% of the outstanding common stock;
and (ii) all directors and executive officers of the Company, and as a group
(each person has sole voting power and sole dispositive power as to all of the
shares shown as beneficially owned by them):

Name and Address
    Position
    Amount of Stock Beneficially Owned
    Percentage of ClassETIFF Holdings, LLC (Eiger Technology, Inc.
      subsidiary)
    Greater than 5% shareholder
      14,234,600
      50.4%


12

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John Simmonds
    Director, Pres. and CEO
    *1
    *1Jason Moretto
    Director and CFO
    *1
    *1Gerry Racicot
    Chairman
    *1
    *1Directors, Officers and 5% stockholders in total (4
      Persons)
    
      14,234,600
      50.4%


|1. | No shares of common stock are registered in John Simmonds,
        Jason Moretto and Gerry Racicots names. However, as well as being
        directors of the Registrant, they are directors and executive officers
        of Eiger Technology Inc., which through its wholly owned subsidiary ETIFF
        Holdings, LLC, owns 14,234,600 shares of common stock of the Registrant.
        As stated in the table above, ETIFF holds a total of 50.4% of the issued
        and outstanding stock of the Company.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 12. | Certain Relationships and Related
      Transactions
|-------- | ----------------------------------------------------

During the past two years, there have not been any transactions
that have occurred between the Company and its officers, directors, and five
percent or greater shareholders, except as follows:

The Companys parent, Eiger Technology, Inc., has advanced it a
total of $152,087 in the last three years to cover the Companys operating
expenses including transfer agent fees, legal and accounting fees and other
expenses that have yet to be repaid.

Certain of the officers and directors of the Company are engaged
  in other businesses, either individually or through partnerships and corporations
  in which they have an interest, hold an office, or serve on a board of directors.
  As a result, certain conflicts of interest may arise between the Company and
  its officers and directors. The Company will attempt to resolve such conflicts
  of interest in favor of the Company. The officers and directors of the Company
  are accountable to it and its shareholders as fiduciaries, which require that
  such officers and directors exercise good faith and integrity in handling the
  companys affairs. A shareholder may be able to institute legal action
  on behalf of the Company or on behalf of itself and other similarly situated
  shareholders to recover damages or for other relief in cases of the resolution
  of conflicts is in any manner prejudicial to the Company.

|Item 13. | Exhibits and Reports on Form 8-K
|-------- | --------------------------------

The exhibits to be filed with this Form 10-KSB are listed below
in the Exhibit Index.

During the reporting period and subsequent to it but prior to
the date of this Report, the Registrant filed seven (7) Reports on Form 8K on
the EDGAR system dated June 13, June 23, July 6, July 10, July 17, July 25 and
November 13, 2006.

13

---

|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

During the fiscal year ended September 30, 2006, the Company
incurred professional service fees of CAD$20,000 for audit and audit related
services provided by the principal accountant. During the fiscal year ended
September 30, 2005 these fees totaled CAD$40,000. These fees included the cost
of the annual audit, tax reviews of the quarterly and annual, SB-2 filings with
the Securities and Exchange Commission.

EXHIBIT INDEX

|Number | Exhibit Description
|------ | -------------------

|3.1  | Articles of Incorporation
        (incorporated by reference to Exhibit 3 of the Registration Statement
        on Form 10-SB filed on September 28, 2000).                           
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2  | Certificate of Amendment to Articles of
        Incorporation (incorporated by reference to Exhibit 2 of the Form 10-SB
        filed on September 28, 2000).                         
|3.3  | Certificate of
        Amendment to Articles of Incorporation dated October 13, 2000. (incorporated
        by reference to Exhibit 3.3 of the Form 10-QSB filed on November 7, 2000).
|3.4  | ByLaws (incorporated by reference
        to Exhibit 3.3 of the Form 10-QSB filed on November 7, 2001).                                                                               
|14.1 | Code
        of Business Conduct (incorporated by reference to Exhibit 14.1 of the
        Registrants previous Report on Form 10-KSB)                                               
|31.1 | Section
        302 certification of Chief Executive Officer                                                                                                                          
|31.2 | Section
        302 certification of Chief Financial Officer                                                                                                                          
|32.1 | Section
        906 certification of Chief Executive Officer                                                                                                                          
|32.2 | Section
        906 certification of Chief Financial Officer                                                                                                                          

14

---

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

|                         | RACINO ROYALE, INC.                       
|------------------------ | ------------------------------------------
|                         |                                           
|                         |                                           
|Dated: December 28, 2006 | By: /s/ John Simmonds                     
|                         | John Simmonds, Director, President and CEO

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

|Dated: December 28, 2006 | By: /s/ John Simmonds  
|------------------------ | -----------------------
|                         | John Simmonds, Director

15

---

|RACINO ROYALE, INC. AND SUBSIDIARY       
|-----------------------------------------
|(FORMERLY K  TRONIK INTERNATIONAL CORP.)
|(A DEVELOPMENT STAGE COMPANY)            
|                                         
|CONSOLIDATED FINANCIAL STATEMENTS        
|                                         
|YEARS ENDED SEPTEMBER 30, 2006 AND 2005  

CONTENTS

|Report of Independent Registered
      Public Accounting Firm      | 17     
|------------------------------------------------------------------ | -------
|Consolidated Balance Sheets                                        | 18     
|Consolidated Statements
      of Operations and Comprehensive Loss | **19** 
|Consolidated Statements of Stockholders'
      Equity              | **20** 
|Consolidated Statements
      of Cash Flows                        | **21** 
|Notes to Consolidated Financial Statements                         | 22 - 32

16

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Racino Royale,
Inc.

We have audited the accompanying consolidated balance sheets of
Racino Royale, Inc. (Formerly K-Tronik International Corp.) a company in the
development stage, as of September 30, 2006 and 2005, and the related
consolidated statements of operations and comprehensive loss, stockholders
equity, and cash flows for each of the years in the two-year period ended
September 30, 2006. 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 audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Racino Royale, Inc. as of September 30, 2006 and 2005, and the results of its
operations and its cash flows for each of the years in the two-year period ended
September 30, 2006 in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated financial statements have been
prepared assuming that the company will continue as a going concern. As
discussed in note 1 to the consolidated financial statements, the company
experienced operating losses and has a working capital deficiency. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

|                  | SF PARTNERSHIP, LLP
|----------------- | ---------------------
|Toronto, Canada   | CHARTERED ACCOUNTANTS
|December 22, 2006 |                      

17

---

|RACINO ROYALE, INC. AND SUBSIDIARY     
|---------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)
|(A Development Stage Company)          
|Consolidated Balance Sheets            
|September 30, 2006 and 2005            

|                                                  |   |            |   |   | Restated   |  
|------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                  |   |            |   |   | (Note 3)   |  
|                                                  |   | 2006       |   |   | 2005       |  
|ASSETS                                            |  
|Current                                           |   |            |   |   |            |  
|Cash and cash
      equivalents                   | $ | 27,059     |   | $ | -          |  
|Accounts receivable                               |   | 5,847      |   |   | -          |  
|Total Current Assets                              |   | 32,906     |   |   | -          |  
|                                                  |   |            |   |   |            |  
|Other Long-Term                                   |   |            |   |   |            |  
|Licensing rights (note 4)                         |   | 1,317,471  |   |   | -          |  
|Total Long-Term Assets                            |   | 1,317,471  |   |   | -          |  
|                                                  |   |            |   |   |            |  
|Total Assets                                      | $ | 1,350,377  |   | $ | -          |  
|                                                  |   |            |   |   |            |  
|LIABILITIES                                       |  
|                                                  |   |            |   |   |            |  
|Current                                           |   |            |   |   |            |  
|Advances from related party
      (note 5)        | $ | 152,087    |   | $ | 83,837     |  
|Accounts payable                                  |   | 20,913     |   |   | -          |  
|Accrued liabilities                               |   | 15,431     |   |   | -          |  
|Total Current Liabilities                         |   | 188,431    |   |   | 83,837     |  
|                                                  |   |            |   |   |            |  
|Total Liabilities                                 |   | 188,431    |   |   | 83,837     |  
|                                                  |   |            |   |   |            |  
|STOCKHOLDERS'
      EQUITY                        |  
|Capital Stock(note 6)                             |   |            |   |   |            |  
|Common stock,
      $0.00001 par value per share; |   |            |   |   |            |  
|100,000,000 shares authorized; 28,223,886 (2005  |   |            |   |   |            |  
|23,223,886) shares issued and outstanding         |   | 283        |   |   | 233        |  
|Additional Paid-In Capital                        |   | 6,572,444  |   |   | 5,278,750  |  
|Accumulated Comprehensive Loss                    |   | 12,037     |   |   | -          |  
|Deficit Accumulated Through The Development Stage |   |            |   |   |            |  
|(2006 - $93,517;
      2005 - $19,011) and        |   |            |   |   |            |  
|Accumulated Deficit                               |   | (5,422,818 | ) |   | (5,362,820 | )
|                                                  |   |            |   |   |            |  
|Total Stockholders' Equity                        |   | 1,161,946  |   |   | (83,837    | )
|                                                  |   |            |   |   |            |  
|Total Liabilities and Stockholders' Equity        | $ | 1,350,377  |   | $ | -          |  

18

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

---

|RACINO ROYALE, INC. AND SUBSIDIARY                                   
|---------------------------------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)                              
|(A Development Stage Company)                                        
|Consolidated Statements of Operations and Comprehensive
      Loss   
|Years Ended September 30, 2006 and 2005 and the Period from          
|Re-entering the Development Stage Through to September 30,
      2006

|                                                  |   |            |   |   |            |   |   | (Note 1)            |  
|------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ------------------- | -
|                                                  |   |            |   |   |            |   |   | Period from         |  
|                                                  |   |            |   |   |            |   |   | Re-entering the     |  
|                                                  |   |            |   |   | Restated   |   |   | Development Stage   |  
|                                                  |   |            |   |   | (Note 3)   |   |   | Through to Sep. 30, |  
|                                                  |   | 2006       |   |   | 2005       |   |   | 2006                |  
|Revenues                                          |   |            |   |   |            |   |   |                     |  
|Provincial grant income                           | $ | 96,347     |   | $ | -          |   | $ | 96,347              |  
|Parimutuel betting income                         |   | 19,018     |   |   | -          |   |   | 19,018              |  
|Miscellaneous income                              |   | 571        |   |   | -          |   |   | 571                 |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Total Revenues                                    |   | 115,936    |   |   | -          |   |   | 115,936             |  
|Cost of Revenues                                  |   |            |   |   |            |   |   |                     |  
|Purses and awards                                 |   | 60,177     |   |   | -          |   |   | 60,177              |  
|Bets paid out                                     |   | 12,539     |   |   | -          |   |   | 12,539              |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Total Cost of Revenues                            |   | 72,716     |   |   | -          |   |   | 72,716              |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Gross Margin                                      |   | 43,220     |   |   | -          |   |   | 43,220              |  
|Expenses                                          |   |            |   |   |            |   |   |                     |  
|General and administrative                        |   | 117,726    |   |   | 19,011     |   |   | 136,737             |  
|Total Expenses                                    |   | 117,726    |   |   | 19,011     |   |   | 136,737             |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Loss from Continuing Operations                   |   | (74,506    | ) |   | (19,011    | ) |   | (93,517             | )
|                                                  |   |            |   |   |            |   |   |                     |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Income from Discontinued Operations, Net
      of |   |            |   |   |            |   |   |                     |  
|Income Taxes(note 7)                              |   | 14,508     |   |   | 509,557    |   |   | 524,065             |  
|                                                  |   |            |   |   |            |   |   |                     |  
|(Loss) Income Before Income Taxes                 |   | (59,998    | ) |   | 490,546    |   |   | 430,548             |  
|Provision for income taxes (note
      8)         |   | -          |   |   | -          |   |   | -                   |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Net (Loss) Income                                 |   | (59,998    | ) |   | 490,546    |   |   | 430,548             |  
|Foreign currency translation adjustment           |   | 12,037     |   |   | -          |   |   | 12,037              |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Comprehensive (Loss) Income                       | $ | (47,961    | ) | $ | 490,546    |   | $ | 442,585             |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Earnings Per Weighted Average Number Of           |   |            |   |   |            |   |   |                     |  
|Shares Outstanding During the Year                |   |            |   |   |            |   |   |                     |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Basic and Diluted                                 |   |            |   |   |            |   |   |                     |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Income from continuing operations                 | $ | -          |   | $ | -          |   |   |                     |  
|Net income                                        | $ | -          |   | $ | 0.02       |   |   |                     |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Weighted Average Number of                        |   |            |   |   |            |   |   |                     |  
|Common Shares Outstanding During the              |   |            |   |   |            |   |   |                     |  
|Year                                              |   |            |   |   |            |   |   |                     |  
|                                                  |   |            |   |   |            |   |   |                     |  
|Basic                                             |   | 24,648,543 |   |   | 23,223,886 |   |   |                     |  
|Diluted                                           |   | 24,791,009 |   |   | 23,223,886 |   |   |                     |  

19

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

---

|RACINO ROYALE, INC. AND SUBSIDIARY             
|-----------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)        
|(A Development Stage Company)                  
|Consolidated Statements of Stockholders' Equity
|September 30, 2006                             

|                            |  |            |  |   |        |  |   | Additional |  |   |             |   |   | Accumulated   |   |   |           |  
|--------------------------- |  | ---------- |  | - | ------ |  | - | ---------- |  | - | ----------- | - | - | ------------- | - | - | --------- | -
|                            |  | Number of  |  |   |        |  |   | Paid in    |  |   | Accumulated |   |   | Comprehensive |   |   | Total     |  
|                            |  | Shares     |  |   | Amount |  |   | Capital    |  |   | Deficit     |   |   | Loss          |   |   | Deficit   |  
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Balance, September 30, 2004 |  | 23,223,886 |  | $ | 233    |  | $ | 5,278,750  |  | $ | (5,853,366  | ) | $ | (315,536      | ) | $ | (899,919  | )
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Net income from the year    |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|as previously reported      |  | -          |  |   | -      |  |   | -          |  |   | 806,082     |   |   | -             |   |   | 806,082   |  
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Restatement of foreign      |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|currency
      translation  |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|adjustment (note 3)         |  | -          |  |   | -      |  |   | -          |  |   | (315,536    | ) |   | 315,536       |   |   | 806,082   |  
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Balance, September 30, 2005 |  | 23,223,886 |  |   | 233    |  |   | 5,278,750  |  |   | (5,362,820  | ) |   | -             |   |   | (83,837   | )
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Issuance of common stock    |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|for licensing
      rights  |  | 5,000,000  |  |   | 50     |  |   | 1,200,000  |  |   | -           |   |   | -             |   |   | 1,200,050 |  
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Issuance of common stock    |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|purchaser warrants for      |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|licensing rights            |  | -          |  |   | -      |  |   | 93,694     |  |   | -           |   |   | -             |   |   | 93,694    |  
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Foreign currency            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|translation adjustment      |  | -          |  |   | -      |  |   | -          |  |   | -           |   |   | 12,037        |   |   | 12,037    |  
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Net loss for year           |  | -          |  |   | -      |  |   | -          |  |   | (59,998     | ) |   | -             |   |   | (59,998   | )
|                            |  |            |  |   |        |  |   |            |  |   |             |   |   |               |   |   |           |  
|Balance, September 30, 2006 |  | 28,223,886 |  | $ | 283    |  | $ | 6,572,444  |  | $ | (5,422,818  | ) | $ | 12,037        |   | $ | 1,161,946 |  

20

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

---

|RACINO ROYALE, INC. AND SUBSIDIARY                                   
|---------------------------------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)                              
|(A Development Stage Company)                                        
|Consolidated Statements of Cash Flows                                
|Years Ended September 30, 2006 and 2005 and the Period from
      Re-
|entering the Development Stage Through to September 30,
      2006   

|                                                            |   |         |   |   |            |   |   | (Note 1)          |  
|----------------------------------------------------------- | - | ------- | - | - | ---------- | - | - | ----------------- | -
|                                                            |   |         |   |   |            |   |   | Period from       |  
|                                                            |   |         |   |   |            |   |   | Re-entering the   |  
|                                                            |   |         |   |   |            |   |   | Development Stage |  
|                                                            |   |         |   |   | Restated   |   |   | Through to        |  
|                                                            |   |         |   |   | (Note 3)   |   |   | Sep. 30,          |  
|                                                            |   | 2006    |   |   | 2005       |   |   | 2006              |  
|Cash Flows from Operating Activities                        |   |         |   |   |            |   |   |                   |  
|Loss from continuing operations                             | $ | (74,506 | ) | $ | (19,011    | ) | $ | (93,517           | )
|Amortization expense                                        |   | -       |   |   | -          |   |   | -                 |  
|                                                            |   | (74,506 | ) |   | (19,011    | ) |   | (93,517           | )
|Changes in
      non-cash working capital                   |   |         |   |   |            |   |   |                   |  
|Accounts
      receivable                                   |   | (5,847  | ) |   | -          |   |   | (5,847            | )
|Advances from related party                                 |   | 68,250  |   |   | 83,837     |   |   | 152,087           |  
|Accounts payable                                            |   | 20,913  |   |   | -          |   |   | 20,913            |  
|Accrued liabilities                                         |   | 15,431  |   |   |            |   |   | 15,431            |  
|                                                            |   |         |   |   |            |   |   |                   |  
|Net cash provided by continuing
      operating activities  |   | 24,241  |   |   | 64,826     |   |   | 89,067            |  
|Income from discontinued
      operations                   |   | 14,508  |   |   | 509,557    |   |   | 524,065           |  
|Non-cash foreign currency translation                       |   |         |   |   |            |   |   |                   |  
|adjustment (note 3)                                         |   | -       |   |   | 315,536    |   |   | 315,536           |  
|                                                            |   | 14,508  |   |   | 825,093    |   |   | 839,601           |  
|Changes in non-cash working
      capital                   |   |         |   |   |            |   |   |                   |  
|Assets of discontinued operations                           |   | -       |   |   | 3,100,858  |   |   | 3,100,858         |  
|Liabilities of
      discontinued operations                |   | -       |   |   | (3,990,777 | ) |   | (3,900,777        | )
|                                                            |   |         |   |   |            |   |   |                   |  
|Net Cash Provided by (Used in) Discontinued
      Operating |   |         |   |   |            |   |  
|Activities                                                  |   | 14,508  |   |   | (64,826    | ) |   | (50,318           | )
|                                                            |   |         |   |   |            |   |   |                   |  
|Cash Flows from Investing Activities                        |   |         |   |   |            |   |   |                   |  
|Acquisition of licensing rights                             |   | (23,727 | ) |   | -          |   |   | (23,727           | )
|                                                            |   |         |   |   |            |   |   |                   |  
|Net Cash Used in Investing Activities                       |   | (23,727 | ) |   | -          |   |   | (23,727           | )
|                                                            |   |         |   |   |            |   |   |                   |  
|Cash Flows from Financing Activities                        |   |         |   |   |            |   |   |                   |  
|Issuance of
      common stock                              |   | -       |   |   | -          |   |   | -                 |  
|                                                            |   |         |   |   |            |   |   |                   |  
|Net Cash Provided by Financing
      Activities             |   | -       |   |   | -          |   |   | -                 |  
|                                                            |   |         |   |   |            |   |   |                   |  
|Effect of Exchange Rate Changes                             |   | 12,037  |   |   | -          |   |   | 12,037            |  
|Net Increase in Cash                                        |   | 27,059  |   |   | -          |   |   | 27,509            |  
|Cash - beginning of year                                    |   | -       |   |   | -          |   |   | -                 |  
|                                                            |   |         |   |   |            |   |   |                   |  
|Cash - end of year                                          | $ | 27,059  |   | $ | -          |   | $ | 27,059            |  
|                                                            |   |         |   |   |            |   |   |                   |  
|Supplemental Disclosures of Cash Flow
      Information     |   |         |   |   |            |   |   |                   |  
|Cash paid for interest and
      income taxes               | $ | -       |   | $ | -          |   | $ | -                 |  

21

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

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|1. | Nature of Business and Basis of Presentation
      and Development Stage Activities
|-- | -----------------------------------------------------------------------------------

The Company was incorporated on September
  2, 1999 in the State of Nevada as LMC Capital Corp. and was organized for the
  purpose of creating a corporate vehicle to locate and acquire an operating business.
  On December 12, 2001, the Company changed its name to K-Tronik International
  Corp. ("KTI").

By agreement dated November 29, 2001
and approved by the board of directors effective December 12, 2001, KTI issued
14,285,714 shares of restricted common stock to the shareholders of K-Tronik
Int'l Corporation, a Nevada corporation, in exchange for 100% interest in
K-Tronik Asia Corporation ("KTA"), a Korean corporation. In connection with this
transaction, K-Tronik Int'l Corporation changed its name effective December 12,
2001 to K-Tronik N.A. Inc. ("KTNA").

The acquisition resulted in the former
shareholders of KTNA acquiring 93.4% of the outstanding shares of KTI and has
been accounted for as a reverse acquisition with KTNA being treated as the
accounting parent and KTI, the legal parent, being treated as the accounting
subsidiary. Accordingly, the consolidated results of operations of KTI included
those of KTNA for all periods shown and those of the KTI since the date of the
reverse acquisition.

KTNA and KTA were engaged in the
manufacture and distribution of various types of electronic stabilizers and
illuminator ballasts for fluorescent lighting fixtures. KTNA granted credit, on
an unsecured basis, to distributors and installers located throughout the United
States.

On December 15, 2004, KTI entered into
an agreement to sell all of its interest in KTNA and the fixed assets of its
subsidiary, KTA. KTI is no longer engaged in the business of manufacturing,
distributing or selling electronic ballasts and is considered to have re-entered
the development stage at December 15, 2004.

On June 13, 2006, KTI announced it
would implement a new corporate strategy focusing on horseracing track
development opportunities. An agreement was signed on June 19, 2006 to buy
exclusive rights for a racetrack and casino (racino) development opportunity in
Saskatchewan, Canada. On July 5, 2006, KTI changed its name to Racino Royale,
Inc. (RR or the Company) to reflect its intention to engage in the business
of owning or leasing race-courses and/or conduct horse-races.

Going Concern

The accompanying consolidated financial
  statements have been prepared on a going concern basis, in accordance with accounting
  principles generally accepted in the United States of America.

The going concern basis of presentation
  assumes that the Company will continue in operation for the foreseeable future
  and will be able to realize its assets and discharge its liabilities and contingencies
  in the normal course of operations.

22

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|1. | Nature of Business and Basis of Presentation(contd)
|-- | ----------------------------------------------------

Going Concern (contd)

There is doubt about the Company's
ability to continue as a going concern as it has operating losses from
continuing operations of $74,506 (2005 - $19,011) a working capital deficiency
of $155,525 as at September 30, 2006 ($83,837 as at September 30, 2005). The
Company's ability to continue as a going concern is dependent upon the Company's
ability to raise additional capital and successfully complete a business
acquisition or business opportunity. The outcome of these matters cannot be
predicted at this time.

The consolidated financial statements
have been prepared on a going concern basis and do not include any adjustments
to the amounts and classifications of the assets and liabilities that would be
necessary if the going concern basis was not appropriate.

|2. | Summary of Significant Accounting
      Policies
|-- | ------------------------------------------------

The accounting policies of the Company
are in accordance with accounting principles generally accepted in the United
States of America. Outlined below are those policies considered particularly
significant:

| | a) | Principles of Consolidation                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                            
| |    | The accompanying consolidated financial statements
      include the accounts of the Company as described in note 1 and its newly
      formed wholly owned subsidiary 6584292 Canada Inc.. All material
      intercompany balances and transactions have been eliminated.
| |    |                                                                                                                                                                                                                                                                            
| | b) | Cash and Cash Equivalents                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                            
| |    | The Company considers all highly liquid investments with
      an initial maturity date of three months or less and money market accounts
      to be cash equivalents.                                                                                                    
| |    |                                                                                                                                                                                                                                                                            
| | c) | Licensing Rights                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                            
| |    | Licensing rights are recorded at cost and are considered
      to have a perpetual life. Licensing rights are tested for impairment on a
      periodic basis or when events or circumstances dictate.                                                                     
| |    |                                                                                                                                                                                                                                                                            
| | d) | Revenue Recognition                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                            
| |    | The Company currently derives its revenues from the
      conduct of horse-races. Revenues are primarily grants received from the
      government to subsidize the horse-races and to a much lesser extent from
      parimutuel wagering.                                

23

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|2. | Summary of Significant Accounting Policies(continued)
|-- | -----------------------------------------------------

| | d) | Revenue Recognition (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Revenues are recognized upon approval by regulatory
      authority as a result grant income is recognized subsequent to the race
      date whereas wagering revenues are recognized on the race date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | e) | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company accounts for foreign currency translation
      pursuant to the Statement of Financial Accounting Standards (SFAS) No.
      52, Foreign Currency Translation. The Companys foreign subsidiarys
      functional currency is the Canadian dollar. All assets and liabilities of
      the Companys foreign subsidiary are translated into United States dollars
      using the rate of exchange in effect at the end of the period. Revenues
      and expenses are translated at the average rate of exchange prevailing
      throughout the period. Translation adjustments are reflected as a separate
      component of stockholders' deficit in accumulated other comprehensive loss
      for the period.                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | f) | Comprehensive Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company adopted SFAS No. 130, Reporting
      Comprehensive Income, SFAS No. 130 establishes standards for reporting
      and presentation of comprehensive income (loss) and its components in a
      full set of financial statements. Comprehensive income (loss) is presented
      in the consolidated financial statements of operations, and consists of
      unrealized gains (losses) on available for sale marketable securities;
      foreign currency translation adjustments and charges in market value of
      future contracts that qualify as a hedge; and negative equity adjustments
      recognized in accordance with SFAS No. 87, Employers Accounting for
      Pensions. SFAS No. 130. requires only additional disclosures in the
      consolidated financial statements and does not affect the Companys
      consolidated financial position or results of operations.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | g) | Advertising Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company expenses advertising costs as incurred in
      accordance with SOP 93-7.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | h) | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The preparation of consolidated financial statements, in
      conformity with accounting principles generally accepted in the United
      States of America requires management to make estimates and assumptions
      that affect the reported amounts of assets and liabilities and the
      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. These estimates are reviewed periodically, and, as adjustments
      become necessary, they are reported in earnings in the period in which
      they become known.                                                                                                                                                                                                 

24

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|2. | Summary of Significant Accounting Policies(contd)
|-- | --------------------------------------------------
|   |                                                   
|   | i)                                                
|   |                                                   
|   |                                                   
|   |                                                   
|   | j)                                                
|   |                                                   
|   |                                                   
|   |                                                   
|   | k)                                                
|   |                                                   
|   |                                                   
|   |                                                   
|   | l)                                                
|   |                                                   
|   |                                                   
|   |                                                   
|   | m)                                                
|   |                                                   
|   |                                                   
|   |                                                   
|   |                                                   

25

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|2. | Summary of Significant Accounting Policies(contd)
|-- | --------------------------------------------------

| | n) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In February 2006, the Financial Accounting Standards
      Board ("FASB") issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instrumentsan amendment of FASB Statements No. 133 and 140
      (SFAS No. 155). This statement permits fair value of remeasurement for
      any hybrid financial instrument that contains an embedded derivative that
      otherwise would require bifurcation; clarifies which interest-only strips
      and principal-only strips are not subject to the requirements of SFAS No.
      133, "Accounting for Derivative Instruments and Hedging Activities";
      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; clarifies that concentrations of credit risk in the form of
      subordination are not embedded derivatives; and amended SFAS No. 140,
      "Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities", 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. SFAS No. 155 is effective for all
      financial instruments acquired, issued, or subject to a remeasurement (new
      basis) event occurring after the beginning of an entitys first fiscal
      year that begins after September 15, 2006. The Company is currently
      reviewing the effect, if any, the proposed guidance will have on its
      financial position.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In March 2006, FASB issued SFAS No. 156, "Accounting for
      Servicing of Financial Assets", which amends SFAS No. 140, Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities" (SFAS No. 156). In a significant change to current
      guidance, SFAS No. 156 permits an entity to choose either of the following
      subsequent measurement methods for each class of separately recognized
      servicing assets and servicing liabilities: (1) Amortization Method or (2)
      Fair Value Measurement Method. SFAS No. 156 is effective as of the
      beginning of an entitys first fiscal year that begins after September 15,
      2006. The Company is currently reviewing the effect, if any, the proposed
      guidance will have on its financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In June 2006 FASB issued Financial Accounting Standards
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN
      48). FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in an enterprises financial statements in accordance with SFAS
      No. 109, Accounting for Income Taxes ("SFAS No. 109"). FIN 48 prescribes
      a recognition threshold and measurement attributable for the financial
      statement recognition and measurement of a tax position taken or expected
      to be taken in a tax return. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties, accounting in
      interim periods, disclosures and transitions. FIN 48 is effective for
      fiscal years beginning after December 15, 2006. The Company is currently
      reviewing the effect, if any, FIN 48 will have on its financial
      position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

26

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|2. | Summary of Significant Accounting Policies
      (continued)
|-- | ------------------------------------------------------------

| | n) | Recent Accounting Pronouncements (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In September 2006, the SEC staff issued Staff Accounting
      Bulletin No. 108 (SAB No. 108), Considering the Effects of Prior Year
      Misstatements when Quantifying Misstatements In Current Year Financial
      Statements, SAB No. 108 was issued to provide consistency in how
      registrants quantify financial statement misstatements. The Company is
      required to and will initially apply SAB No. 108 in connection with the
      preparation of its annual financial statements for the year ending
      September 30, 2007. The Company does not expect the application of SAB No.
      108 to have a material effect on its financial position and results of
      operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In September 2006, the FASB issued SFAS No. 157, Fair
      Value Measurements ("SFAS No. 157"), which is effective for calendar year
      companies on January 1, 2008. The statement defines fair value,
      establishes a framework for measuring fair value in accordance with
      generally accepted accounting principles, and expands disclosures about
      fair value measurements. The statement codifies the definition of fair
      value as the price that would be received to sell an asset or paid to
      transfer a liability in an orderly transaction between market participants
      at the measurement date. The standard clarifies the principle that fair
      value should be based on the assumptions market participants would use
      when pricing the asset or liability and establishes a fair value hierarchy
      that prioritizes the information used to develop those assumptions. The
      Company is currently assessing the potential impacts of implementing this
      standard.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In September 2006, the FASB issued SFAS No. 158,
      Employers' Accounting for Defined Benefit Pension and Other
      Postretirement Plans an amendment of FASB Statements No. 87, 88, 106 and
      132 (R) ("SFAS No. 158"). SFAS No. 158 requires an employer to recognize
      the funded status of a defined benefit postretirement plan as an asset or
      liability in its statement of financial position and to recognize changes
      in that funded status in the year in which the changes occur through
      comprehensive income. The funded status of a benefit plan is defined as
      the difference between the fair value of the plan assets and the plans
      benefit obligation. For a pension plan the benefit obligation is the
      projected benefit obligation and for any other postretirement benefit
      plan, such as a retiree health care plan, the benefit obligation is the
      accumulated postretirement benefit obligation. SFAS No. 158 requires an
      employer to recognize as a component of other comprehensive income, net of
      tax, the gains and losses and prior service costs or credits that arise
      during the period but that are not recognized as components of net
      periodic benefit costs pursuant to SFAS No. 87 Employers Accounting for
      Pensions. SFAS No. 158 also requires an employer to measure the funded
      status of a plan as of the date of its year-end. Additional footnote
      disclosure is also required about certain effects on net periodic benefit
      cost for the next year that arise from the delayed recognition of gains or
      losses, prior service costs or credits, and transition asset or
      obligation. Except for the year-end measurement requirement, SFAS No. 158
      is effective for the year ending December 31, 2006. The Company does not
      anticipate that the adoption of this statement will have a material effect
      on its financial condition or operations.

27

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|3. | Restatement of Prior Year Financial
      Statements  Correction of an Error
|-- | -----------------------------------------------------------------------------

In 2006, it was determined that the
Company had inadvertently excluded the accumulated comprehensive loss from the
determination of discontinued operations in 2005. The accumulated comprehensive
loss primarily included foreign currency translation adjustments. As a result,
the September 30, 2005 figures, presented for comparative purposes, have been
restated from those previously reported, in order to properly account for the
error. The effect on the consolidated statement of operations and comprehensive
loss and the consolidated balance sheet for the year ended September 30, 2005 is
as follows:

**As previously Reported**
      Increase / (Decrease)
      RestatedConsolidated Statement of Operations and Comprehensive
        LossIncome from discontinued operations, net
        of income taxes
      825,093
      (315,536)
      509,557Net (loss) income
      806,082
      (315,536)
      490,546Earnings per weighted average number of
        shares outstanding during the year
      0.03
      (0.01)
      0.02Consolidated Balance Sheet:Accumulated Comprehensive Loss
      (315,536)
      315,536
      -Accumulated Deficit
      (5,047,284)
      (315,536)
      (5,362,820)


28

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|4. | Licensing Rights
|-- | ----------------

On June 14, 2006, the Company acquired
the exclusive rights for a racetrack development opportunity in Saskatchewan,
Canada

Licensing rights were valued as
follows:

| | Cash                                                               | $ | 22,727        | 
| | ------------------------------------------------------------------ | - | ------------- | 
| | Capital stock issuance (5,000,000 shares at $0.24 per
      share) |   | **1,200,050** | 
| | Warrants                                                           |   | 93,694        | 
| | Legal costs                                                        |   | 1,000         | 
| |                                                                    |   |               | 
| | Total                                                              | $ | 1,317,471     | 

The warrants are exercisable at $0.10
per share, expiring in three yeas from the date of issuance.

The fair value of the warrants was
estimated on the date of issuance using the Black-Scholes option pricing model
with the following weighted average assumptions used:

| | Dividend yield          | 0.0%   
| | ----------------------- | -------
| | Expected volatility     | 106%   
| | Risk-free interest rate | 4.3%   
| | Expected lives          | 3 years

|5. | Advances from Related Party
|-- | ---------------------------

Advances are non-interest bearing,
unsecured and have no specified terms of repayment and are payable to the parent
company.

29

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|6. | Capital Stock
|-- | -------------

The legal share capital of the Company
subsequent to the reverse acquisition is that of RR, the legal parent. RR has
authorized capital of 100,000,000 shares of common stock with a par value of
$0.00001 of which 28,223,886 shares are issued and outstanding as of September
30, 2006 (23,223,886 as at September 30, 2005).

On June 19, 2006, RR issued 5,000,000
common shares and 500,000 common share purchase warrants of RR, exercisable at
$0.10 per share expiring in three years, for the acquisition of licensing rights
as described in Note 1 and 4.

The Company has never had a stock
option plan. Therefore, there are no stock options outstanding as of September
30, 2006 and the Company has not recorded any stock-based compensation in the
current or any prior periods.

|7. | Discontinued Operations
|-- | -----------------------

On December 15, 2004, KTI entered into
  an agreement to sell all of its interest in KTNA and the fixed assets of its
  subsidiary, KTA. The terms of the agreement call for KTA to use the purchase
  proceeds to retire the debts of KTNA and its subsidiary KTA to the purchaser.
  KTI and the purchaser also entered into agreements whereby KTI transfers to
  the purchaser ownership of all of the issued and outstanding shares of KTNA,
  its U.S. subsidiary which owns KTA. Upon final closing of the agreements described
  above, the purchaser is to own all of the issued and outstanding shares of KTNA
  and the assets of KTA. KTI is no longer engaged in the business of manufacturing,
  distributing or selling electronic ballasts.

As such, the operations of KTNA and KTA
are presented in the consolidated financial statements as discontinued
operations.

30

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|7. | Discontinued Operations(contd)
|-- | -------------------------------

| |                                                             |   |        |  |   | Restated |  
| | ----------------------------------------------------------- | - | ------ |  | - | -------- | -
| |                                                             |   |        |  |   | (note 3) |  
| |                                                             |   | 2006   |  |   | 2005     |  
| | Revenues of discontinued operations                         | $ | -      |  | $ | -        |  
| |                                                             |   |        |  |   |          |  
| |                                                             |   |        |  |   |          |  
| | Loss on discontinued operations,                            | $ | 14,508 |  | $ | (64,826  | )
| | Gain on disposal of assets of discontinued
      operations |   | -      |  |   | 574,383  |  
| | Income taxes                                                |   | -      |  |   | -        |  
| |                                                             | $ | 14,508 |  | $ | 509,557  |  

There were no assets or liabilities of
discontinued operations presented in the consolidated balance sheets for the
years ended September 30, 2006 and 2005.

|8. | Income Taxes
|-- | ------------

Under SFAS No. 109 income taxes are
recognized for the following: a) amount of tax payable for the current year, and
b) deferred tax liabilities and assets for future tax consequences of events
that have been recognized differently in the financial statements than for tax
purposes.

The provision for income taxes has been
computed as follows:

| |                                                                                                                                       |       |             |   |       | Restated |  
| | ------------------------------------------------------------------------------------------------------------------------------------- | ----- | ----------- | - | ----- | -------- | -
| |                                                                                                                                       |       |             |   |       | (note 3) |  
| |                                                                                                                                       |       | **2006**    |   |       | 2005     |  
| | Expected income tax expense
      (recovery) at the statutory rate of 24.5% (2005 - 15%)                                              | **$** | (14,702     | ) | $     | 73,582   |  
| |                                                                                                                                       |       |             |   |       |          |  
| | Tax effect of expenses that are not
      deductible for income tax purposes (net of other amounts deductible
      for tax purposes) |       | -           |   |       | **-**    |  
| |                                                                                                                                       |       |             |   |       |          |  
| |                                                                                                                                       |       | **(14,702** | ) |       | 73,582   |  
| | Changes in valuation allowance                                                                                                        |       | **14,702**  |   |       | (73,582  | )
| |                                                                                                                                       |       |             |   |       |          |  
| | Provision for income taxes                                                                                                            | $     | -           |   | **$** | **-**    |  

31

---

|RACINO ROYALE, INC. AND SUBSIDIARY        
|------------------------------------------
|(FORMERLY K-TRONIK INTERNATIONAL CORP.)   
|Notes to Consolidated Financial Statements
|September 30, 2006 and 2005               

|8. | Income Taxes(contd)
|-- | --------------------

The components of deferred income taxes
are as follows:

| |                                  |   |         |   |       | Restated |  
| | -------------------------------- | - | ------- | - | ----- | -------- | -
| |                                  |   |         |   |       | (note 3) |  
| |                                  |   | 2006    |   |       | 2005     |  
| |                                  |   |         |   |       |          |  
| | Deferred income tax liabilities  |   |         |   |       |          |  
| | Net operating loss carryforwards | $ | 80,620  |   | $     | 65,918   |  
| |                                  |   |         |   |       |          |  
| | Valuation allowance              |   | (80,620 | ) |       | (65,918  | )
| | Deferred income taxes            | $ | -       |   | **$** | **-**    |  

The Company has tax losses available to
be applied against future years income. Due to the losses incurred from a
predecessor business and expected future operating results, management
determined that it is more likely than not that the deferred tax asset resulting
from the tax losses available for carryforward will not be realized in timely
manner, through the reduction of future income tax payments. Accordingly a 100%
valuation allowance has been recorded for deferred income tax assets.

As at September 30, 2006, the Company
had approximately $499,455 (2005  439,457) of Federal and State net operating
loss carryovers available to offset future taxable income, such carryovers
expire in various years.

|9. | Related Party Transactions
|-- | --------------------------

All related party transactions are in
the normal course of operations and are measured at the exchange amount, which
is the amount of consideration established and agreed to by both parties. During
the year, administrative expenses of $82,235 and licensing rights of $25,000
were paid on behalf of the Company by the parent company. The Company is
economically dependent upon its parent company for ongoing financing needs of
the business.

Payables to KTNA in the amount of
$14,508 were written off as a component of discontinued operations in the year.

|10. | Comparative Information
|--- | -----------------------

Certain comparative figures have been
reclassified in order to conform with the current year's presentation.

32

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