---

**UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION**
  Washington, D.C. 20549

FORM 10-KSB/A

(Mark One)

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

For the fiscal year ended August 31, 2004

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

For the transition period from __________ to __________

Commission file number 000-49664

IKONA GEAR INTERNATIONAL, INC.(Name of small business issuer in its charter)

|Nevada                                           | 88-0474903                          
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     

1850 Hartley Avenue, Unit #1
  Coquitlam, British ColumbiaCanada, V3K 7A1 
  (Address of principal executive offices)

604-523-5500
  (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:
  None

Securities registered under Section 12(g) of the Exchange Act:
  Common Stock, $0.00001 par value

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

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

The issuers revenues for its most recent fiscal year were:
  $157,782 The aggregate market value of common equity of the registrant held
  by non-affiliates computed by reference to the last sales price at which the
  common stock was sold on November 22, 2004 was $11,092,836.

As of November 22, 2004, there were 24,090,325 shares of common
  stock issued and outstanding.

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

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TABLE OF CONTENTS

|Part I                                                                                                                        | 4 
|----------------------------------------------------------------------------------------------------------------------------- | --
|                                                                                                                              |   
|Item 1. Description of Business                                                                                               | 4 
|                                                                                                                              |   
|Item 2. Description of Property                                                                                               | 9 
|                                                                                                                              |   
|Item 3. Legal Proceedings                                                                                                     | 10
|                                                                                                                              |   
|Item 4. Submission of Matters to a Vote of Security
      Holders                                                             | 10
|                                                                                                                              |   
|Part II                                                                                                                       | 10
|                                                                                                                              |   
|Item 5. Market for Common Equity and Related Stockholder
      Matters                                                        | 10
|                                                                                                                              |   
|Item 6. Management's Discussion and Analysis or Plan
      of Operation                                                       | 12
|                                                                                                                              |   
|Item 7. Financial Statements                                                                                                  | 16
|                                                                                                                              |   
|Item 8. Changes In and Disagreements with Accountants
      on Accounting and Financial Disclosure                            | 17
|                                                                                                                              |   
|Item 8A Controls and Procedures                                                                                               | 17
|                                                                                                                              |   
|Part III                                                                                                                      | 18
|                                                                                                                              |   
|Item 9. Directors, Executive Officers, Promoters and
      Control Persons; Compliance with Section 16(a) of the Exchange Act | 18
|                                                                                                                              |   
|Item 10. Executive Compensation                                                                                               | 22
|                                                                                                                              |   
|Item 11. Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters                 | 25
|                                                                                                                              |   
|Item 12. Certain Relationships and Related Transactions                                                                       | 27
|                                                                                                                              |   
|Item 13. Exhibits and Reports on Form 8-K                                                                                     | 27
|                                                                                                                              |   
|Item 14. Audit Fees                                                                                                           | 28
|                                                                                                                              |   
|Signatures                                                                                                                    | 29

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Caution Regarding Forward Looking Information

This
  report contains forward-looking statements within the meaning of Section 27A
  of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
  of 1934, including, without limitation, statements regarding our expectations,
  beliefs, intentions or future strategies that are signified by the words "expect,"
  "anticipate," "intend," "believe," or similar language. All forward-looking
  statements included in this report are based on information available to us
  on the date hereof, and we assume no obligation to update any such forward-looking
  statements. Our business and financial performance are subject to substantial
  risks and uncertainties. Actual results could differ materially from those projected
  in the forward-looking statements. In evaluating our business, you should carefully
  consider the information set forth below under the caption "Risk Factors." Readers
  are cautioned not to place undue reliance on these forward-looking statements.

References
  in this Report to "Ikona," the "Company," "we," "our," and "us" refer to Ikona
  Gear International, Inc., a Nevada corporation.

3

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PART I

Item 1.     Description of Business

General

Ikona
  Gear International, Inc. ("Ikona" or our "Company") engaged in the development
  and plans to commercialize its proprietary, patented gear technology (the "Ikona
  Gearing System"). The Ikona Gearing System utilizes a unique, newly designed,
  patented tooth shape which enables gears to be much, smaller, lighter, stronger
  and more energy efficient while achieving a higher single stage reduction ratio
  and a lower backlash than any other gear currently available on the market.
  In high-ratio applications the Ikona Gearing System can replace multiple stage
  gearing systems with a single stage reduction ratio and is thus can be more
  cost effective to manufacture. Ikona has received patents for the gear tooth
  form in the United States, Canada, Germany, France, Italy, Great Britain and
  Sweden.

Our
  business strategy is based on building strategic alliances and collaborating
  to further develop our technology. We
  are not gear manufacturers, we are gear designers who will manufacture a prototype
  and then allow our clients to manufacture their own gears based on our design,
  therefore we have no dependency on any principal suppliers of manufacturing
  materials or labor. Our business model is to develop licensing agreements
  and associated royalties attached to the sale of products, where our gear design
  is licensed for a per unit fee from our clients. Our goal in the current operating
  year is to enter into licensing agreements in
  three different vertical markets (for example: automotive, shipping, alternative
  energy, or robotics) with different business partners, where we will
  prove the virtues of our patented gearing technology in applications that generate
  revenues for us. Our ability to generate revenues may vary with the extent of
  competition in the market. We
  have only one revenue-producing licensing agreement; as a result we have insufficient
  information to predict how differences in these markets could have a significant
  effect on our revenues.

Because
  of the engineering design of the Ikona Gearing System, our marketing plans emphasize
  the technical advantages of the Ikona Gearing System by jointly developing vertical,
  industry-specific applications which focus on the unique high torque and low
  weight attributes of the Ikona Gearing System, including but not limited to:
  alternative energy sources such as windmills; robotics and high precision machinery;
  high torque industrial machinery; and aircraft and military equipment.

We
  seek to enhance shareholder value and maximize income from our patented technology
  by licensing product to industrial original equipment manufacturers and Tier
  1 suppliers for high volume gearing applications, and by supplying and/or licensing
  the Ikona Gearing System to industry manufacturing specialists and other strategic
  partners and suppliers. The Company will also seek to develop further intellectual
  property and generate royalty income directly and through additional joint-development
  partnerships.

HISTORY OF THE IKONA GEAR SYSTEM

The
  Ikona gear design was originally developed by Ukrainian scientists working in
  the former USSR for the purpose of reducing the weight of an attack helicopter
  known as the MIL MI-28 Havoc, a long-range Russian military helicopter. In September
  1993, Laith Nosh, our President and founder traveled to Dnepropetrovsk, Ukraine
  on a trade mission to acquire technology developed by the former military of
  the USSR. There, Mr. Nosh met with Boris A.Koriakov-Savoysky, Igor V. Aleksahin,
  and Ivan P. Vlasov, the inventors of the new gear design technology. During
  1993, Mr. Nosh collaborated with the Ukrainian inventors and in mid-1994 acquired
  the rights to the technology from its inventors.

In
  October 1994, Mr. Nosh introduced the gear technology to Dr. J. R. Colbourne,
  a Ph.D. in mechanical engineering, gear industry specialist, and professor emeritus
  at the University of Alberta in Edmonton, Canada. Dr. Colbourne did technical
  due diligence on the gear design, enhanced the technology, and then assisted
  Mr. Nosh with preparing and filing patents for the technology in the USA, Canada
  and Europe. The patents were filed in August 1994 and issued in the US as patent
  5,505,668 in April 1996. The patent was issued in Europe as patent 0770192 in
  November 1998, and in Canada in September 1999, as patent 2,129,188.

Dr.
  Colbourne then assisted Mr. Nosh with recruiting gear specialists in 2001, and
  Ikona Gear International, Inc. was incorporated in August 2001 to carry on the
  business in the US and Canada. The US patents were originally filed by Ikona
  Gears Limited, Nicosia, Cyprus (a prior owner of the technology rights), and
  were transferred by Mr. Nosh to Diversified Sciences Limited (an Alberta corporation)
  in 1997. Diversified Sciences

4

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Limited completed the patents for Europe and Canada, and subsequently transferred the patents to Ikona Gear International, Inc. in August 2001, just after the company was incorporated.

HISTORY OF OUR COMPANY

Ikona
  Gear International, Inc. (previously Oban Mining, Inc.) (the "Company") was
  incorporated in the State of Nevada on September 20, 2000. From our incorporation
  until October 2003, we pursued our business as a mineral resource exploration
  company from Vancouver, Canada, which was ultimately unsuccessful and abandoned.

Effective
  October 30, 2003, we consummated an Agreement and Plan of Reorganization (the
  "Agreement") pursuant to which we acquired 100% of the issued and outstanding
  shares of common stock of Ikona Gear USA, Inc. (formerly Ikona Gear International,
  Inc.)("Ikona USA"). Under the terms of the Agreement, the shareholders of Ikona
  USA received, pro rata, an aggregate of 15,041,633 shares of common stock of
  the Company in exchange for 100% of the outstanding shares of Ikona USA. A principal
  shareholder of the Company surrendered for cancellation 14,500,000 shares of
  common stock, which resulted in the Ikona USA shareholders acquiring shares
  representing approximately 70% of the total issued and outstanding shares of
  the Company. As a result, the transaction was accounted for as a recapitalization
  of Ikona USA.

The
  audited consolidated statements of operations, stockholders' equity (deficiency)
  and cash flows of the Company prior to October 30, 2003 are those of Ikona USA.
  The Company's consolidated date of incorporation is considered to be August
  16, 2001, the date of inception of Ikona USA. Following the acquisition, we
  changed our name from Oban Mining, Inc. to Ikona Gear International, Inc. On
  October 31, 2003, we incorporated a wholly-owned subsidiary, Ikona Gear Corp.,
  a British Columbia Corporation.

We
  are now focusing on commercializing and further developing Ikona's unique, patented
  gear technology, the Ikona Gearing System. Today, our Company comprises a series
  of corporations organized in a multi-tiered arrangement depicted in the following
  schematic:



The functions and relationships of these entities to one another can be summarized as follows:

Ikona
  Gear International, Inc. ("IKGI") is a corporation incorporated in Nevada and
  publicly-traded on the OTC market under the ticker symbol IKGI. We are also
  listed and trading in the Regulated Unofficial Market on the Frankfurt Stock
  Exchange under the ticker symbol IG2. We are also listed and trading on the
  Berlin Stock Exchange under the ticker symbol A0BLY1.

IKGI,
  is based in Vancouver, British Columbia, and is primarily involved in capital
  formation, investor relations and head office and executive office administration.
  We have two wholly-owned subsidiaries:

- Ikona Gear USA, Inc., incorporated in Nevada, is a non-operating
      entity holding all intellectual property owned by the Ikona group of companies
      and was formed on August 16, 2001.
- Ikona Gear Corp., incorporated in British Columbia, Canada,
      was formed October 31, 2003. This company is currently carrying out the
      operations of the Ikona group of companies.

5

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ABOUT GEARING TECHNOLOGIES AND THE IKONA GEARING SYSTEM

A gear is a toothed wheel, which is usually round. The purpose
  of gearing is to transmit motion from one shaft to another. This motion transfer
  may or may not be uniform and may be accompanied by change in direction, speed
  and shaft torque (rotational force). A gear reducer is used to reduce and convert
  the higher turning speed of a motor into power or torque for such diverse items
  as winches and helicopters. Conversely, a gear speed increaser (speed multiplier)
  converts a higher torque and lower rotational speed into a higher-speed turning
  shaft that can be used to turn a power generator for the production of electricity
  such as in windmills.

In general, gears may be divided into several broad classifications
  based on the arrangement of the axes and of the gear pair. Examples of these
  classifications include worm, bevel, helical, parallel shaft, spur and planetary.
  Planetary gears are generally the most energy efficient class of gears and account
  for approximately 35% of all gearing applications (managements estimates).
  The Ikona Gearing System can be broadly classified as a planetary gearing system.

The essence of any gear is its tooth form. Gear teeth are
  classified as being either involute or non-involute. An involute tooth has a
  specific geometrical curve. The contacting gear teeth on two separate gear system
  components (i.e. the internal and external gears) are identical in shape. An
  involute tooth is constructed such that constant angular velocity (rotation
  rate) is maintained throughout gear contact. This constant angular velocity
  is what is known as conjugate action and is a necessary feature for many applications.
  A non-involute tooth is any tooth form that does not have the specific geometry
  of an involute tooth form.

There are many forms of non-involute teeth. With the Ikona
  non-involute tooth form - the contacting gear teeth on two separate components
  of the gear system are complementary in shape to one another. The pinion teeth
  have convex profiles, while those of the internal gear are concave, making for
  favourable gear tooth contact conditions.

The Ikona Gearing System improves significantly upon the shortcomings
  of the planetary gear (i.e. gear backlash and low ratios of contact between
  gear teeth), and as a result, the Ikona Gearing System has technical advantages
  over other types of gear systems presently being used (e.g. worm gears). The
  Ikona gearing system has generally a higher contact ratio than conventional
  planetary gears. In addition, the contact ratio increases as the gearing reduction
  ratio increases. As a result, in high torque applications (with a high gearing
  reduction ratio) the Ikona gear can maintain several times more teeth in contact
  than a conventional planetary gear. As a result it is possible to reduce the
  overall size of the gear and maintain the same strength and reliability of a
  gear system several times the size of a comparable Ikona Gearing system.

The Ikona Gearing System can result in significant weight
  reductions in applications where high torque and high gearing reduction ratios
  are required, for example, in aviation where fuel consumption is directly reduced
  by weight savings.

ADVANTAGES OF THE IKONA GEARING SYSTEM

The Ikona Gearing System is superior to conventional gearing systems for the following reasons:

- High tooth contact ratio - in gearing, contact ratio
      can be thought of as the average number of teeth pairs in contact at any
      one time. Traditional involute gears may have only 1.77 pairs of teeth in
      contact at a time. In the Ikona Gearing System, up to 40 or more pairs of
      teeth can be in contact. With more mating teeth, the Ikona Gearing System
      is stiffer and stronger than its counterparts. With the inherent strength
      of the Ikona Gearing System, it is also possible to make gearing systems
      smaller and lighter. These particular benefits are important for the robotics,
      automotive and aerospace industries.
- Low noise level - the Ikona Gearing System is designed
      to operate with a noise level lower than most gear systems due to the unique
      meshing features of its teeth and the rolling motion inherent in the gear
      system design. Low noise levels are important in the aviation and robotics
      industries.
- High single stage reduction ratio - reduction ratio is a measurement of the ability of a gear to convert speed

6

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- Cost effectiveness - devices that have more components
      or high part counts are inherently more expensive due to production and
      maintenance costs. They also waste a significant amount of energy because
      of the added number of moving pieces. While doing the work of competitors'
      multi-stage gear systems in a single stage, the Ikona Gearing system is
      more cost effective because of its reduced part count.
- Conjugate system - the Ikona Gearing System is conjugate,
      meaning that it operates at a constant speed. Conjugate action equates to
      repeatability, which is an essential characteristic of precise machinery
      and positioning devices. In applications such as robotics, this feature
      is a necessity.
- Zero backlash - backlash can be thought of as the movement
      of one gear while the mating gear is held stationary. This freedom of movement
      implies imprecision (e.g. putting a car's transmission into park still allows
      the vehicle to roll a few inches before reaching a complete stop). With
      present involute technology, zero backlash is only realized using a gear
      reducer with very tight tolerances. These tight tolerances are expensive
      and the result is still not absolutely zero backlash. With the Ikona Gearing
      System, zero backlash is theoretically inherent in the design of the tooth
      form. Absolutely zero backlash is not practical as it impedes the assembly
      process of a gearing system. The Ikona Gear has the lowest backlash presently
      available in current gear design and manufacture. Robotics is an ideal application
      for the Ikona Gearing System due to the necessity of extreme precision.

Intellectual Property, Patents and Licenses

Our technology includes a number of proprietary and patented
  technologies. We hold patents issued from the United States (5,505,668), Canada
  (2,129,188), Europe (including France, Great Britain, Germany, Italy and Sweden)
  (0770192). All intellectual property, including original patents for the Ikona
  Gearing System, provisional patent applications, design specifications, trade
  secrets, improvements to the technologies, software, contractual provisions
  with third parties, were assigned to us according to an acquisition agreement
  dated August 31, 2001, between Diversified Sciences Limited and Ikona Gear International,
  Inc. (now Ikona Gear USA, Inc.). We have subsequently ensured that all patents
  have been duly re-assigned under the name of Ikona Gear USA, Inc.

Although we intend to continue to protect the technology and
  any improvements to the technology with additional patent applications, no assurance
  can be given that any patent will be issued or that the scope of any patent
  protection will exclude competitors or that any patent, if issued, will be held
  valid if subsequently challenged.

In meetings in March 2004, conducted with Magna Advanced Technologies,
  we were advised that we had neglected to advise the U.S. Patent Office regarding
  all material correspondences with the European Patent Office during the application
  period for the US Patent.

We brought this comment to our patent attorneys and asked
  that they conduct an independent review of the US Patent and our disclosure
  requirements vis-à-vis the European search report. In a response from
  our attorneys dated 2 July 2004, this information was confirmed. In particular,
  that we had received a patent search report from the European Patent Office
  on November 23, 1995, that indicated an existing relevant patent (GB, A, 1 101
  522 issued on 31 January 1966) which could be interpreted as similar to the
  Patent we filed with the European Patent Office. As we subsequently convinced
  the European Patent Office with reasoning as to why our patent was unique and
  dissimilar to the pre-existing patent GB, A, 1 101 522, we neglected to bring
  this correspondence to the attention of the US Patent Office.

7

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Regardless of the fact that the correspondence occurred and
  did not impair our ability to file a European Patent Convention Treaty, it is
  possible that through a strict interpretation of our responsibilities under
  US Patent law that management had a responsibility to disclose to the US Patent
  Office the European search report and its findings, and our subsequent response
  and our successful conclusion in achieving a European Patent Convention Treaty.

We are currently evaluating the proper course to follow under
  these circumstances, which could include the filing of a request for reexamination
  of the US Patent, along with the additional disclosures, in an attempt to make
  all efforts to rectify any possibility that there has occurred an inadvertent
  failure to comply with our obligations under US patent law. However, it is possible
  that in a reexamination application that additional disclosures may not remedy
  the potential violation. We are seeking a second opinion prior to determining
  whether a response is required.

It is difficult to forecast the outcome of a reexamination
  procedure if we requested a reexamination to be filed, and therefore we cannot
  be assured that the outcome would be favorable to our company.

|Jurisdiction/ | Patent/Appln No. |               |                     | Assigned   |              
|------------- | ---------------- | ------------- | ------------------- | ---------- | -------------
|Title         |                  | Issue Date    | Applicant           | To         | Expiry Date  
|USA/          | 5,505,688        | April 9, 1996 | Ikona Gears Limited | Ikona Gear | November 11, 
|Gear system   |                  |               | (Nicosia, CY)       | USA, Inc.  | 2015         
|Canada/       | 2,129,188        | Sept. 7, 1999 | Ikona Gears Limited | Ikona Gear | July 29, 2014
|Gear system   |                  |               | & Ikona Inc.        | USA, Inc.  |              
|Europe/       | 0770192          | November 11,  | Ikona Gears Limited | Ikona Gear | July 26, 2015
|Gear system   |                  | 1998          | & Ikona Inc.        | USA, Inc.  |              

We also intend to rely on a combination of trade secrets,
  license agreements, non-disclosure and other contractual provisions, and technical
  measures to establish and protect the proprietary aspects of the Ikona Gearing
  System. All of our current employees, consultants and advisers have signed non-disclosure
  agreements. We believe that our intellectual property rights are appropriately
  protected having regard for the technical complexity of the systems, and the
  expertise required to design and manufacture gearing systems that are unique
  to their applications.

Other Intellectual Property

Our Company has registered the domain name www.ikonagear.com.

Limitations of Intellectual Property Protection

The Ikona trademark and domain name play an important role
  in expanding the awareness of our technology on the Internet and in developing
  partnerships between those who use the Internet to retrieve information and
  many providers of products and services available on the Internet. We have applied
  for Canadian registration of the "Ikona" trademarks and we have registered our
  domain name in an effort to protect them, our efforts may be inadequate to prevent
  others from claiming violations of our marks and may be inadequate to protect
  our use of those names as unique. In addition, trademark protection and the
  uncertainty surrounding the legal protections of domain names may be unenforceable
  or limited in other countries, and the global nature of the Internet makes it
  impossible to control the ultimate destination of our Company's communications.
  The regulation of web addresses in the United States and in foreign countries
  is subject to change. As a result, we may not be able to maintain our domain
  name in the future. Furthermore, the relationship between regulations governing
  such domain names and the laws protecting trademarks is unsettled.

8

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Competition

Ikona's
  Gearing system is based on a design similar to the cycloidal drive system, originally
  developed in Japan and now manufactured by a number of large Japanese companies.
  We have identified the following five competing companies as those with technology
  most comparable to the Ikona Gearing System. We believe the Ikona Gearing System
  is technologically superior to technologies marketed by these companies. However,
  as these companies have the legacy of lengthy historical operations and well
  established reputations, it is our challenge to continue to establish Ikona
  Gear as a company and to prove the importance of the superior technological
  characteristics of the Ikona Gearing system, including low weight, high strength,
  near-zero backlash and reduced friction and wear.

Sumitomo
  Heavy Industries ("Sumitomo") - Operating since 1888, Sumitomo serves the steel,
  heavy machinery, ship, bridge manufacturing, automotive, chemical, construction,
  materials handling, medical, timber, and utility industries. Sumitomo has more
  than 30 major subsidiaries and affiliates operating in Japan and other Asian
  countries in addition to the US and Europe. Sumitomo is part of Japan's Sumitomo
  Group and, while it has a global customer base, Japan and North America account
  for about 90% of sales. Its mass-produced industry segment (which includes the
  manufacturing of gears) generated ¥140 billion ($1.1 billion) in 2000.

Sumitomo
  gear manufacturing, with an approximately 9% share of the global gearing market
  (managements estimates), may be considered one of Ikona's largest competitors.
  Its main gear product uses a cycloidal drive system similar to the IKONA Gearing
  System; however, Sumitomo's technology uses a wave plate and pins (a non-conjugate
  gear system) as opposed to meshed teeth. As a result, its product performance
  is inferior when compared to Ikona's system.

SEW-Eurodrive
  - has focused on the following five technologies: gear reducers, adjustable
  speed drives, electric motors, brakes, and electronic controls. SEW-Eurodrive
  has grown during the past 65 years in drive technology, with more than 38,000
  employees in 142 countries and sales in excess of DM1.9 billion ($880 million).

Flender
  USA ("Flender") - has over 9,500 employees located in 15 manufacturing operations
  with over 70 sales offices worldwide. Each product line and facility is supported
  by ongoing research, development, the latest in manufacturing techniques, and
  a rapid transfer of today's technologies to Flender operations throughout the
  world. Flender offers gear reducer packages with helical or bevel gearing with
  smooth action and low noise and a maximum reduction ratio of 450:1.

Harmonic
  Drive Technologies - is a leading manufacturer of precision gearing systems,
  gearboxes, servo actuators and custom assemblies based on the unique principle
  of harmonic drive. It is also an importer of heavy-duty precision gear and servo
  actuator systems based on the cycloidal gear system.

Fairfield
  Manufacturing Company, Inc. - a manufacturer of custom gears, gear sets and
  transmission assemblies. Services also include design engineering, heat treating,
  and testing. Fairfield has over 1,300 employees with a 600,000 square foot manufacturing
  space.

Research and Development

We
  charge research and development expenditures to operations as expended. In the
  three years ended August 31, 2002, 2003, and 2004, our expenditures on research
  and development were $229,881, $218,600 and $216,329, respectively.

Employees and Consultants

We have nine full-time
  employees, and one part-time employee

Item 2.     Description of Property

We
  occupy our offices under a three-year operating lease requiring monthly rent
  of $4,875, expiring on August 31, 2007. The lease for our new premises, consisting
  of executive offices and research and development area, at 1850 Hartley Avenue,
  Unit#1, Coquitlam, BC, Canada, commenced on August 1, 2004. The facilities are
  adequate for the foreseeable future.

9

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Item 3.     Legal Proceedings

At
  the date of this report, there are no pending legal proceedings in which the
  Company is a party and we are not aware of any threatened legal proceedings.

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

No matters were
  submitted to a vote of security holders during the three months ended August
  31, 2004.

PART II

Item 5.     Market for Common Equity and Related
  Stockholder Matters

Since
  December 5, 2003, our common stock has traded on the Over-the-Counter Market
  and is quoted on the OTC Electronic Bulletin Board under the symbol "IKGI."
  From September 20, 2000, to December 5, 2003, our stock traded on the Over-the-counter
  market as "OBAN". To date the Over-the-Counter Market has been the principal
  trading market for our shares. We are also listed on the Berlin and Frankfurt
  stock exchanges, although our trading has been random and sporadic.

The
  following table sets forth the high and low prices for our common stock on the
  over-the-counter market and quoted on the Bulletin Board for each quarter since
  August 2001. The prices presented below are bid and ask prices which represented
  price between broker-dealers and do not include retail markups and markdowns
  or any commission to the broker. The prices do not necessarily reflect actual
  transactions.

|                  | Common Stock
|----------------- | ------------
|Quarter Ended     | Low         
|August 31, 2001   | n/a         
|November 30, 2001 | n/a         
|February 28, 2002 | n/a         
|May 31, 2002      | n/a         
|August 31, 2002   | 0.05        
|November 30, 2002 | 0.01        
|February 28, 2003 | 0.01        
|May 31, 2003      | 0.01        
|August 31, 2003   | 0.01        
|November 30, 2003 | 0.01        
|February 29, 2004 | 0.60        
|May 31, 2004      | 1.10        
|August 31, 2004   | 0.80        

Holders

As
  of November 22, 2004, we had approximately 149 shareholders of record. This
  does not include shareholders who held stock in accounts at broker/dealers.

Dividends

We
  have not declared or paid cash dividends on our common stock in the preceding
  two fiscal years. We currently intend to retain all future earnings, if any,
  to fund the operation of our business, and, therefore, do not at this time anticipate
  paying dividends in the foreseeable future. Future cash dividends, if any, will
  be determined by our Board of Directors, based upon such factors as our historical
  and projected earnings, our working capital surplus and anticipated demands
  for capital expenditures.

10

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Recent Sales of Unregistered Securities.

1.          In
  October 2003, we completed a private placement of 314,000 shares of common stock
  at $0.50 per share for total proceeds of $157,000. The issuance was to a total
  of one investor who qualified as a non-US Person within the meaning of Rule
  902 and who acquired the securities in offshore transactions. The securities,
  which were taken for investment purposes, were subject to appropriate transfer
  restrictions and restrictive legend, and were issued without registration under
  the Securities Act in reliance upon the exemptions set forth in Regulation S
  thereunder.

2.          In
  October 2003, we completed the acquisition of Ikona Gear International, Inc.
  ("Ikona"). As consideration for all of the common shares of Ikona, we issued
  15,041,633 common shares to the stockholders of Ikona. The issuance was to a
  total of 59 investors, all of whom qualified as non-US Persons within the meaning
  of Rule 902 and who acquired the securities in offshore transactions. The securities,
  which were taken for investment purposes, were subject to appropriate transfer
  restrictions and restrictive legend, and were issued without registration under
  the Securities Act in reliance upon the exemptions set forth in Regulation S
  thereunder.

3.          In
  January 2004, we completed a private placement consisting of 290,000 shares
  of common stock at a price of $0.50 per share for gross proceeds of $145,000.
  The issuance was to a total of 11 investors, all of whom qualified as non-US
  Persons within the meaning of Rule 902 and who acquired the securities in offshore
  transactions. The securities, which were taken for investment purposes, were
  subject to appropriate transfer restrictions and restrictive legend, and were
  issued without registration under the Securities Act in reliance upon the exemptions
  set forth in Regulation S thereunder.

4.          From
  February to April 2004, we completed a private placement consisting of 2,384,026
  units at a price of $0.75 per unit for gross proceeds of $1,788,020 Each unit
  consisted of one share of common stock and one-half of one non-transferable
  share purchase warrant whereby each whole warrant entitles the holder to acquire
  one additional share of common stock at a price of $3.00 per share for a period
  of one year. The issuance was to a total of 63 investors, all of which qualified
  as non-US Persons within the meaning of Rule 902, who acquired the securities
  in offshore transactions. The securities, which were taken for investment purposes,
  were subject to appropriate transfer restrictions and restrictive legend, and
  were issued without registration under the Securities Act in reliance upon the
  exemptions set forth in Regulation S thereunder.

5.          From
  February to April 2004, we sold an aggregate of 54,000 units at a price of $0.75
  per unit for gross proceeds of $40,500. Each unit consisted of one share of
  common stock and one-half warrant, each whole warrant exercisable to purchase
  one share of common stock at a price of $3.00 per share. The units were sold
  to two persons who qualified as "accredited investors" within the meaning of
  Rule 502(a) of Regulation D. The securities, which were taken for investment
  purposes and were subject to appropriate transfer restrictions and restrictive
  legend, were issued without registration under the Securities Act in reliance
  upon the exemption set forth in Section 4(2) of the Securities Act and Regulation
  D thereunder.

6.          In
  July 2004, we sold an aggregate of 6,666 units at a price of $0.75 per unit
  for gross proceeds of $5,000. Each unit consisted of one share of common stock
  and one-half warrant, each whole warrant exercisable to purchase one share of
  common stock at a price of $3.00 per share. The issuance was to one investor
  that qualified as a non-US Person within the meaning of Rule 902, who acquired
  the securities in offshore transactions. The securities, which were taken for
  investment purposes, were subject to appropriate transfer restrictions and restrictive
  legend, and were issued without registration under the Securities Act in reliance
  upon the exemptions set forth in Regulation S thereunder.

11

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EQUITY COMPENSATION PLAN INFORMATION

|                                       |                   | Weighted       |                          
|-------------------------------------- | ----------------- | -------------- | -------------------------
|                                       | Number of         | average        |                          
|                                       | securities to be  | exercise price | Number of securities     
|                                       | issued upon       | of             | remaining available for  
|                                       | exercise of       | outstanding    | future issuances under   
|                                       | outstanding       | options,       | equity compensation plans
|                                       | options, warrants | warrants and   | (excluding securities    
|                                       | and rights        | rights         | reflected in column (a)) 
|                                       | (a)               | (b)            | (c)                      
|                                       |                   |                |                          
|Equity compensation plans approved by  |                   |                |                          
|security holders                       | 4,400,000         | $1.01          | -0-                      
|Equity compensation plans not approved |                   |                |                          
|by security holders(1)                 | -0-               | $0.00          | -0-                      
|                                       |                   |                |                          
|Total                                  | 4,400,000         | $1.01          | -0-                      

(1) Includes nonqualified options granted to directors.

Item 6.     Management's Discussion and Analysis
  or Plan of Operations

Plan of Operations

Subsequent
  to fiscal year end, we successfully initiated phase two of our agreement with
  Magna Advanced Technologies ("the Magna Agreement"), as more fully described
  in this report under the heading "Business." However, under the revised Magna
  Agreement, previously negotiated advance royalties were eliminated in favor
  of negotiating royalties on a per application basis. As a result, our immediate
  cash flow from royalties will remain uncertain until additional negotiations
  conclude over the next twelve months.

We
  plan to complete the manufacturing and testing of an industrial gearing prototype.
  We will be expanding the engineering team with world class gear industry designers
  and mechanical engineers. We are developing marketing plans for vertical, industry-specific
  applications of the proprietary Ikona Gearing System for applications which
  capitalize on the unique high torque and low weight attributes of the Ikona
  Gearing System, including but not limited to:

- High torque industrial machinery;
- Aircraft and military equipment;
- Alternate energy sources such as windmills;
- Robotics and high precision machinery;

To
  achieve these goals we will be developing a sales and marketing team to manage
  and execute the marketing plans in various vertical markets. The projected budget
  for the next twelve months of sales and marketing activities is $488,000. Our
  planned marketing activities include spending additional funds on travel in
  order to meet prospective customers and joint development partners. We anticipate
  our annual sales and marketing operating costs will increase from approximately
  $225,000 to about $488,000 over the next twelve months.

We
  will be promoting Ikona Gear technology to European and North American industry
  leaders through: securing public relations representatives in North America
  and Europe; participating in gear industry trade shows such as Gear Expo; developing
  and refining joint development
  alliances and licensing agreements for existing and potential customers;
  developing alliances with gear manufacturers capable of manufacturing Ikona
  related products; and developing portable demonstration units.

12

---

We
  have focused substantially all research and development over the past year on
  our joint development relationship with MAT. Over the next twelve months we
  will be focusing our efforts on developing new prototypes for potential clients
  and in responses to requests for proposal we anticipate being presented to us
  over the next 12 months. We are developing new business opportunities to leverage
  our investment over the past two years in our core intellectual properties.
  We anticipate this will result in royalty-producing operations from our patented
  gear-reducer technologies. We anticipate that we will expend $800,000 on research
  and development over the twelve months ending August 31, 2005.

We
  have invested approximately $170,000 in capital equipment over the past twelve
  months. We expect to continue to purchase furniture and equipment in the next
  12 months as we recruit new specialized engineers with requirements for specialized
  software, hardware and tools. We anticipate that we will need to invest a further
  $117,000 in capital equipment (computers and software) for our new engineers
  and technical salespeople, plus an additional $11,000 in new furniture, as we
  add an additional ten employees over the next 12 months.

In
  general, we anticipate that staffing levels will continue to increase at a growth
  rate of approximately 100% per year. We presently have ten employees and we
  expect to grow to twenty employees within the next 12 months. These growth estimates
  are contingent on access to sufficient funding and our ability to recruit suitable
  candidates with requisite engineering academic qualifications and gear industry
  work experience.

We
  anticipate that administrative overhead levels will increase from approximately
  $260,000 per year to $300,000 per year due to increased variable overheads associated
  with more staff and more commercial activities. We also anticipate that our
  investor relations campaign for the next twelve months will increase to $140,000
  as we attempt to create a market for our stock through a network of consultants
  and press agents.

We
  anticipate our total cash requirements for the next twelve months will be approximately
  $2 million, of which we had $1.1 million available at August 31, 2004. The balance
  of our cash requirements will need to be raised through additional financings.
  We estimate that an additional $900,000 will be required to support our needs
  over the next 12 months. We have no current arrangements with respect to sources
  of additional financing and there can be no assurance that additional financing
  will be available to us on commercially reasonable terms. The inability to obtain
  additional financing, when needed, would have a material adverse affect on us,
  including possibly requiring us to curtail our operations. To the extent that
  future financing involves the sale of our equity securities, our then existing
  stockholders, including investors in this offering, could be substantially diluted.

We
  do not consider any specific accounting policies to be critical to the economic
  success of its business.

Operating and Financial Review and Prospects

The
  following discussion and analysis of the financial condition and operating results
  of the Company for the two fiscal years ended August 31, 2004 and 2003, should
  be read in conjunction with the financial statements and related notes attached
  hereto. (See Financial Statements.) These are the results of our business acquired
  on October 30, 2003, which for generally accepted accounting principles in the
  United States of America, require that the historical comparative results of
  the accounting acquirer become the results of the legal parent (previously Oban
  Mining, Inc.).

Our
  financial statements were prepared in conformity with generally accepted accounted
  principles in the United States of America. They also comply, in all material
  respects, without requiring material adjustments, with the rules and regulations
  of the Securities and Exchange Commission.

Our
  business is in the development stage and has limited revenues in its last two
  fiscal years. In the past, we have acquired necessary capital through the limited
  issuance of common shares. There is no assurance that this source of capital
  will continue to be available in future operating periods.

13

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Operating Results

Fiscal year ended August 31, 2004 compared to fiscal year ended August
  31, 2003.

REVENUES. Revenues are generated from licensing royalties
  and the provision of engineering services. In the years ended August 31, 2004
  and 2003, we generated revenues of $152,782 and $44,307 respectively. Engineering
  services revenues in the current period relate to services provided to two customers,
  Magna Advanced Technologies ("MAT") and Aircast Inc. ("Aircast"). MAT has a
  services agreement that committed them to provide us $11,175 (CAD$ 15,000) per
  month from May 1, 2003, to April 30, 2004 (extended on April 28, 2004 to cover
  May 1, 2004 to August 31, 2004). In February 2004, Aircast paid us $10,000 of
  gear design fees and committed to provide royalties of $2.50 per unit for each
  of their arm braces sold that incorporate our Ikona Gear. We received a royalty
  from Aircast for $270 covering a two-week period in March 2004, and a royalty
  receipt of $1,685 to cover the three months ended June 30, 2004.

AMORTIZATION AND DEPRECIATION. We record amortization expense
  on our capitalized patents and trademark costs and depreciation on our property,
  plant and equipment. In the years ended August 31, 2004 and 2003, we recorded
  depreciation and amortization expense of $27,643 and $16,507 respectively. The
  increase in expense reflects depreciation associated with $169,842 of purchases
  of depreciable equipment (net of disposals) made in the current year, whereas
  there was no depreciable equipment in the comparative prior year period.

BUSINESS DEVELOPMENT. Business development expense reflects
  internal and external costs to market our business opportunity to existing clients
  and potential new clients. Business development expense includes: the salaries
  and benefits of our President and our Executive Vice President; and fees paid
  to external consultants for web design and web based marketing services. Business
  development expense was $223,616 and $60,959 respectively for the years ended
  August 31, 2004 and 2003. The increase in business development expense pertains
  to a significant increase in travel to service our MAT and Aircast relationships
  and to establish new relationships in North America and Europe, and to salary
  increases.

CORPORATE FINANCE. Corporate finance expense reflects costs
  associated with fees paid to maintain the corporate finance function within
  our company. These fees are paid to our CFO and external consultants who oversee
  accounting, auditing, fund raising and regulatory reporting functions for our
  company. Corporate finance expense was $72,688 and $73,138 respectively for
  the years ended August 31, 2004 and 2003.

GENERAL AND ADMINISTRATIVE. Our general and administrative
  expenses consist primarily of clerical and administrative salaries and benefits,
  office rents, office supplies, telephone and telecommunications expenses, courier
  and other general costs not attributable directly to other statement of operations
  line items. Our general and administrative expenses were $64,965 and $11,919
  for the years ended August 31, 2004 and 2003. The increase in general and administrative
  expense pertains to the recruitment of an accountant and an executive assistant
  to support administrative needs of the company.

INVESTOR RELATIONS. Our investor relations expense consists
  primarily of external consulting fees, some of which are non-cash compensation
  expenses associated with stock option incentives. Investor relations expenses
  also are associated with communications costs to increase investors' awareness
  of our company. Investor relations expenses were $106,185 and $0 for the years
  ended August 31, 2004 and 2003. The increase in expense is associated public
  awareness campaigns initiated after our company becoming publicly traded as
  of October 2003. Included in the August 31, 2004 expense is an amount of $38,758
  of non-cash compensation attributed under the Black-Scholes option pricing model
  to stock options issued to one investor relations consultant in 2004.

PROFESSIONAL FEES. Our professional fees expense consists
  primarily of external consulting fees associated with our auditors and our corporate
  and securities counsel. Professional fees expenses were $140,609 and $3,000
  for the years ended August 31, 2004 and 2003 respectively. The increase in expense
  is associated with our company becoming publicly traded as of October 2003,
  with increased legal support for agreements entered into with Aircast and Magna
  Advanced Technologies, and with minimal audit and legal requirements in the
  comparative prior year period.

14

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RESEARCH AND DEVELOPMENT. Research and development expense
  reflects internal and external costs to develop our technology including the
  salaries of our engineers, fees paid to external consultants, and materials
  and supplies consumed in advancing our core intellectual property. Research
  and development expense was $216,329 and $218,600 respectively for the years
  ended August 31, 2004 and 2003.

TRAVEL AND RELATED. Travel and related expense includes all
  of our travel costs associated with travel for reasons of business development,
  research and development, and corporate finance. Included in travel are the
  costs of flights, trains, automotive rentals, accommodations, meals and other
  associated travel costs. Travel and related expense was $98,598 and $14,574
  respectively for the years ended August 31, 2004 and 2003. In the comparative
  period virtually all costs were associated with research and development in
  the Vancouver area and minimal travel was undertaken. In the current year, there
  has been an increase in travel and related expense associated with joint development
  partnerships with MAT and Aircast, and with establishing new investor relations
  business development relationships in North America and in Europe.

Apart from the stock-based compensation expense, our general
  and administrative costs increased in the aggregate due to the added professional
  fees, filing and reporting costs, and investor relations expense associated
  with our status as a public company.

Liquidity and Capital Resources

As
  at August 31, 2004, our total cash was $1,125,799, our working capital was $1,058,506,
  and our stockholders' equity was $1,215,210. Since inception, we have incurred
  cumulative losses of $1,747,383. We have been actively seeking new investment
  to further operations. In April 2004, we closed on a private placement of $1,800,000
  to address current operating requirements, having received these funds in February,
  March and April of 2004. We are actively pursuing significant investments from
  a number of possible private placement sources.

Our
  Company is in the development stage and expects to remain in the development
  stage for the current operating year. We do not expect to generate significant
  cash flow from operations in the present year.

We
  anticipate our total cash requirements for the next twelve months will be approximately
  $2 million, of which we had $1.1 million available at August 31, 2004. The balance
  of our cash requirements will need to be raised through additional financings.
  We estimate that an additional $900,000 will be required to support our needs
  over the next 12 months. We have no current arrangements with respect to sources
  of additional financing and there can be no assurance that additional financing
  will be available to us on commercially reasonable terms, or at all. The inability
  to obtain additional financing, when needed, would have a material adverse affect
  on us, including possibly requiring us to curtail or cease our operations. To
  the extent that future financing involves the sale of our equity securities,
  our then existing stockholders, including investors in this offering, could
  be substantially diluted.

In
  the year ended August 31, 2004, our operations consumed $668,830. Our net loss
  of $1,016,640 was partially offset by depreciation and amortization of $27,643,
  by $38,758 of non-cash stock-based compensation, and by $183,763 for an impairment
  write down of our patents. Our working capital provided $97,760, for net cash
  consumed by operations of $668,830. In the year ended August 31, 2003, our operations
  consumed $328,259.

In
  the year ended August 31, 2004 we spent $169,910 on machinery and equipment
  (net of disposals). In the year ended August 31, 2003, we had no investing activities.

In
  the year ended August 31, 2004, we generated $1,962,313 from financing activities.
  Of this amount, $1,891,023 was generated from the sale of equity securities,
  $155,000 was advanced to us by Oban Mining Inc. in advance of us acquiring their
  public company, and $83,710 was consumed in repaying loans associated with the
  purchase of our intellectual property from related parties. In the year ended
  August 31, 2003, we generated $326,776 from financing activities as a private
  company.

In
  total, our cash and cash equivalents increased by $1,123,573 to $1,125,799 for
  the year ended August 31, 2004.

15

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Our
  current working capital is not sufficient to meet our business operating objectives
  (see Plan of Operations). Our ability to satisfy projected working capital requirements
  is dependent upon our ability to secure additional funding through public or
  private sales of securities, including equity securities. There is no assurance
  that we will be able to secure the necessary capital on terms acceptable to
  us or at all.

Trends

Our
  Company is in the development stage and is presently continuing research and
  development of a platform gearing technology that can be applied to any industry
  and any product that incorporates a gear. We are jointly developing product
  prototypes to advance our business development goals. As a result, there are
  no trends in production, sales or inventory, the state of the order book, or
  costs and selling prices. For the current financial year, our Company has doubled
  its operating cash requirements and increased the capital raised by six times
  that of the prior year. We believe that operating costs will stabilize at the
  current levels, subject to the uncertainty of raising additional capital resources
  through private or public placements. We will only continue to expand our number
  of staff and the associated salaries and benefits expenses of our company if
  additional capital resources are provided for that purpose.

Sales revenues are of an uncertain nature. We expect royalties
  to increase as we establish new royalty agreements and as our joint development
  partners establish sales of their products which incorporate our gears. At present
  we have one royalty agreement with Aircast Inc. and for which we received $270
  in royalties associated with two weeks in the calendar quarter ended March 31,
  2004, and a further royalty receipt of $1,685 to cover the three months ended
  June 30, 2004 of their sales. We expect this trend will continue.

We were attempting to negotiate royalty terms with MAT prior
  to August 31, 2004, however we agreed to waive our initial request for advance
  royalties of CAD$1,000,000 ($745,000) in favor of negotiating advance royalties
  on an application by applications basis with MAT over the next twelve months
  ended August 31, 2005.

We expect that sales levels will likely continue to be indeterminate
  until we have passed another year of operations and have determined what royalties
  to anticipate, if any, from MAT and from other prospects with whom we are attempting
  to negotiate royalty arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, FASB issued Financial Interpretation No.
  46 Consolidation of Variable Interest Entities (FIN 46)
  (revised in December 17, 2003). The objective of FIN 46 is to improve financial
  reporting by companies involved with variable interest entities. A variable
  interest entity is a corporation, partnership, trust, or any other legal structure
  used for business purposes that either (a) does not have equity investors with
  voting rights or (b) has equity investors that do not provide sufficient financial
  resources for the entity to support its activities. FIN 46 requires a variable
  interest entity to be consolidated by a company if that company is subject to
  a majority of the risk of lass from the variable interest entitys activities
  or entitled to receive a majority of the entitys residual returns or both.
  FIN 46 also requires disclosures about variable interest entities that the company
  is not required to consolidate but in which it has a significant variable interest.
  The consolidation requirements of FIN 46 are required in financial statements
  of public entities that have interests in variable interest entities for periods
  ending after December 15, 2003. The consolidation requirements for all other
  types of entities are required in financial statements for periods ending after
  March 15, 2004. The adoption of FIN 46 is not expected to have any material
  effect on our results of operations or financial position.

16

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Item 7.     Financial Statements

(A Development Stage Company)

Consolidated Financial Statements
  (Expressed in United States Dollars)

August 31, 2004 and 2003

F-1

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|                                           | 7700  North Kendall Drive, 200
|------------------------------------------ | ------------------------------
|Miama, Florida         33156-7578         
|Telephone          (305)
      274-1366   
|Facsimile             (305)
      274-1368
|E-mail              info@uscpa.com        
|Internet           www.uscpa.com          

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
  Ikona Gear International, Inc.

We have
  audited the accompanying consolidated balance sheets of Ikona Gear International,
  Inc. (A Development Stage Company) (the Company) as of August 31, 2004 and 2003,
  and the related consolidated statements of operations, stockholders’ equity
  (deficiency), and cash flows for the years then ended and for the period from
  August 16, 2001 (inception) to August 31, 2004. 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. An audit includes examining, on a test basis,
  evidence supporting the amounts and disclosures in the financial statements.
  An audit also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall financial statement
  presentation. We believe that our audits provide a reasonable basis for our
  opinion.

In our opinion,
  the financial statements referred to above present fairly, in all material respects,
  the financial position of the Company as of August 31, 2004 and 2003, and the
  results of its operations and its cash flows for the years then ended and from
  August 16, 2001 (inception) to August 31, 2004, in conformity with U.S. generally
  accepted accounting principles.

The accompanying
  financial statements have been prepared assuming that the Company will continue
  as a going concern. As discussed in Note 2 to the consolidated financial statements,
  the Company is in the development stage, has suffered recurring losses from
  operations, has used, rather than provided, cash from operations and has an
  accumulated deficit during the development stage of $1,747,383 that raise substantial
  doubt about its ability to continue as a going concern. Management's plans in
  regard to these matters are also described in Note 2. The financial statements
  do not include any adjustments that might result from the outcome of this uncertainty.

| | /s/ Dohan and Company, CPA's
| | ----------------------------

Miami, Florida
  October 15, 2004

|Member:
      Florida Institute of Certified Public Accountants
      American Institute of Certified Public Accountants*Private Companies and SEC Practice Sections* | *National and worldwide associations
      through*
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------

F-2

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IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Consolidated Balance Sheets
  As at August 31

|                                                                                         |   |            |   |   |          |  
|---------------------------------------------------------------------------------------- | - | ---------- | - | - | -------- | -
|                                                                                         |   | 2004       |   |   | 2003     |  
|                                                                                         |   |            |   |   |          |  
|ASSETS                                                                                   |   |            |   |   |          |  
|                                                                                         |   |            |   |   |          |  
|Current:                                                                                 |   |            |   |   |          |  
|Cash                                                                                     | $ | 1,125,799  |   | $ | 2,226    |  
|Accounts
      receivable                                                                |   | 14,272     |   |   | -        |  
|Prepaid expenses                                                                         |   | 16,822     |   |   | 2,000    |  
|Advances
      to related party (Note 6)                                                 |   | -          |   |   | 28,467   |  
|Deferred taxes, net of valuation allowance of $594,100 (2003 -
      $248,300) (Note 11) |   | -          |   |   | -        |  
|                                                                                         |   |            |   |   |          |  
|Total current assets                                                                     |   | 1,156,893  |   |   | 32,693   |  
|                                                                                         |   |            |   |   |          |  
|Property and equipment (Note 5)                                                          |   | 156,704    |   |   | -        |  
|Patents and trademark
      rights (Note 4)                                              |   | -          |   |   | 198,086  |  
|                                                                                         |   |            |   |   |          |  
|Total assets                                                                             | $ | 1,313,597  |   | $ | 230,779  |  
|                                                                                         |   |            |   |   |          |  
|LIABILITIES ANDSTOCKHOLDERS'EQUITY                                                       |   |            |   |   |          |  
|                                                                                         |   |            |   |   |          |  
|Current liabilities:                                                                     |   |            |   |   |          |  
|Accounts payable and accrued
      liabilities                                           | $ | 98,226     |   | $ | -        |  
|Due to related parties (Note 6)                                                          |   | 161        |   |   | 83,710   |  
|                                                                                         |   |            |   |   |          |  
|Total current liabilities                                                                |   | 98,387     |   |   | 83,710   |  
|                                                                                         |   |            |   |   |          |  
|Commitments (Note 14)                                                                    |   |            |   |   |          |  
|                                                                                         |   |            |   |   |          |  
|Stockholders' equity                                                                     |   |            |   |   |          |  
|Common stock (Note 7)                                                                    |   |            |   |   |          |  
|Authorized                                                                               |   |            |   |   |          |  
|100,000,000 common shares,
      each with par value of $0.00001                         |   |            |   |   |          |  
|Issued
      and outstanding                                                             |   |            |   |   |          |  
|24,090,325 common shares
      (2003 - 12,033,306 shares)                                |   | 241        |   |   | 120      |  
|Additional
      paid-in capital                                                         |   | 2,962,352  |   |   | 877,692  |  
|Accumulated
      deficit during the development stage                                   |   | (1,747,383 | ) |   | (730,743 | )
|                                                                                         |   |            |   |   |          |  
|Total
      stockholders' equity                                                         |   | 1,215,210  |   |   | 147,069  |  
|                                                                                         |   |            |   |   |          |  
|Total liabilities and stockholders'
      equity                                         | $ | 1,313,597  |   | $ | 230,779  |  

The accompanying notes are an integral part of these consolidated
  financial statements. 
  F-3

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Consolidated Statements of Operations

|                                                           |   | Cumulative        |   |                             |            |   |   |            |  
|---------------------------------------------------------- | - | ----------------- | - | --------------------------- | ---------- | - | - | ---------- | -
|                                                           |   | Amounts           |   |                             |            |   |   |            |  
|                                                           |   | From Inception    |   |                             |            |   |   |            |  
|                                                           |   | (August 16, 2001) |   |                             |            |   |   |            |  
|                                                           |   | to                |   | Year Ended August
      31, |           
|                                                           |   | August 31, 2004   |   |                             | 2004       |   |   | 2003       |  
|                                                           |   |                   |   |                             |            |   |   |            |  
|REVENUES                                                   |   |                   |   |                             |            |   |   |            |  
|Engineering
      services                                 | $ | 197,089           |   | $                           | 152,782    |   | $ | 44,307     |  
|                                                           |   |                   |   |                             |            |   |   |            |  
|EXPENSES                                                   |   |                   |   |                             |            |   |   |            |  
|Amortization and depreciation                              |   | 60,657            |   |                             | 27,643     |   |   | 16,507     |  
|Business development                                       |   | 343,260           |   |                             | 223,616    |   |   | 60,959     |  
|Corporate finance                                          |   | 152,441           |   |                             | 72,688     |   |   | 73,138     |  
|General and administrative                                 |   | 91,533            |   |                             | 64,965     |   |   | 11,919     |  
|General consulting                                         |   | 13,122            |   |                             | -          |   |   | 1,354      |  
|Investor relations (Note
      8)                          |   | 106,185           |   |                             | 106,185    |   |   | -          |  
|Listing and filing fees                                    |   | 11,480            |   |                             | 11,480     |   |   | -          |  
|Professional fees                                          |   | 146,109           |   |                             | 140,609    |   |   | 3,000      |  
|Rent                                                       |   | 37,105            |   |                             | 23,546     |   |   | 13,559     |  
|Research and development                                   |   | 674,677           |   |                             | 216,329    |   |   | 218,600    |  
|Travel and related                                         |   | 124,140           |   |                             | 98,598     |   |   | 14,574     |  
|Impairment
      of patents and trademark                  |   | 183,763           |   |                             | 183,763    |   |   | -          |  
|                                                           |   |                   |   |                             |            |   |   |            |  
|                                                           |   | 1,944,472         |   |                             | 1,169,422  |   |   | 413,610    |  
|                                                           |   |                   |   |                             |            |   |   |            |  
|Loss before income taxes                                   |   | (1,747,383        | ) |                             | (1,016,640 | ) |   | (369,303   | )
|Income taxes                                               |   | -                 |   |                             | -          |   |   | -          |  
|                                                           |   |                   |   |                             |            |   |   |            |  
|Net loss for the period                                    | $ | (1,747,383        | ) | $                           | (1,016,640 | ) | $ | (369,303   | )
|                                                           |   |                   |   |                             |            |   |   |            |  
|Basic and diluted net loss per share                       |   |                   |   | $                           | (0.05      | ) | $ | (0.03      | )
|                                                           |   |                   |   |                             |            |   |   |            |  
|Weighted average number of common shares
      outstanding |   |                   |   |                             | 21,660,390 |   |   | 11,029,572 |  

The accompanying notes are an integral part of these consolidated
  financial statements. 
  F-4

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Consolidated Statement of Stockholders' Equity (Deficiency)

|                                                     |              |  |   |        |  |   |            |   |   | Accumulated |   |   |          |  
|---------------------------------------------------- | ------------ |  | - | ------ |  | - | ---------- | - | - | ----------- | - | - | -------- | -
|                                                     | Common Stock |  |   |        |  |   | Deficit    |   |   |             |  
|                                                     |              |  |   |        |  |   | Additional |   |   | During the  |   |   |          |  
|                                                     | Number of    |  |   |        |  |   | Paid-in    |   |   | Development |   |   |          |  
|                                                     | Shares       |  |   | Amount |  |   | Capital    |   |   | Stage       |   |   | Total    |  
|                                                     |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|Balance at August 16, 2001 (inception)               | -            |  | $ | -      |  | $ | -          |   | $ | -           |   | $ | -        |  
|Net Loss for the period                              | -            |  |   | -      |  |   | -          |   |   | (5          | ) |   | (5       | )
|Balance at August 31, 2001                           | -            |  | $ | -      |  | $ | -          |   | $ | (5          | ) | $ | (5       | )
|                                                     |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|Issuance of common shares on acquisition of patents  |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|at $0.04 per share, September 2001                   | 2,725,000    |  | $ | 27     |  | $ | 108,973    |   | $ | -           |   | $ | 109,000  |  
|Issuance of common shares on acquisition of          |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|trademark at $0.45 per share, September 2001         | 25,000       |  |   | -      |  |   | 1,000      |   |   | -           |   |   | 1,000    |  
|Issuance of common shares to founders at $0.00001    |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|per share, October 2001                              | 8,713,416    |  |   | 87     |  |   | (17        | ) |   | -           |   |   | 70       |  
|Issuance of common shares for cash at $0.20 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, November 2001                                 | 263,665      |  |   | 3      |  |   | 52,730     |   |   | -           |   |   | 52,733   |  
|Issuance of common shares for cash at $0.20 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, February 2002                                 | 1,286,335    |  |   | 13     |  |   | 257,253    |   |   | -           |   |   | 257,266  |  
|Issuance of common shares for cash at $0.20 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, May 2002                                      | 393,750      |  |   | 4      |  |   | 78,746     |   |   | -           |   |   | 78,750   |  
|Net Loss for the year                                | -            |  |   | -      |  |   | -          |   |   | (361,435    | ) |   | (361,435 | )
|Balance at August 31, 2002                           | 13,407,166   |  | $ | 134    |  | $ | 498,685    |   | $ | (361,440    | ) | $ | 137,379  |  
|                                                     |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|Issuance of common shares for cash at $0.20 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, November 2002                                 | 336,250      |  | $ | 3      |  | $ | 67,247     |   | $ | -           |   | $ | 67,250   |  
|Issuance of common shares for corporate finance fees |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|at $0.20 per share, November 2002                    | 85,800       |  |   | 1      |  |   | 17,159     |   |   | -           |   |   | 17,160   |  
|Issuance of common shares for cash at $0.20 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, January 2003                                  | 175,000      |  |   | 2      |  |   | 34,998     |   |   | -           |   |   | 35,000   |  
|Issuance of common shares for cash at $0.20 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, May 2003                                      | 175,000      |  |   | 2      |  |   | 34,998     |   |   | -           |   |   | 35,000   |  
|Issuance of common shares for corporate finance fees |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|at $0.20 per share, May 2003                         | 67,625       |  |   | 1      |  |   | 13,524     |   |   | -           |   |   | 13,525   |  
|Issuance of common shares for cash at $0.20 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, July 2003                                     | 526,792      |  |   | 5      |  |   | 105,353    |   |   | -           |   |   | 105,358  |  
|Issuance of common shares for corporate finance fees |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|at $0.20 per share, July 2003                        | 7,500        |  |   | -      |  |   | 1,500      |   |   | -           |   |   | 1,500    |  
|Issuance of common shares for cash at $0.40 per      |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|share, August 2003                                   | 251,250      |  |   | 2      |  |   | 100,498    |   |   | -           |   |   | 100,500  |  
|Issuance of common shares for corporate finance fees |              |  |   |        |  |   |            |   |   |             |   |   |          |  
|at $0.40 per share, August 2003                      | 9,250        |  |   | 1      |  |   | 3,699      |   |   | -           |   |   | 3,700    |  
|Net loss for the year                                | -            |  |   | -      |  |   | -          |   |   | (369,303    | ) |   | (369,303 | )
|Balance at August 31, 2003                           | 15,041,633   |  | $ | 151    |  | $ | 877,661    |   | $ | (730,743    | ) | $ | 147,069  |  

| | --Continued --
| | --------------

The accompanying notes are an integral part of these consolidated
  financial statements.
  F-5

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Consolidated Statement of Stockholders' Equity (Deficiency)
  --Continued--

|                                                            |                    |   |   |        |   |   |            |  |   | Accumulated |   |   |            |  
|----------------------------------------------------------- | ------------------ | - | - | ------ | - | - | ---------- |  | - | ----------- | - | - | ---------- | -
|                                                            | Common
      Stock |   |   |        |   |   | Deficit    |  |   |             |  
|                                                            |                    |   |   |        |   |   | Additional |  |   | During the  |   |   |            |  
|                                                            | Number of          |   |   |        |   |   | Paid-in    |  |   | Development |   |   |            |  
|                                                            | Shares             |   |   | Amount |   |   | Capital    |  |   | Stage       |   |   | Total      |  
|                                                            |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|Recapitalization, October 2003                              | 6,814,000          |   | $ | 68     |   | $ | 154,932    |  | $ | -           |   | $ | 155,000    |  
|Shares cancelled, January 2004                              | (500,000           | ) |   | (5     | ) |   | 5          |  |   | -           |   |   | -          |  
|Issuance of common shares for cash at $0.50
      per       |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|share, January 2004                                         | 290,000            |   |   | 3      |   |   | 144,997    |  |   | -           |   |   | 145,000    |  
|Issuance of common shares for cash at $0.75
      per       |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|share (gross proceeds $465,500,
      net of issuance costs |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|of $29,225), February 2004                                  | 620,666            |   |   | 6      |   |   | 436,269    |  |   | -           |   |   | 436,275    |  
|Issuance of common shares for cash at $0.75
      per       |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|share (gross proceeds $1,016,201,
      net of issuance     |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|costs of $51,275), March 2004                               | 1,354,933          |   |   | 14     |   |   | 964,912    |  |   | -           |   |   | 964,926    |  
|Issuance of common shares for cash at $0.75
      per       |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|share (gross proceeds $346,822, net of
      issuance costs |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|of $7,000), April 2004                                      | 462,427            |   |   | 4      |   |   | 339,818    |  |   | -           |   |   | 339,822    |  
|Issuance of common shares for cash at $0.75
      per       |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|share, July 2004                                            | 6,666              |   |   | -      |   |   | 5,000      |  |   | -           |   |   | 5,000      |  
|Stock based compensation expense                            | -                  |   |   | -      |   |   | 38,758     |  |   | -           |   |   | 38,758     |  
|Net loss for the year                                       | -                  |   |   | -      |   |   | -          |  |   | (1,016,640  | ) |   | (1,016,640 | )
|                                                            |                    |   |   |        |   |   |            |  |   |             |   |   |            |  
|Balance at August
      31, 2004                            | 24,090,325         |   | $ | 241    |   | $ | 2,962,352  |  | $ | (1,747,383  | ) | $ | 1,215,210  |  

The accompanying notes are an integral part of these consolidated
  financial statements.
  F-6

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Consolidated Statements of Cash Flows

|                                                        |   | Cumulative        |   |                             |            |   |   |          |  
|------------------------------------------------------- | - | ----------------- | - | --------------------------- | ---------- | - | - | -------- | -
|                                                        |   | Amounts           |   |                             |            |   |   |          |  
|                                                        |   | From Inception    |   |                             |            |   |   |          |  
|                                                        |   | (August 16, 2001) |   |                             |            |   |   |          |  
|                                                        |   | to                |   |                             |            |   |   |          |  
|                                                        |   | August 31,        |   | Year Ended August
      31, |           
|                                                        |   | 2004              |   |                             | 2004       |   |   | 2003     |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                   |   |                   |   |                             |            |   |   |          |  
|Net loss                                                | $ | (1,747,383        | ) | $                           | (1,016,640 | ) | $ | (369,303 | )
|Adjustments to reconcile net income to net cash used in |   |                   |   |                             |            |   |   |          |  
|operating activities:                                   |   |                   |   |                             |            |   |   |          |  
|Amortization and depreciation                           |   | 60,657            |   |                             | 27,643     |   |   | 16,507   |  
|Investor relations fees
      paid by stock options     |   | 38,758            |   |                             | 38,758     |   |   | -        |  
|Consulting fees paid by
      common stock              |   | 35,885            |   |                             | -          |   |   | 35,885   |  
|Gain on disposal of assets                              |   | (114              | ) |                             | (114       | ) |   | -        |  
|Impairment of patents and
      trademark               |   | 183,763           |   |                             | 183,763    |   |   | -        |  
|Change in operating assets and liabilities:             |   |                   |   |                             |            |   |   |          |  
|Accounts receivable                                     |   | (14,272           | ) |                             | (14,272    | ) |   | -        |  
|Prepaid expenses                                        |   | (16,822           | ) |                             | (14,822    | ) |   | (2,000   | )
|Advances to related party                               |   | -                 |   |                             | 28,467     |   |   | (9,348   | )
|Accounts payable                                        |   | 98,226            |   |                             | 98,226     |   |   | -        |  
|Due
      to related party                              |   | 161               |   |                             | 161        |   |   | -        |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|Cash
      used in operating activities                 |   | (1,361,141        | ) |                             | (668,830   | ) |   | (328,259 | )
|                                                        |   |                   |   |                             |            |   |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES                    |   |                   |   |                             |            |   |   |          |  
|Advances received from the
      Company                |   |                   |   |                             |            |   |   |          |  
|prior to recapitalization                               |   | 155,000           |   |                             | 155,000    |   |   | -        |  
|Due to related parties                                  |   | (121,100          | ) |                             | (83,710    | ) |   | (16,332  | )
|Issuance
      of common stock, net of issuance costs   |   | 2,622,950         |   |                             | 1,891,023  |   |   | 343,108  |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|Cash
      provided by financing activities             |   | 2,656,850         |   |                             | 1,962,313  |   |   | 326,776  |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                    |   |                   |   |                             |            |   |   |          |  
|Property and equipment acquired
      for cash          |   | (171,845          | ) |                             | (171,845   | ) |   | -        |  
|Proceeds
      on disposal of assets                    |   | 1,935             |   |                             | 1,935      |   |   | -        |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|Cash
      used in investing activities                 |   | (169,910          | ) |                             | (169,910   | ) |   | -        |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|NET INCREASE (DECREASE) IN CASH                         |   | 1,125,799         |   |                             | 1,123,573  |   |   | (1,483   | )
|CASH AT BEGINNING OF PERIOD                             |   | -                 |   |                             | 2,226      |   |   | 3,709    |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|CASH AT END OF PERIOD                                   | $ | 1,125,799         |   | $                           | 1,125,799  |   | $ | 2,226    |  
|                                                        |   |                   |   |                             |            |   |   |          |  
|CASH PAID FOR:                                          |   |                   |   |                             |            |   |   |          |  
|Interest                                                | $ | -                 |   | $                           | -          |   | $ | -        |  
|Income
      taxes                                      | $ | -                 |   | $                           | -          |   | $ | -        |  

The accompanying notes are an integral part of these consolidated
  financial statements.
  F-7

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 1 - The Company and Nature of Operations

Ikona Gear International, Inc. (previously Oban Mining, Inc.)
  (the "Company") was incorporated in the State of Nevada on September 20, 2000.
  The Company is in business to develop and commercialize a unique, patented gearing
  technology. The Company is commercializing its patented technology in applications
  it establishes through developing joint ventures and entering into licensing
  agreements with strategic partners in vertical industrial markets. The Company
  is considered to be a development stage company as it has not generated significant
  revenues from operations.

Effective October 30, 2003, the Company consummated an Agreement
  and Plan of Reorganization (the "Agreement") pursuant to which it acquired 100%
  of the issued and outstanding shares of common stock of Ikona Gear USA, Inc.
  (formerly Ikona Gear International, Inc.)("Ikona USA"). Under the terms of the
  Agreement, the shareholders of Ikona USA received, pro rata, an aggregate of
  15,041,633 shares of common stock of the Company in exchange for 100% of the
  outstanding shares of Ikona USA. A principal shareholder of the Company surrendered
  for cancellation 14,500,000 shares of common stock, which resulted in the Ikona
  USA shareholders acquiring shares representing approximately 70% of the total
  issued and outstanding shares of the Company. As a result, the transaction was
  accounted for as a recapitalization of Ikona USA.

The consolidated statements of operations, stockholders' equity
  (deficiency) and cash flows of the Company prior to October 30, 2003, are those
  of Ikona USA. The Company's consolidated date of incorporation is considered
  to be August 16, 2001, the date of inception of Ikona USA. Following the acquisition,
  the Company changed its name from Oban Mining, Inc. to Ikona Gear International,
  Inc.

On October 31, 2003, the Company incorporated a wholly-owned
  subsidiary, Ikona Gear Corp., a British Columbia Corporation.

Note 2 - Going Concern

These financial statements have been prepared in conformity
  with generally accepted accounting principles in the United States of America
  with the on-going assumption that the Company will be able to realize its assets
  and discharge its liabilities in the normal course of business rather than through
  a process of forced liquidation. However, certain conditions noted below currently
  exist which raise substantial doubt about the Company's ability to continue
  as a going concern. These financial statements do not include any adjustments
  to the amounts and classifications of assets and liabilities that might be necessary
  should the Company be unable to continue as a going concern.

The operations of the Company have primarily been funded by
  the issuance of capital stock and advances from related parties. Continued operations
  of the Company are dependent on the Company's ability to complete additional
  equity financings or generate profitable operations in the future. Management's
  plan in this regard is to secure additional funds through future equity financings.
  Such financings may not be available or may not be available on terms reasonable
  to the Company.

|                                                 |   | 2004       |   |   | 2003     |  
|------------------------------------------------ | - | ---------- | - | - | -------- | -
|                                                 |   |            |   |   |          |  
|Accumulated deficit during the development stage | $ | (1,747,383 | ) | $ | (730,743 | )
|Working capital (deficiency)                     | $ | 1,058,506  |   | $ | (51,017  | )

F-8

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 3 - Significant Accounting Policies

The significant accounting policies adopted by the Company
  are as follows:

(a) Use of Estimates

The preparation of financial statements in conformity with
  generally accepted accounting principles in the United States of America requires
  management to make estimates and assumptions that affect the reported amount
  of assets and liabilities and the disclosure of contingent assets and liabilities
  at the date of the financial statements and the reported amount of revenues
  and expenses during the reporting period. Actual results could differ from these
  estimates.

(b) Property and Equipment

Property and equipment consist of computers and software,
  furniture, research and development equipment and leasehold improvements. Equipment
  is recorded at cost less accumulated depreciation, and depreciation is calculated
  over its useful life of between
  two and five years using the straight–line method. Leasehold improvements
  are recorded at cost less accumulated depreciation. Depreciation is calculated
  on a straight-line basis over the three
  year term of the lease .

(c) Long-Lived or Disposal of Assets

The Company follows FASB Statement No. 144 (SFAS 144), "Accounting
  for the Impairment of Long-Lived Assets." SFAS 144 requires that long-lived
  assets to be held and use be reviewed for impairment whenever events or changes
  in circumstances indicate that the related carrying amount may not be recoverable.
  When required, impairment losses on assets to be held and used are recognized
  based on the fair value of the asset. Long-lived assets to be disposed of, if
  any, are reported at the lower of carrying amount or fair value less cost to
  sell.

(d) Intangible Assets

Intangible assets, consisting of patent applications, are
  recorded at cost and amortized using the straight-line method over the life
  of the patent which is twenty years from the date of the application of the
  patent or seventeen years from the date of grant, which ever is longer.

The carrying value of intangible assets is evaluated for potential
  impairment on an annual basis or more often if conditions warrant. In order
  to determine whether an impairment exists, management considers the undiscounted
  cash flows expected to be generated by intangible assets as well as market related
  values, among other things. If the carrying value of intangible assets exceeds
  fair value, the carrying value of intangible assets will be written down to
  fair value in the year the impairment occurs.

(e) Fair Value of Financial Instruments

The Company's financial instruments consist of cash, accounts
  receivable, prepaids, accounts payable and accrued liabilities, and due to related
  parties. Unless otherwise noted, it is management's opinion that the Company
  is not exposed to significant interest, currency or credit risks arising from
  these financial instruments. The fair value of these financial instruments approximates
  their carrying values, unless otherwise noted.

(f) Revenue Recognition

Revenues from engineering services is recognized when the
  service has been provided and collection is reasonably assured.

(g) Research and Development Expenses

Costs incurred for research and development are expensed as
  incurred.

F-9

---




IKONA GEAR INTERNATIONAL,
  INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 3 - Significant Accounting Policies (continued)

(h) Stock-Based Compensation

Statements of Financial Accounting Standards No. 123, "Accounting
  for Stock-Based Compensation" ("SFAS 123") encourages, but does not require,
  companies to record compensation cost for stock-based employee compensation
  plans at fair value. The Company has chosen to account for stock-based employee
  compensation using Accounting Principles Board Opinion No. 25, "Accounting for
  Stock Issued to Employees" ("APB 25"). Accordingly, compensation cost for stock
  options is measured as the excess, if any, of the quoted market price of the
  Company's stock at the date of the grant over the amount employees are required
  to pay for the stock.

The Company accounts for stock-based compensation issued to
  non-employees in accordance with the provisions of SFAS 123 and the consensus
  in Emerging Issues Task Force No. 96-18, "Accounting for Equity Instruments
  that are Issued to Other Than Employees for Acquiring or in Conjunction with
  Selling, Goods or Services".

The following table illustrates the effect on loss and loss
  per share if the Company had applied the fair value recognition provisions of
  SFAS 123 to stock-based employee compensation.

CumulativeAmountsFromInception(August 16,
      
      
      Year
      
      
      Year2001) to
      
      
      Ended
      
      
      EndedAugust 31,
      
      
      August 31,
      
      
      August 31,2004
      
      
      2004
      
      
      2003Loss, as reported
      $
      (1,747,383
      )
      $
      (1,016,640
      )
      $
      (369,303
      )Deduct: Total stock-based employeecompensation expense determined under fairvalue based method for all awards, net ofrelated tax effects
      
      (767,581
      )
      
      (767,581
      )
      
      -Pro-forma loss
      $
      (2,514,964
      )
      $
      (1,784,221
      )
      $
      (369,303
      )Basic and diluted loss per share,
        as reported
      
      
      
      $
      (0.05
      )
      $
      (0.03
      )Basic and diluted loss per share,
        pro-forma
      
      
      
      $
      (0.07
      )
      $
      (0.03
      )


(i) Loss per share

Basic loss per share is computed by dividing the loss for
  the period attributable to common stockholders by the weighted average number
  of shares of common stock outstanding during the period. Diluted loss per share
  takes into consideration shares of common stock outstanding (computed under
  basic loss per share) and potentially dilutive shares of common stock. Diluted
  loss per share is not presented separately from loss per share since there are
  no potentially dilutive shares of common stock outstanding. At August 31, 2004,
  the total number of potentially dilutive shares of common stock excluded from
  basic net loss per share was 3,171,349 (August 31, 2003 - Nil).

F-10

---




IKONA GEAR INTERNATIONAL,
  INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 3 - Significant Accounting Policies (continued)

(j) Income Taxes

A deferred tax asset or liability is recorded for all temporary
  differences between financial and tax reporting and net operating loss carry
  forwards. Deferred tax expenses (benefits) result from the net change during
  the period of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when,
  in the opinion of management, it is more likely than not that some portion or
  all of the deferred tax assets will not be realized. Deferred tax assets and
  liabilities are adjusted for the effects of changes in tax laws and rates on
  the date of enactment.

(k) Foreign Currency Translation

Transaction amounts denominated in foreign currencies are
  translated at exchange rates prevailing at transaction dates. Carrying values
  of monetary assets and liabilities are adjusted at each balance sheet date to
  reflect the exchange rate at that date. Non-monetary assets and liabilities
  are translated at the exchange rate on the original transaction date. Gains
  and losses from restatement of foreign currency monetary and non-monetary assets
  and liabilities are included in the statement of operations. Revenues and expenses
  are translated at the rates of exchange prevailing on the dates such items are
  recognized in the statement of operations. Foreign
  exchange gains (losses) of $3,217 (2003 - $0) are included in the operating
  statement within the “General and administrative” expenses account.

(l) Recent Accounting Requirements

In January 2003, FASB issued Financial Interpretation No.
  46 "Consolidation of Variable Interest Entities" ("FIN 46") (revised in December
  17, 2003). The objective of FIN 46 is to improve financial reporting by companies
  involved with variable interest entities. A variable interest entity is a corporation,
  partnership, trust, or any other legal structure used for business purposes
  that either (a) does not have equity investors with voting rights or (b) has
  equity investors that do not provide sufficient financial resources for the
  entity to support its activities. FIN 46 requires a variable interest entity
  to be consolidated by a company if that company is subject to a majority of
  the risk of lass from the variable interest entity's activities or entitled
  to receive a majority of the entity's residual returns or both. FIN 46 also
  requires disclosures about variable interest entities that the company is not
  required to consolidate but in which it has a significant variable interest.
  The consolidation requirements of FIN 46 are required in financial statements
  of public entities that have interests in variable interest entities for periods
  ending after December 15, 2003. The consolidation requirements for all other
  types of entities are required in financial statements for periods ending after
  March 15, 2004.

The adoption of this new pronouncement is not expected to
  have a material effect on the Company's consolidated financial position or results
  of operations.

(m) Comparative Figures

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

Note 4 - Patents and Trademark Rights

In September 2001, the Company acquired patent and trademark
  rights (the "Acquired Technology") from Diversified Sciences Limited ("Diversified")
  and Ikona Technologies Inc. ("Technologies"), companies related by virtue of
  a common director, officer and significant shareholder. The patent rights relate
  to planetary gearing technology and consist of a United States patent, a Canadian
  patent and a European patent applicable in France, Germany, Italy, Great Britain
  and Sweden. The US patent has a term of 17 years from the issue date and expires
  on November 11, 2015. The Canadian patent has a term of 20 years from the filing
  date and expires on July 29, 2014. The remaining patents have terms of 20 years
  from the date of filing the European patent and expire on July 26, 2015. The
  trademark acquired by the Company provides for the exclusive assignment of rights,
  title and interest in the "IKONA Gear TM" Canadian Trademark.

The patent acquisition agreement with Diversified required
  the Company to issue 2,180,000 shares of common stock at a value of $109,000
  to Diversified and pay $63,000 (C$100,000) less Diversified's tax credit
  recoveries of $18,900 (C$30,000) relating to the patents.

F-11

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 4 - Patents and Trademark rights (continued)

The trademark acquisition agreement with Technologies required
  the Company to issue 20,000 shares of common stock at a value of $1,000
  to Technologies, pay $62,000 to Technologies and repay amounts owing of
  $15,000 on behalf of Technologies.

The Acquired Technology was recorded by the Company at a cost
  of $231,100.

There is significant uncertainty regarding future revenue
  to be generated from intangible assets due to the fact that this is a new business
  with a developing technology and there are currently no comparable businesses
  in the intended market segments for which any reliable predictions for future
  revenue generation can be based.

Due to the uncertainties related to expected future undiscounted
  cash flows, management has concluded that the carrying value of intangible assets
  had been materially impaired and has written-down the entire value of intangible
  assets resulting in a charge of $183,763 to operations.

Note 5 - Property and Equipment

|                                   | August 31, |        
|---------------------------------- | ---------- | -------
|                                   | 2004       |        
|                                   |            |        
|                                   |            |        
|                                   |            | Cost   
|                                   |            |        
|Computers and Software             | $          | 54,542 
|Furniture                          |            | 17,184 
|Research and Development Equipment |            | 23,935 
|Leasehold Improvements             |            | 74,181 
|                                   |            |        
|                                   | $          | 169,842

Note 6 - Related Party Transactions

In September 2001, the Company entered into an agreement with
  Ikona Gear (Canada) Inc. ("Ikona Canada"), a company controlled by a common
  director, officer and significant shareholder, whereby Ikona Canada provides
  certain research and development and related services to the Company. Under
  this agreement, the Company compensated Ikona Canada for all direct expenses
  plus a 5% profit margin. During the fiscal year ended August 31, 2004, total
  expense amounted to $132,162 (2003 - $100,232). During the year ended
  August 31, 2004, Ikona Canada received research and development tax credits
  of $108,905. The Company received $88,124 from Ikona Canada to settle
  previous overpayments of $28,467 of the Company and as a result of the research
  and development tax credits, after deducting the 5% profit margin. As of November
  1, 2003, operations were discontinued and assumed by Ikona Gear Corp.

As of August 31, 2004, amounts due to (from) related parties
  consisted of the following:

|             |   | August 31, |  |   | August 31, | 
|------------ | - | ---------- |  | - | ---------- | 
|             |   | 2004       |  |   | 2003       | 
|             |   |            |  |   |            | 
|Directors    | $ | 161        |  | $ | -          | 
|Diversified  |   | -          |  |   | 21,862     | 
|Technologies |   | -          |  |   | 61,848     | 
|             |   |            |  |   |            | 
|             | $ | 161        |  | $ | 83,710     | 

F-12

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 6 - Related Party Transactions (continued)

The Company entered into the following transactions with related parties during
  the year ended August 31, 2004:

|a) | Paid the balance of $61,848 owing to Technologies
        pursuant to the purchase of the "IKONA Gear TM" Canadian Trademark (Note
        4).                                     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                    
|b) | Paid or accrued business development fees of $55,762
        (2003 - $60,959) to a company controlled by a relative of a director
        of the Company.                          
|   |                                                                                                                                                                                    
|c) | Paid or accrued business development fees of $71,545
        (2003 - $0) to a company controlled by a director of the Company.                                                     
|   |                                                                                                                                                                                    
|d) | Paid or accrued corporate finance fees of $65,188
        (2003 - $0) to a company related to a director of the Company.                                                           
|   |                                                                                                                                                                                    
|e) | Pair or accrued general and administrative fees
        of $0 (2003 - $15,240) to a company controlled by a director of
        the Company                                        
|   |                                                                                                                                                                                    
|f) | Paid or accrued corporate finance fees of $0
        (2003 - $37,253) to a company controlled by a director of the Company.                                                        
|   |                                                                                                                                                                                    
|g) | Paid or accrued research and development expenses
        of $0 (2003 - $54,592) to a company controlled by a director,
        officer and significant shareholder of the Company.

These 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 the related parties.

Note 7 -Capital Stock

In September 2001, the Company issued 2,725,000 common shares
  at a value of $0.04 per share for $109,000 as partial consideration
  on acquisition of patent rights (Note 4).

In September 2001, the Company issued 25,000 common shares
  at a value of $0.04 per share for $1,000 as partial consideration on
  acquisition of a trademark (Note 4).

In October 2001, the Company issued 8,713,416 shares to the
  founders of the Company at a price of $0.00001 per share for cash proceeds
  of $70.

In November 2001, the Company issued 263,665 common shares
  at a price of $0.20 per share for cash proceeds of $52,733.

In February 2002, the Company issued 1,286,335 common shares
  at a price of $0.20 per share for cash proceeds of $257,266.

In May 2002, the Company issued 393,750 common shares at a
  price of $0.20 per share for cash proceeds of $78,750.

In November 2002, the Company issued 336,250 common shares
  at a price of $0.20 per share for cash proceeds of $67,250.

In November 2002, the Company issued 85,800 common shares at
  a price of $0.20 per share for corporate finance fees of $17,160.

In January 2003, the Company issued 175,000 common shares
  at a price of $0.20 per share for cash proceeds of $35,000.

In May 2003, the Company issued 175,000 common shares at a
  price of $0.20 per share for cash proceeds of $35,000.

In May 2003, the Company issued 67,625 common shares at a price
  of $0.20 per share for corporate finance fees of $13,525.

In July 2003, the Company issued 526,792 common shares at a
  price of $0.20 per share for cash proceeds of $105,358.

In July 2003, the Company issued 7,500 common shares at a price
  of $0.20 per share for corporate finance fees of $1,500.

In August 2003, the Company issued 251,250 common shares at
  a price of $0.40 per share for cash proceeds of $100,500.

F-13

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 7 -Capital Stock (Continued)

In August 2003, the Company issued 9,250 common shares at
  a price of $0.40 per share for corporate finance fees of $3,700.

In October, 2003, the Company acquired all the issued and outstanding
  capital stock of Ikona USA, which was accounted for as a recapitalization of
  the Company (Note 1). The issued number of shares of common stock is that of
  the Company with adjustments made for differences in par value between the Company
  and Ikona USA.

In January 2004, the Company cancelled 500,000 common shares
  at a par value of $0.00001 per share.

In January 2004, the Company issued 290,000 common shares
  at a price of $0.50 per share for cash proceeds of $145,000.

In February 2004, the Company issued 620,666 units at a price
  of $0.75 per unit for cash proceeds of $436,275 (gross proceeds of $465,500
  net of finders' fees of $29,225). Each unit consists of one share of common
  stock and one-half of one non-transferable share purchase warrant whereby each
  whole warrant entitles the holder to acquire one additional share of common
  stock at a price of $3.00 per share for a period of one year.

In March 2004, the Company issued 1,354,933 units at a price
  of $0.75 per unit for cash proceeds of $964,926 (gross proceeds of $1,016,201
  net of finders' fees of $51,275). Each unit consists of one share of common
  stock and one-half of one non-transferable share purchase warrant whereby each
  whole warrant entitles the holder to acquire one additional share of common
  stock at a price of $3.00 per share for a period of one year.

In April 2004, the Company issued 462,427 units at a price
  of $0.75 per unit for cash proceeds of $334,197 (gross proceeds of $346,822
  net of finders' fees of $7,000). Each unit consists of one share of common
  stock and one-half of one non-transferable share purchase warrant whereby each
  whole warrant entitles the holder to acquire one additional share of common
  stock at a price of $3.00 per share for a period of one year.

In July 2004, the Company issued 3,333 units at a price of
  $0.75 per unit for cash proceeds of $5,000. Each unit consists of one
  share of common stock and one-half of one non-transferable share purchase warrant
  whereby each whole warrant entitles the holder to acquire one additional share
  of common stock at a price of $3.00 per share for a period of one year.

Note 8 - Stock Options and Warrants

Stock Options

On October 28, 2003, the Company adopted
  a stock incentive plan (the "2003 Stock Plan") to provide incentives to employees,
  directors and consultants. On October 28, 2003, the Company's stockholders approved
  the 2003 Stock Plan which provides for the issuance of up to 4,400,000 options
  with a maximum term of ten years. The board of directors has the exclusive power
  over the granting of options and their vesting provisions.

|                                                                 | 2004      | 
|---------------------------------------------------------------- | --------- | 
|                                                                 | Number of | 
|                                                                 | Options   | 
|Options outstanding, beginning of the year                       | -         | 
|Issued                                                           | 1,974,000 | 
|Exercised                                                        | -         | 
|Expired                                                          | -         | 
|Options outstanding, end of the period                           | 1,974,000 | 
|                                                                 |           | 
|Weighted average fair value
      of options granted in the year |           | 

The fair
  value of 50,000 options with an exercise price of $1.00 granted on December
  1, 2003, and 25,000 granted on August 1, 2004 with an exercise price of $1.00,
  both issued to a consultant, were recognized during the current period of $38,758
  (2003 - $ nil ) has been recorded as investor relations fees in the consolidated
  statement of operations. The Company did not issue any stock options
  prior to December 1, 2003.

F-14

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 8 - Stock Options and Warrants (Continued)

Stock Options (continued)

A summary of stock options outstanding at August 31,
  2004, is as follows:

|               | Outstanding Options |  | Exercisable Options | 
|-------------- | ------------------- |  | ------------------- | 
|               |                     |  | Weighted            | 
|               |                     |  | Average             | 
|               |                     |  | Remaining           | 
|               |                     |  | Contractual         | 
|Exercise Price | Number              |  | Life                | 
|$0.60          | 341,000             |  | 6.25 years          | 
|$1.00          | 75,000              |  | 3.38 years          | 
|$1.10          | 1,558,000           |  | 5.83 years          | 

The Company used the Black-Scholes option pricing model to compute estimated
  fair value, based on the following assumptions:

| | Risk-free interest rate                   | 4.25%      | 
| | ----------------------------------------- | ---------- | 
| | Dividend yield rate                       | 0.00%      | 
| | Price volatility                          | 106.20%    | 
| | Weighted average expected life of options | 5.84 years | 

Warrants

|                  |           |  |             |  | Exercise |  | Expiry            | 
|----------------- | --------- |  | ----------- |  | -------- |  | ----------------- | 
|Issuances         | Issued    |  | Outstanding |  | Price    |  | Date              | 
|February 29, 2004 | 310,332   |  | 310,332     |  | $3.00    |  | February 29, 2005 | 
|March 29, 2004    | 677,469   |  | 677,469     |  | $3.00    |  | March 29, 2005    | 
|April 30, 2004    | 231,215   |  | 231,215     |  | $3.00    |  | April 30, 2005    | 
|July 31, 2004     | 3,333     |  | 3,333       |  | $3.00    |  | July 31, 2005     | 
|                  |           |  |             |  |          |  |                   | 
|Total outstanding | 1,222,349 |  | 1,222,349   |  |          |  |                   | 

Revenues are generated from royalties and the provision of
  engineering services to two clients, Magna Advanced Technologies ("MAT"), and
  Aircast Inc. ("Aircast").

The Company entered into an agreement dated April 8, 2003,
  with MAT whereby the Company will allow MAT, on a sole and exclusive basis,
  to examine and develop automotive applications for the Acquired Technology owned
  by the Company. Under phase 1 of the agreement, MAT will engage in development,
  prototyping and testing commencing May 1, 2003, to April 30, 2004, then extended
  to August 31, 2004. The Company receives a monthly engineering fee of approximately
  $10,750 (C$15,000) during phase 1. MAT may elect to proceed to phase
  2 to continue developing the technology with the intent to commercialize automotive
  applications. The terms of the license agreement would include royalties of
  between 1% to 6% of the gross selling price of automotive gearing products incorporating
  the technology. Subsequent to year end, the agreement with MAT was amended (note
  15).

Aircast has agreed under Licencing Agreement to provide royalties
  on a calendar quarterly basis. This year Aircast has provided two royalty payments
  , the first being of $270 on May 11, 2004, the second being $1,685 on
  August 3, 2004.

F-15

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 10 - Supplemental Disclosure With Respect to Cash Flows

The significant non-cash transactions for the year ended August 31, 2004,
  consisted of:

|- | the Company recorded impairment of the Acquired Technology at a value
      of $183,763,
|- | ----------------------------------------------------------------------------------------
|  |                                                                                         
|- | the Company disposed of assets with accumulated depreciation of $183.                   

The significant non-cash transaction for the year ended August 31, 2003, consisted
  of the Company issuing 136,140 shares of common stock at a value of $35,885
  for corporate finance fees.

Note 11 - Income Taxes

A reconciliation of income taxes at statutory rates with the reported taxes
  is as follows:

|                                                           |   | 2004       |   |   | 2003     |  
|---------------------------------------------------------- | - | ---------- | - | - | -------- | -
|                                                           |   |            |   |   |          |  
|Loss before income taxes                                   | $ | (1,016,640 | ) | $ | (369,303 | )
|                                                           |   |            |   |   |          |  
|Expected income tax benefit                                | $ | 345,660    |   | $ | 125,500  |  
|Unrecognized benefit of operating
      loss carryforwards |   | (345,660   | ) |   | (125,500 | )
|                                                           |   |            |   |   |          |  
|Income tax benefit                                         | $ | -          |   | $ | -        |  

|                                                 |   | 2004     |   |   | 2003     |  
|------------------------------------------------ | - | -------- | - | - | -------- | -
|                                                 |   |          |   |   |          |  
|Deferred tax assets:                             |   |          |   |   |          |  
|Tax effect of operating
      loss carryforwards | $ | 594,100  |   | $ | 248,300  |  
|Valuation
      allowance                        |   | (594,100 | ) |   | (248,300 | )
|                                                 |   |          |   |   |          |  
|Net deferred tax assets                          | $ | -        |   | $ | -        |  




The Company has provided a valuation allowance against its
  deferred tax assets given that it is in the development stage and it is more
  likely than not that these benefits will not be realized.

Note 12 - Segment Information

The Company's operations were conducted in one reportable
  segment, being the development and commercialization of a unique patented gearing
  technology, primarily in Canada.

F-16

---

IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)
  Notes to the Consolidated Financial Statements
  (Expressed in United States Dollars)
  August 31, 2004 and 2003

Note 13 - Financial Instruments

a) Fair Value

The Company's financial instruments consist of cash, advances
  to related party accounts payable and accrued liabilities due to related parties.
  Unless otherwise noted, it is management's opinion that the Company is not exposed
  to significant interest or credit risks arising from these financial instruments.
  The fair value of these financial instruments approximates their carrying values,
  unless otherwise noted.

b) Currency Risk

Currency risk is the risk arising from fluctuations and changes
  in foreign currency exchange rates. The Company does not use any derivative
  instruments to reduce its exposure to fluctuations in foreign currency exchange
  rates.

c) Credit Risk

The Company maintains cash in bank deposit accounts which,
  at times, may exceed federally insured limits. The Company has not experienced
  losses in such accounts. Management believes the Company is not exposed to any
  significant credit risk on cash in such bank deposit accounts.

Note 14 - Commitments

The Company amended a consulting agreement with a director,
  officer and significant shareholder of the Company effective April 1, 2004,
  to pay monthly management fees totalling approximately $8,500 (C$11,333)
  ( 2003 $5,370 (C$7,500)). This agreement can be terminated with six
  months advance notice.

On June 9, 2004, the Company entered into a premises lease
  for office and workshop facilities for a period of 36 months commencing August
  1, 2004. The premises lease commits the Company to a net annual rental expense
  of $36,969 (C$49,623) and additional operating costs estimated at $14,048
  (C$18,857) for a period of three years with an option to extend the period
  to a further three years. The Company provided a deposit of three months of
  rent equalling $9,242 (C$12,406) of which two of the three months will
  be applied to rent in the final two months of the three-year lease term.

Note 15 - Subsequent Events

In September 2004, the Company agreed with Magna Advanced
  Technologies to proceed to commercialize automotive applications and demonstrate
  prototypes to divisions within Magna and to Magna's OEM and partner network.
  Ikona agreed to waive the requirement for Magna to pay C$20,000 (US$15,400)
  monthly engineering fees as entertained in the original phase 1 agreement between
  Ikona and Magna. Ikona also has agreed to waive the mandatory lump sum C$1
  million (US$770,000) advance royalty, instead Magna and Ikona have agreed
  to negotiate financial and royalty details on an application by application
  basis. These amendments had
  no impact on revenues earned from Magna Advanced Technologies in the years ended
  August 31, 2003 or August 31, 2004.

In September 2004, the Company entered into a number of short-term
  investor relations agreements. The Company has committed in these agreements
  to issue a total of 100,000 stock options at prices between $1.00 and $1.40.

F-17

---

Item 8.     Changes in and Disagreements with
  Accountants on Accounting and Financial Disclosure

Effective
  November 5, 2003, our Board of Directors and the Audit Committee of our Board
  of Directors approved the appointment of Dohan and Company, CPAs, P.A.,
  to serve as our independent accountant to audit the Company's financial statements.
  Prior to engaging Dohan and Company, we had not consulted Dohan and Company
  with respect to the application of accounting principles to specific transactions
  or the type of audit opinion that might be rendered on our financial statements.
  The engagement of Dohan and Company was effective on November 5, 2003.

Effective
  November 5, 2003, we dismissed Hoogendoorn Vellmer, Chartered Accountants, as
  our independent auditors. The board of directors approved the dismissal. The
  audit reports of Hoogendoorn Vellmer on the financial statements of the Company
  as of and for the years ended December 31, 2002 and 2001, did not contain an
  adverse opinion or disclaimer of opinion, nor were qualified or modified as
  to audit scope or accounting principles except that each report of Hoogendoorn
  Vellmer contained an explanatory paragraph as to the uncertainty of the Company's
  ability to remain a going concern.

In
  connection with the audits of our financial statements for the fiscal years
  ended December 31, 2002 and 2001, and in connection with the subsequent period
  up to November 5, 2003 (the date of dismissal), there were no disagreements
  with Hoogendoorn Vellmer on any matters of accounting principles or practices,
  financial statement disclosure, or auditing scope and procedures which, if not
  resolved to the satisfaction of Hoogendoorn Vellmer, would have caused Hoogendoorn
  Vellmer to make reference to the matter in its report of the financial statements
  for such years; and there were no reportable events as defined in Item 304(a)
  (1) (iv) (B) of Regulation S-B. Hoogendoorn Vellmer has not reported on financial
  statements for any periods subsequent to December 31, 2002.

We
  have provided Hoogendoorn Vellmer with a copy of the above disclosures, and
  they have stated their agreement with such statements.

ITEM 8A.     CONTROLS AND PROCEDURES

Laith
  Nosh, Principal Executive and Raymond Polman, Chief Financial Officer of Ikona
  Gear International, Inc., have established and are currently maintaining our
  disclosure controls and procedures. The disclosure controls and procedures have
  been designed to ensure that material information relating to the Company is
  made known to him as soon as it is known by others within the organization.

Our
  Principal Executive and Financial Officers conduct an update and a review and
  evaluation of the effectiveness of our disclosure controls and procedures and
  have concluded, based on his evaluation at
  August 31, 2004 , that our disclosure controls and procedures are effective
  for gathering, analyzing and disclosing the information we are required to disclose
  in our reports filed under the Securities Exchange Act of 1934. There have been
  no significant changes in our internal controls or in other factors that could
  significantly affect these controls subsequent to the date of the previously
  mentioned evaluation.

17

---

PART III

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

Our executive
  officers, key employees and outside Directors and their respective ages and
  positions are set forth below:

|Name           | Age | Position                                       
|-------------- | --- | -----------------------------------------------
|               |     |                                                
|Laith I. Nosh  | 56  | President, Chief Executive Officer and Director
|Dal Brynelsen  | 57  | Executive Vice President and Director          
|Barrie Freeke  | 62  | Director                                       
|Raymond Polman | 44  | Chief Financial Officer and Director           
|Simon Anderson | 43  | Secretary and Director                         

None of our directors are "independent" within the meaning
  of the National Association of Securities Dealers, Inc.'s listing standards.
  For this purpose, a director is deemed to be independent if he does not have
  a relationship which, in the opinion of our Board of Directors, would interfere
  with the exercise of independent judgment in carrying out the responsibilities
  of a director.

Laith Nosh, Director, President and Chief Executive Officer
  
  Mr. Nosh has served as a director and our President and CEO since October 2003.
  Mr. Nosh was a founder of our predecessor company and the current operating
  subsidiaries, where he worked as President and Chief Executive Officer since
  inception in August 2001. He has been instrumental in the development, refinement
  and patenting of the Ikona Gearing System over the last eight years. He has
  also developed and patented consumer product devices for the construction industry.
  He received his degree from the University of Alberta in Mechanical Engineering
  and has over 30 years of experience in engineering, business management and
  marketing.

Dal Brynelsen, Director, Executive Vice President 
  Mr. Brynelsen has served as a director and our Executive Vice President since
  October 2003. From August 2001 until the merger with our company, Mr. Brynelsen
  worked for our predecessor and the current operating subsidiaries developing
  the business model, raising funds for the business and being active in business
  development activities. Mr. Brynelsen is presently, and has been since 1990,
  the President and CEO of Vangold Resources Ltd. He has been a director of Griffin
  Mining Ltd. since 2001, and a director of International Silver Ridge Inc. since
  2003. From 1999 through 2001, Mr. Brynelsen acted in a corporate finance consulting
  position with Thomson Kernaghan (a Canadian national brokerage firm). Mr. Brynelsen
  is a graduate of the University of British Columbia, Vancouver (1972), and has
  over 25 years of experience sourcing ongoing private and public financing for
  early stage companies.

Barrie Freeke, P. Eng., Director, Vice President Engineering 
  Mr. Freeke has served as a director and our Vice President Engineering since
  October 2003. From March 2001 until the merger with our company, Mr. Freeke
  served as senior Engineer for our predecessor company. Prior to joining Ikona
  in March 2001, Mr. Freeke worked in excess of five years with Lantec Industries
  Inc., and held the position of Chief Engineer with Lantec Industries Inc., a
  large manufacturer of gear drives and winches. Mr. Freeke is a professional
  mechanical engineer and a graduate of Bradford University in Mechanical Engineering
  (Honors) with over 25 years of experience in gear design. Mr. Freeke is a gear
  designer and much of his work and development can be seen with companies including
  Timberland Ellicott, Swann Winches (marine winches), Canron, Western Bridge
  Div., Vanterm Container Cranes (cranes that have been used in Vancouver and
  San Francisco), and Locheed Petroleum (oilfield equipments).

18

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Raymond L. Polman, B. Sc., CA, Director, Chief Financial
  Officer 
  Mr. Polman has served as a director and our Chief Financial Officer since December
  2003. From October 1999 to September 2001, Mr. Polman was founder, President
  and Chief Executive Officer of Oglenet Software Inc., a private start-up company.
  From October 2001 to November 2003, Mr. Polman consulted to MCSI Consulting
  Services Inc. From April 2002 to November 2002 Mr. Polman was President and
  Chief Executive Officer of Nomadic Collaboration International, Inc., an OTC
  Bulletin Board company. Prior to the past five years, from 1992-95, he managed
  the finances and administration of a rapid-growth global environmental consultancy.
  From 1995-1998 he served as Chief Financial Officer of Nexmedia Technologies
  Inc., a display advertising software developer, where he was responsible for
  fund raising and regulatory compliance. Mr. Polman has consulted to a number
  of rapid growth companies in the Vancouver area including fSONA Communications,
  and has been an associate with the MCSI Consulting Group, a Vancouver, BC-based
  firm specializing in corporate finance matters, strategic planning and business
  planning services. From 1985 to 1992, Mr.Polmanwas a professional
  accountant with Deloitte where he specialized in Information Technology Consulting
  and Computerized Audit Services departments upon completion of his articles
  in accountancy, audit and taxation. Mr. Polman's academic qualifications include
  a designation as a (Canadian) Chartered Accountant (1990) and he holds a Bachelor
  of Sciences degree from the University of Victoria (1985).

Simon Anderson, CA, CBV, Director 
  Mr. Anderson has served as one of our directors since October 2003. Mr. Anderson
  has a been a 50% owner and Vice President of MCSI Consulting Services Inc. from
  1996 to present. Mr. Anderson is both a Chartered Accountant and a Chartered
  Business Valuator. From August 1999 to March 2000 he was Treasurer of MC2 Learning
  Systems, Inc. From August 1999 until March 2004 he was CFO of XML Global Technologies,
  Inc., and from August 1999 until June 2004 he was a director of that company.
  From February 2004 to November 2004 he has been CFO of Shep Technologies Inc.,
  since May 2004 he has been CFO of Buffalo Gold Ltd. Since July 2004, Mr. Anderson
  has been a director of Sinovac Biotech Co, Ltd. Mr. Anderson received a Bachelor
  of Commerce in Accounting and Management Information Systems from the University
  of British Columbia in May 1983 and was admitted as a member of the Institute
  of Chartered Accountants in British Columbia in 1986. He has also been a member
  of the Canadian Institute of Charter Business Valuators since 1990.

Except as indicated above, during the last five years none of our directors
  or officers have:

| | a. | had any bankruptcy petition filed by or against
        any business of which such person was a general partner or executive officer
        either at the time of the bankruptcy or within two years prior to that
        time;                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                       
| | b. | been convicted in a criminal proceeding or subject to a pending criminal
      proceeding;                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                       
| | c. | been subject to any order, judgment, or decree, not
        subsequently reversed, suspended or vacated, of any court of competent
        jurisdiction, permanently or temporarily enjoining, barring, suspending
        or otherwise limiting his involvement in any type of business, securities
        or banking activities; or
| |    |                                                                                                                                                                                                                                                                                                                                       
| | d. | been found by a court of competent jurisdiction
        in a civil action, the Commission or the Commodity Futures Trading Commission
        to have violated a federal or state securities or commodities law, and
        the judgment has not been reversed, suspended, or vacated.                                               

2.Meetings
  and Committees of the Board of Directors

a.     Meetings
  of the Board of Directors

During
  the fiscal year ended August 31, 2004, the Board of Directors held six meetings,
  including regularly scheduled and special meetings. Anderson, Nosh and Polman
  attended 100% of the board meetings. Brynelsen attended 83% (five) of the board
  meetings, and Freeke attended 67% (four) of the board meetings. Outside directors
  were not reimbursed their expenses associated with attendance at such meetings
  or otherwise incurred in connection with the discharge of their duties as directors.
  Directors receive 100,000 stock options at the date of their appointment and
  receive an additional 25,000 options for each year annually on the anniversary
  date of their appointment, as long as they continue to serve as directors and
  15,000 options per year for serving on a committee.

19

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b.     Committees

The
  board appoints committees to help carry out its duties. In particular, board
  committees work on key issues in greater detail than would be possible at full
  board meetings. Each committee reviews the results of its meetings with the
  full board.

During the fiscal
  year ended August 31, 2004, the Board established the following committees:

Audit Committee

The audit committee
  is currently composed of the following directors:

Simon
  Anderson, CA 
                      Laith
  Nosh

The
  Board of Directors has determined that Simon Anderson and Laith Nosh are not
  "independent" within the meaning of the National Association of Securities Dealers,
  Inc.'s listing standards. For this purpose, an audit committee member is deemed
  to be independent if he does not have a relationship that, in the opinion of
  the Company's board of directors, would interfere with the exercise of independent
  judgment in carrying out the responsibilities of a director.

During
  the fiscal year ended August 31, 2004, and during the current period the audit
  committee does not have a member who would be deemed an audit committee financial
  expert within the meeting of Item 401(e)(2) of regulation SB. The reason has
  been a lack of unreserved working capital which would be required to engage
  the services of such an expert.

During
  the fiscal year ended August 31, 2004, the audit committee met two times, which
  meetings were attended by all of its members. The committee is responsible for
  accounting and internal control matters. The audit committee:

| | - | reviews with management, the internal auditors and
        the independent auditors, policies and procedures with respect to internal
        controls;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | - | reviews significant accounting matters;                                                                                                                
| | - | approves the audited financial statements prior to public distribution;                                                                                
| | - | approves any significant changes in accounting principles or financial
      reporting practices;                                                      
| | - | reviews independent auditor services; and                                                                                                              
| | - | recommends to the board of directors the firm of independent auditors
      to audit our consolidated financial statements.                            

In
  addition to its regular activities, the committee is available to meet with
  the independent accountants, controller or internal auditor whenever a special
  situation arises.

Our
  board of directors has not adopted a written charter for the audit committee,
  but plans to adopt one before the end of the current fiscal year.

20

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Audit Committee Report

The audit committee
  of the board of directors has:

1.     reviewed
  and discussed the Company's audited financial statements for the fiscal year
  ended August 31, 2004 with management and representatives of Dohan and Company,
  CPAs, P.A.

2.     discussed
  with Dohan and Company the matters required to be discussed by SAS 61, as modified
  or supplemented; and

3.     received
  the written disclosures and letter from Dohan and Company required by Independence
  Standards Board Standard No. 1 and discussed Dohan and Company's independence
  with representatives of Dohan and Company.

Based
  on the review and discussions referred to above, the audit committee recommends
  to the board of directors that the audited financial statements for the fiscal
  year ended August 31, 2004, be included in the Company's annual report on Form
  10-KSB filed with the Securities and Exchange Commission.

By: The Audit Committee

Compensation Advisory Committee

There
  is presently no appointed compensation advisory committee. Matters normally
  addressed by the compensation advisory committee are currently addressed by
  the board at large.

Any
  transactions between the Company and its officers, directors, principal shareholders,
  or other affiliates have been and will be on terms no less favorable to the
  Company than could be obtained from unaffiliated third parties on an arms-length
  basis and will be approved by a majority of the Company's independent, outside
  disinterested directors.

Nomination Process

The
  Board of Directors has not appointed a standing nominating committee but intends
  to do so during the current year. The board as a whole, which consists of five
  members currently, has addressed the process of determining director nominees.
  The board has not adopted a charter to govern the director nomination process.

Of
  the currently serving five directors, none would be deemed to be independent
  within the meaning of the National Association of Securities Dealers, Inc.'s
  listing standards. For this purpose, a director is deemed to be independent
  if he does not possess any vested interests related to those of management and
  does not have any financial, family or other material personal ties to management.

The
  board of directors has not adopted a policy with regard to the consideration
  of any director candidates recommended by security holders, since to date the
  board has not received from any security holder a director nominee recommendation.
  The board of directors will consider candidates recommended by security holders
  in the future. Security holders wishing to recommended a director nominee for
  consideration should contact Mr. Laith Nosh, President, at the Company's principal
  executive offices located in Coquitlam, British Columbia and provide to Mr.
  Nosh, in writing, the recommended director nominee's professional resume covering
  all activities during the past five years, the information required by Item
  401 of Regulation SB, and a statement of the reasons why the security holder
  is making the recommendation. The Company must receive such recommendation before
  August 31, 2005.

The
  board of directors believes that any director nominee must possess significant
  experience in business and/or financial matters as well as a particular interest
  in the Company's activities.

21

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Shareholder Communications

Any
  shareholder of the Company wishing to communicate to the board of directors
  may do so by sending written communication to the board of directors to the
  attention of Mr. Laith Nosh, President, at the principal executive offices of
  the Company. The board of directors will consider any such written communication
  at its next regularly scheduled meeting.

Any
  transactions between the Company and its officers, directors, principal shareholders,
  or other affiliates have been and will be on terms no less favorable to the
  Company than could be obtained from unaffiliated third parties on an arms-length
  basis and will be approved by a majority of the Company's independent, outside
  disinterested directors.

Code of Ethics

Our
  Board of Directors adopted a Code of Business Conduct and Ethics for all of
  our directors, officers and employees subsequent to fiscal year ended August
  31, 2004. We will provide to any person without charge, upon request, a copy
  of our Code of Business Conduct and Ethics. Such request should be made in writing
  and addressed to Investor Relations, Ikona Gear International, Inc., 1850 Hartley
  Avenue, Unit #1, Coquitlam, British Columbia Canada, V3K 7A1. Further, our Code
  of Business Conduct and Ethics is being filed herewith as an exhibit to this
  Annual Report on Form 10-KSB.

Section 16(a) Compliance

Under
  the Securities Laws of the United States, the Company's Directors, its Executive
  (and certain other) Officers, and any persons holding more than ten percent
  (10%) of our common stock are required to report their ownership of the Company's
  common stock and any changes in that ownership to the Securities and Exchange
  Commission. Specific due dates for these reports have been established and the
  Company is required to report in this report any failure to file by these dates.
  All of these filing requirements were satisfied by our Officers, Directors,
  and ten-percent holders with the following exceptions: - Messrs Anderson, Brynelsen,
  Freeke, and Nosh each failed to file on a timely basis one report covering one
  transaction. In making these statements, we have relied on the written representation
  of its Directors and Officers or copies of the reports that they have filed
  with the Commission.

Item 10.     Executive Compensation

The following table and discussions summarizes all plan and
  non-plan compensation earned by or paid to our chief executive officer for our
  last two completed fiscal years. No other executive officer received total annual
  salary and bonus of at least $100,000 during those periods.

TABLE 1

SUMMARY COMPENSATION TABLE

|                      |                     |         |         |         | Long Term Compensation
|--------------------- | ------------------- | ------- | ------- | ------- | ----------------------
|                      | Annual Compensation | Awards  | Payouts
|                      |                     |         |         | Other   |                       
|                      |                     |         |         | Annual  | Restricted            
|Name and              |                     |         |         | Compen- | Stock                 
|Principal             |                     | Salary  | Bonus   | sation  | Award(s)              
|Position              | Year                | ($)     | ($)     | ($)     | ($)                   
|                      |                     |         |         |         |                       
|Laith I. Nosh,        | 2004                | $82,500 | -0-     | 8,855   | -0-                   
|President & CEO       |                     |         |         |         |                       
|Laith Nosh, President | 2003                | -0-     | -0-     | -0-1    | -0-                   
|& CEO                 |                     |         |         |         |                       
|Richard Achron, past  | 2003                | -0-     | -0-     | -0-2    | -0-                   
|President & CEO       |                     |         |         |         |                       

1Mr. Nosh became President
  & CEO of Ikona Gear International, Inc. on October 27, 2003 when Oban Mining
  Inc. acquire Ikona Gear USA, Inc.. Mr. Nosh received no compensation prior to
  this date for his services, except from Ikona Gear USA, Inc. Mr. Nosh received
  his compensation in the form of management fees paid to his consultancy, Diversified
  Sciences Limited.2Mr. Achron was our sole employee prior to the acquisition of Ikona
  Gear International, Inc. on October 27, 2003. Mr. Achron received no compensation
  for his services. Mr. Achron resigned as President and Chief Executive Officer
  on October 30, 2003, upon completion of the acquisition of Ikona Gear International,
  Inc. Mr. Achron resigned as director on January 22, 2004. 3 On June 28, 2004,
  pursuant to our 2003 Equity Incentive Plan, Mr. Nosh was granted 550,000 options
  with an exercise price of $1.10 per share. Of the options granted, 250,000 shares
  shall be deemed vested immediately and the balance of 300,000 shares shall be
  vested, pro rata, on a quarterly basis, beginning on September 28, 2004, and
  ending on June 28, 2006.

22

---

None of the current executive officers were either employed
  or served in an executive or employment capacity with the company prior assuming
  their duties for Ikona on October 28, 2003, subsequent to the last fiscal year
  of Ikona Gear. Upon acquiring Ikona Gear International, Inc., we adopted the
  fiscal year end of Ikona, being August 31, 2003. Prior to acquiring Ikona, our
  prior fiscal year end was December 31, 2002.

No executive officer will receive perquisites and other personal
  benefits which, in the aggregate, exceed the lesser of either $50,000 or 10%
  of the total of annual salary and bonus paid during the fiscal year.

See Director Compensation below for options granted
  during the fiscal year ended August 31, 2004, to any of the named executive
  officers. No options were exercised during the year ended August 31, 2004.

Director compensation

Under
  our Equity Incentive Plan, each of our current directors received an option
  grant to purchase shares of our common stock. Directors generally receive options
  to purchase 100,000 shares of our common stock for serving on the board and
  further options to purchase 15,000 shares of our common stock for each committee
  on which they serve. Directors who are also officers of our company generally
  receive an option to purchase an additional 150,000 shares of our common stock.
  Directors who are employees of our company may be granted a further "dollar-weighted"
  option to acquire common stock when first employed by our company, whereby they
  receive an option to acquire one share of common stock per dollar of salary
  that they earn on an annualized basis. We may grant additional options to other
  directors commensurate with their roles and other subjective assessments of
  the compensation committee. We plan to make annual grants of options to purchase
  25,000 shares of our common stock to directors who continue to serve, based
  on their anniversary date. Options are priced based on a 100% of their market
  value on the date of the grant.

In
  a grant on December 1, 2003, Mr. Polman, our chief financial officer and a director,
  was granted an option to purchase 341,000 shares of common stock at a purchase
  price per share of $0.60. Of the option grant, 250,000 of these shares relate
  to his services as a director and officer and vested upon issuance, and a further
  91,000 shares were issued "dollar weighted" commensurate with his employment,
  subject to monthly vesting over a period of twenty-four months.

23

---

In
  a grant on June 28, 2004, Mr. Nosh was granted an option to purchase 550,000
  shares of common stock at a purchase price of $1.10 of which 250,000 relate
  to his services as a director and officer and vested upon issuance. The remaining
  300,000 shares relate to his employment and vest on a quarterly basis over a
  two-year period. Vesting of these options is contingent on Mr. Nosh being employed
  as contemplated and on his continued employment. The number of options granted
  to Mr. Nosh reflects his role as a founder of our company.

In
  a grant on June 28, 2004, Mr. Brynelsen was granted an option to purchase 400,000
  shares of common stock at a purchase price of $1.10 of which 250,000 relate
  to his services as a director and vested upon issuance. The remaining 150,000
  options relate to his employment and vest on a quarterly basis over a two-year
  period. Vesting of these options is contingent on Mr. Brynelsen being employed
  as contemplated and on his continued employment. The number of options granted
  to Mr. Brynelsen reflects his role as a founder of our company.

In
  a grant on June 28, 2004, Mr. Freeke was granted an option to purchase 220,000
  shares of common stock at a purchase price of $1.10 of which 100,000 relate
  to his services as a director and vested upon issuance. The remaining 120,000
  options are "dollar weighted" and relate to his employment as Chief Engineer
  and vest on a quarterly basis over a two-year period. Vesting of these options
  is contingent on Mr. Freeke being employed as contemplated and on his continued
  employment. The number of options granted to Mr. Freeke reflects his close ties
  to the gearing industry, which is where we are focusing our efforts.

In
  a grant on June 28, 2004, Mr. Anderson was granted an option to purchase 115,000
  shares of common stock at a purchase price of $1.10 of which 100,000 relate
  to his services as a director and vested upon issuance. The remaining 15,000
  options relate to his role serving on the audit committee and vested upon issuance.

2003 Equity Incentive Plan

On
  October 28, 2003, the Board of Directors authorized and our stockholders approved,
  the 2003 Equity Incentive Plan for our officers, directors and other employees,
  plus outside consultants and advisors. Under the Equity Incentive Plan, our
  employees, outside consultants and advisors may receive awards of non-qualified
  options and incentive options, stock appreciation rights or restricted stock.
  A maximum of 4,400,000 shares of our common stock are subject to the Equity
  Incentive Plan. As of the date of this Report, no stock appreciation rights
  or restricted stock has been granted under the Equity Incentive Plan, and we
  have granted options to purchase 1,974,000 shares of our common stock. To date
  no options have been exercised. The purpose of the Equity Incentive Plan is
  to provide employees, including our officers and employee directors, and non-employee
  consultants and advisors, with an increased incentive to make significant and
  extraordinary contributions to our long-term performance and growth, to join
  their interests with the interests of our shareholders, and to facilitate attracting
  and retaining employees of exceptional ability.

Currently
  under the Plan we have issued 1,974,000 options of which 1,974,000 remain unexercised.
  The options have a weighted average exercise price of $1.01 per share. The stock
  that we may issue under our Equity Incentive Plan shall not exceed 4,400,000
  shares of Common Stock (determined without giving effect to any stock split)
  but we may reclaim stock and re-issue terminated options. The exercise price
  of each Incentive Stock Option shall be not less than 100% of the Fair Market
  Value and such options may not be transferable. The exercise price of each Non-statutory
  stock option shall be not less than 100% of the Fair Market value. The total
  number of shares of stock subject to an Option may, but need not, be allotted
  in periodic installments at the discretion of the Board of Directors or the
  Compensation Committee. Options terminate on the earliest of (i) the date three
  months after termination, (ii) seven years from the date of grant, or (iii)
  an earlier date as previously agreed upon the by the Board of Directors or the
  Compensation Committee.

The
  Equity Incentive Plan may be administered by the Board, or in the Board's sole
  discretion by the Compensation Committee of the Board or such other committee
  as may be specified by the Board to perform the functions and duties of the
  Committee under the Equity Incentive Plan. Subject to the provisions of the
  Equity Incentive Plan, the Committee and the Board shall determine, from those
  eligible to be participants in the Plan, the persons to be granted stock options,
  stock appreciation rights and restricted stock, the amount of stock or rights
  to be optioned or granted to each such person, and the terms and conditions
  of any stock option, stock appreciation rights and restricted stock.

24

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Employment agreements

As
  part of the merger agreement with our predecessor company, we assumed a consulting
  services agreement with Mr. Laith I. Nosh, our President and Chief Executive
  Officer, dated November 1, 2002, amended on April 1, 2004. The agreement continues
  until Mr. Nosh provides six months' notice or termination. Mr. Nosh is to receive
  $102,000, or $8,500 per month (CAD$ 11,333 per month) and the salary is to be
  approved by the Board on November 1st of each year. There is no commitment to
  increase Mr. Nosh's salary, but his salary is subject to upward review only.
  We also provide to Mr. Nosh a car allowance of CAD$1,150 ($863) per month. While
  we have no obligation to provide for Mr. Nosh's retirement savings, we have
  agreed in his employment contract to contribute to a retirement savings plan
  at such time as the board of directors approves such a plan for the Company.

As
  part of the merger agreement with our predecessor company, we assumed a consulting
  agreement with 110980 Investments Ltd., for the services of Mr. Dal Brynelsen,
  our Executive Vice President, dated March 1, 2003, which continues for a term
  of one year. The agreement has been renewed and renews automatically on an annual
  basis until terminated with a 60-day notice requirement. Mr. Brynelsen is to
  receive $90,000 per year. Mr. Brynelsen is also eligible to receive stock options.

Our
  consulting agreement with Raymond L. Polman, our Chief Financial Officer and
  one of our directors, is dated December 1, 2003. The agreement continues until
  we provide three months' notice of termination to Mr. Polman. Mr. Polman is
  to receive $90,000 per year. There is no commitment to increase Mr. Polman's
  salary, but his salary is subject to upward review only.

Item 11.     Security Ownership of Certain Beneficial
  Owners and Management and Related Stockholder Matters

The following table sets forth information with respect to beneficial ownership of our common stock by:

- each person who beneficially owns more than 5% of the common stock;
- each of our executive officers named in the Management section;
- each of our directors; and
- all executive officers and directors as a group.

The table shows the number of shares owned as of November
  22, 2004 and the percentage of outstanding common stock owned as of November
  22, 2004. Each person has sole voting and investment power with respect to the
  shares shown, except as noted.

|                                     | Number of Shares | Percentage of Outstanding
|------------------------------------ | ---------------- | -------------------------
|                                     | Of Common Stock  | Shares Owned             
|                                     | Beneficially     | Current                  
|Name and Address of Beneficial Owner | Owned (1)        | (as of 11/22/2004) (2)   
|                                     |                  |                          
|Laith Nosh                           | 6,550,000(3)     | 27.2                     
|1041 Millstream Road                 |                  |                          
|West Vancouver, BC                   |                  |                          
|Canada V7S2C6                        |                  |                          
|                                     |                  |                          
|Mr. Dal Brynelsen                    | 1,993,416(4)     | 8.3                      
|5825 San Soucie Road, RR 1, S11      |                  |                          
|Halfmoon Bay, BC                     |                  |                          
|Canada                               |                  |                          
|                                     |                  |                          
|Raymond Polman                       | 341,000(5)       | 1.4                      
|2492 West 45thAvenue                 |                  |                          
|Vancouver, BC                        |                  |                          
|V6M 2J8 Canada                       |                  |                          

|Barrie Freeke                                   | 495,000(6) | 2.1 
|----------------------------------------------- | ---------- | ----
|24343 61 Avenue, Langley, BC                    |            |     
|Canada V2Y 2G2                                  |            |     
|                                                |            |     
|Mr. Simon Anderson                              | 490,000(7) | 2.0 
|609 Granville Street, Suite 880, Vancouver, BC, |            |     
|Canada, V7Y
      1G5                           |            |     
|                                                |            |     
|All Officers and Directors as a Group           | 9,869,416  | 41.0
|(5 persons)                                     |            |     

25

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|(1) | Beneficial ownership is based on information provided
        to us, and the beneficial owner has no obligation to inform us of or otherwise
        report any changes in beneficial ownership. Except as indicated, and subject
        to community property laws when applicable, the persons named in the table
        above have sole voting and investment power with respect to all shares
        of common stock shown as beneficially owned by them.                                                                                                                                                                                                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | The percentages shown are calculated based upon
        24,090,325 shares of common stock outstanding on November 22, 2004. In
        calculating the percentage of ownership, unless as otherwise indicated,
        all shares of common stock that the identified person or group had the
        right to acquire within 60 days of the date of this report upon the exercise
        of options and warrants are deemed to be outstanding for the purpose of
        computing the percentage of shares of common stock owned by such person
        or group, but are not deemed to be outstanding for the purpose of computing
        the percentage of the shares of common stock owned by any other person.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(3) | Mr. Nosh is a director and our President and Chief
        Executive Officer. Of the 6,550,000 shares, 3,250,000 are held directly
        by Mr. Nosh; an aggregate of 2,725,000 shares are held by Diversified
        Sciences Limited, a controlled corporation of Mr. Nosh; and an aggregate
        of 25,000 shares are held of record by Ikona Gear Technologies, Inc.,
        also a controlled corporation of Mr. Nosh. This includes 550,000 shares
        of common stock that are subject to an option. Of the shares subject to
        an option, 250,000 are fully vested and could be purchased within 60 days
        from the date of this report.                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(4) | Mr. Brynelsen would be deemed the beneficial owner
        of an aggregate of 1,993,416 shares of our common stock. Of those shares,
        900,000 are held directly by Mr. Brynelsen; and an aggregate of 693,416
        shares are held by Mr. Brynelsen's spouse Ms. Denise Broderick. This includes
        400,000 shares of common stock that are subject to an option. Of the shares
        subject to an option, 250,000 are fully vested and could be purchased
        within 60 days from the date of this report.                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(5) | Mr. Polman is a director and Chief Financial Officer.
        This represents shares of common stock that are subject to option. An
        option to purchase 100,000 shares is fully vested and may be exercised
        in whole or in part at any time before December 1, 2010. An option to
        purchase up to 241,000 is subject to monthly vesting provisions between
        December 1, 2003 and December 1, 2005. Of the shares subject to an option,
        170,292 are fully vested and could be purchased within 60 days from the
        date of this report.                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(6) | Mr. Freeke is a director. Includes 275,000 shares
        of common stock owned directly by Mr. Freeke, and 220,000 shares of common
        stock that are subject to an option. Of the 220,000 shares subject to
        an option, 100,000 are fully vested and may be exercised in whole or in
        part at any time before October 8, 2008, and 120,000 of the options are
        subject to vesting provisions on a quarterly basis between June 28, 2004
        and June 28, 2006. Of the shares subject to an option, 100,000 are fully
        vested and could be purchased within 60 days from the date of this report.                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(7) | Mr. Anderson is a director and Secretary. Represents
        115,000 shares of common stock that are subject to an option, and 375,000
        shares beneficially owned by Mr. Anderson through MCSI Capital Corp. in
        which Mr. Anderson is a 50% partner. All of the options may be exercised
        in whole or in part within 60 days from the date of this report.                                                                                                                                                                                                                                                                                                                                      

26

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Item 12.     Certain Relationships and Related
  Transactions

Diversified
  Sciences Limited., a consulting firm that is 100% owned by Ikona Gear Technologies,
  Inc. which is turn owned by our Chief Executive Officer and his family, provides
  services to us including the services of Laith I. Nosh as President & CEO
  and in developing and executing our business plan. Total payments to Diversified
  Sciences Limited in the period September 1, 2003 to August 31, 2004 were $91,353,
  all of which was payment for Mr. Nosh's services.

Ikona
  Gear (Canada) Inc. an engineering firm that is 100% owned by our Chief Executive
  Officer, provided engineering services to us in the current fiscal year from
  September 1, 2003 to October 31, 2003. These services included the services
  of Barrie Freeke, our most senior engineering resource. Total payments to Ikona
  Gear (Canada) Inc in the period September 1, 2003 to August 31, 2004 were $127,741.
  Effective November 1, 2003, all of the functions of Ikona Gear (Canada) Inc.
  were assumed by Ikona Gear Corp., a new British Columbia incorporated company
  and wholly-owned subsidiary of our company.

Nomadic
  Enterprises Corp., a consulting firm that is 100% owned by our Chief Financial
  Officer, provides services to us including the services of Raymond L. Polman,
  CA as CFO. Total payments to Nomadic Enterprises Corp. in the period September
  1, 2003 to August 31, 2004 were $72,688, all of which was payment for Mr. Polmans
  services.

110980
  Investments Ltd., a consulting firm that is 100% owned by the spouse of our
  Executive Vice President, provides services to us, including the services of
  Mr. Dal Brynelsen, as Executive Vice President. Total payments to 110980 Investments
  Ltd. in the period September 1, 2003, to August 31, 2004 were $67,996, all of
  which was payment for Mr. Brynelsen's services.

Item 13.     Exhibits and Reports on Form 8-K

|Exhibit No. | Title
|----------- | -----
|*           | 2.1  
|**          | 3.1  
|X           | 3.1.1
|***         | 3.2  
|            | 5.1  
|*****       | 10.1 
|****        | 10.2 
|****        | 10.3 
|****        | 10.4 
|****        | 10.7 
|******      | 10.8 
|*******     | 16.0 
|            | 21.0 
|            | 31.1 
|            | 31.2 
|            | 32.1 

* Incorporated by reference from Quarterly Report on Form 10-QSB, filed
  with the Commission on October 23, 2003

27

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|**      | Incorporated by reference from the Registration Statement
      on Form SB-2, filed with the Commission on January 18, 2001
|------- | ---------------------------------------------------------------------------------------------------------------------------
|***     | Incorporated by reference from Quarterly Report on Form 10-QSB,
      filed with the Commission on July 14, 2004           
|****    | Incorporated by reference from Quarterly Report on Form 10-QSB,
      filed with the Commission on January 20, 2004        
|*****   | Incorporated by reference from the Information Statement on
      Form 14C, filed with the Commission on November 10, 2001 
|******  | Incorporated by reference from Quarterly Report on Form 10-QSB,
      filed with the Commission on April 14, 2004          
|******* | Incorporated by reference from a Current Report on Form 8-K,
      filed with the Commission on November 14, 2003          
|X       | Incorporated by reference from a Current Report on Form 8-K,
      filed with the Commission on December 5, 2003           

(b) 	Reports on Form 8-K.

Current Report dated November 26, 2003 reporting under Item 1 a change of control of the Company.

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

The
  following table details the aggregate fees billed to the Company by Dohan &
  Company, CPAs, P.A., its independent auditors, for each of the last two
  fiscal years:

| |                    |   | 2004   |  |   | 2003  | 
| | ------------------ | - | ------ |  | - | ----- | 
| |                    |   |        |  |   |       | 
| | Audit Fees         | $ | 33,500 |  | $ | 7,250 | 
| | Audit-Related Fees |   | -0-    |  |   | -0-   | 
| | Tax Fees           |   | -0-    |  |   | -0-   | 
| | All Other Fees     |   | -0-    |  |   | -0-   | 
| |                    |   |        |  |   |       | 
| | Total              | $ | 33,500 |  | $ | -0-   | 

The
  caption "Audit Fees" includes professional services rendered for the audit of
  the annual consolidated financial statements and review of the quarterly consolidated
  financial statements.

It
  is the policy of the audit committee to pre-approve all services to be performed
  by the independent accountants. The Board of Directors has not considered whether
  the provision of the services covered by the caption "Other" in the above table
  is compatible with Dohan and Companys independence.

28

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SIGNATURES

In
  accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
  the registrant caused this report to be signed on its behalf by the undersigned,
  thereunto duly authorized.

|                              | IKONA GEAR INTERNATIONAL, INC.
|----------------------------- | ------------------------------
|                              |                               
|Date: February
      28, 2005 | By:                           
|                              |                               
|                              |                               

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

|Signature             | Title                                        | Date                   
|--------------------- | -------------------------------------------- | -----------------------
|                      |                                              |                        
|/s/ Laith I. Nosh     | President and Director                       | February
      28, 2005
|Laith I. Nosh         | (Principal Executive Officer)                |                        
|                      |                                              |                        
|/s/ Simon Anderson    | Secretary and Director                       | February
      28, 2005
|Simon Anderson        |                                              |                        
|                      |                                              |                        
|/s/ Dal Brynelsen     | Director                                     | February
      28, 2005
|Dal Brynelsen         |                                              |                        
|                      |                                              |                        
|/s/ Barrie Freeke     | Director                                     | February
      28, 2005
|Barrie Freeke         |                                              |                        
|                      |                                              |                        
|/s/ Raymond L. Polman | Chief Financial Officer and Director         | February
      28, 2005
|Raymond L. Polman     | (Principal Financial and Accounting Officer) |                        

29

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