---

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

FORM 10-KSB

(Mark One)

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

For the fiscal year ended August 31, 2005

 ̈ 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.  ̈

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

The issuers revenues for its most recent fiscal year were:
  $15,886

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 10, 2005
  was $16,613,540.

As of November 10, 2005, there were 25,559,292 shares of common
  stock issued and outstanding.

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

---



IKONA GEAR INTERNATIONAL, INC.

TABLE OF CONTENTS

|Part I                                                                                                                        | 4 
|----------------------------------------------------------------------------------------------------------------------------- | --
|                                                                                                                              |   
|                                                                                                                              |   
|Item 1. Description of Business                                                                                               | 4 
|                                                                                                                              |   
|Item 2. Description of Property                                                                                               | 10
|                                                                                                                              |   
|Item 3. Legal Proceedings                                                                                                     | 11
|                                                                                                                              |   
|                                                                                                                              |   
|Item 4. Submission of Matters to a Vote
      of Security Holders                                                             | 11
|                                                                                                                              |   
|Part II                                                                                                                       | 12
|                                                                                                                              |   
|                                                                                                                              |   
|Item 5. Market for Common Equity and Related
      Stockholder Matters                                                        | 12
|                                                                                                                              |   
|Item 6. Management's Discussion and Analysis
      or Plan of Operation                                                       | 14
|                                                                                                                              |   
|Item 7. Financial Statements                                                                                                  | 21
|                                                                                                                              |   
|Item 8. Changes In and Disagreements with
      Accountants on Accounting and Financial Disclosure                            | 22
|                                                                                                                              |   
|                                                                                                                              |   
|Item 8A Controls and Procedures                                                                                               | 22
|                                                                                                                              |   
|Part III                                                                                                                      | 23
|                                                                                                                              |   
|                                                                                                                              |   
|Item 9. Directors, Executive Officers, Promoters
      and Control Persons; Compliance with Section 16(a) of the Exchange Act | 23
|                                                                                                                              |   
|Item 10. Executive Compensation                                                                                               | 28
|                                                                                                                              |   
|Item 11. Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters                 | 32
|                                                                                                                              |   
|Item 12. Certain Relationships and Related
      Transactions                                                                 | 34
|                                                                                                                              |   
|Item 13. Exhibits and Reports on Form 8-K                                                                                     | 35
|                                                                                                                              |   
|Item 14. Audit Fees                                                                                                           | 36
|                                                                                                                              |   
|Signatures                                                                                                                    | 37

---

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 and its wholly
  owned subsidiaries, Ikona Gear USA, Inc. and Ikona Gear Corp.

3

---

PART I

Item
1.           Description of
Business

General

****We are commercializing our proprietary patented gearing technology (the
"Ikona Gearing System"). The Ikona Gearing System utilizes a proprietary, newly
designed, patented tooth shape which enables gears to be smaller, lighter,
stronger and more energy efficient than conventional planetary gears. The Ikona
Gearing Systems allows what we believe to be the highest single stage reduction
ratio, zero backlash 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 more cost effective to
manufacture.

****Our business strategy is twofold, to incorporate and license our
intellectual property into engineering solutions for industrial applications
(our own products), and to license our core intellectual property into our
clients products under their manufacture through establishing development. Our
business model is to develop and manufacture prototypes on a fee for services
basis, and to licensing commercial production for a licensing fee which is
either paid directly to us for client manufactured product, or incorporated into
the profit margin on our own manufactured products. Our plan is to develop
revenues from two sources, royalty and licensing revenue, and engineered and
manufactured solutions revenue.

****Our goal in the current operating year is also to introduce two new
products, in addition to the Satellite Base Station Pedestal and Continuous
Velocity Transmission currently under development. In our licensing division,
our goal in the current operating year is to enter into licensing agreements in
three different vertical markets (for illustration: automotive, shipping,
alternative energy, or robotics), where we will prove the virtues of our
patented gearing technology in applications that generate licensing royalties.

****We maintain our principal executive offices at 1850 Hartley Avenue,
Unit #1, Coquitlam, British Columbia, Canada, V3K 7A1. Our telephone number at
that address is (604) 523-5500. Out internet website is located at www.ikonagear.com.

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.

4

---

****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 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") and 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. Our 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,
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:



5

---

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 and quoted on the OTC Bulletin
  Board 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 Coquitlam, a suburb of the Greater Vancouver
Metropolitan Area (GVMA), 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,
        consisting of gear engineering design services, manufacture, and licensing
        of patented gearing intellectual property.
|

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.

6

---

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 from the input,
      high-speed shaft into power at the output, slow-speed shaft. A single gear
      stage is comprised of one input shaft and one output shaft. In multi-stage
      gear systems, the output shaft of one gear system will be the input shaft
      of the gear system that follows. When a high reduction ratio is required,
      such as for winches and cranes, which convert enormous torque (i.e. more
      than 30:1 gear reduction ratios), most gear systems must be designed as
      multi-stage systems to achieve the high torque required for that
      application. Every stage added to the system equates to an increase in
      cost and a decrease in gearbox efficiency (i.e. more friction, bearings
      and weight in a larger gearbox). The Ikona Gearing System is capable of a
      single stage reduction ratio of up to 5,000:1, which means higher
      efficiency and lower cost. This feature is ideal for winches and cranes
      since they typically require significant amounts of power or torque and
      therefore a high reduction ratio to lift or pull heavy objects.
|
|
|
|
|
|
|
|
|
|
|
| | * | 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.                                                                                                                                                                                                                                  
|
|
|
|
|
|
|

7

---

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 additional patents 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.

It was brought to our attention in meetings with a potential
  customer Magna Advanced Technologies in 2004 that we had omitted a filing with
  the US Patent office of all material correspondences with the European Patent
  Office during the application period for the US Patent.

We had our patent attorneys conduct an independent review in
which this assertion 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 was interpreted as similar to the Patent we filed with the European
Patent Office. As we subsequently convinced the European Patent Office 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 with the European Patent Office
to the attention of the US Patent Office. Regardless whether 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 have been advised that a resolution to this omission is
possible through requesting a re-examination of our US Patent, a process which
could take two years to complete. We were also advised that it is difficult to
forecast the outcome of a reexamination procedure if we requested one, and since
we cannot be assured that the outcome would be favorable to our company, we have
not requested one. We are uncertain as to the effect, if any, which this matter
will have on our US patent rights.

8

---

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


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.

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.

9

---

****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, 2003, 2004, and 2005, our
expenditures on research and development were $218,600, $216,329, and $581,540
respectively.

Employees and Consultants

****We presently have twelve full-time employees.

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.

10

---

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

****On June 30, 2005, we held our Annual General Meeting and submitted
  two items for the vote of security holders. Of the 25,149,292 shares authorized
  to vote, as of 3:00 PM June 30, 2005, we had received a Proxy Tabulation of
  13,214,260 votes, or 52.5% of the outstanding votes of Ikona Gear International,
  Inc. The first submission of a matter to vote was for the approval of the proposed
  Board of Directors, the second item submitted was the renewal of the auditors,
  Dohan & Company, CPA’s, P.A. to serve for another year of service.
  On item one, the votes tallied for this motion included 13,213,760 votes for,
  500 votes withheld, and zero votes against. The names of the directors elected
  at the meeting are: Simon Anderson, Barrie Freeke, Laith Nosh, Raymond Polman,
  and Nicola Simon. On item two, the votes tallied included 13,184,260 votes for
  the proposal, zero votes against, and 30,000 votes abstaining. Other than these
  two proposals there were no other matters submitted to a vote of security holders
  during the three months ended August 31, 2005.

11

---

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 StockQuarter Ended
      Low
      HighAugust 31, 2001
      n/a
      n/aNovember 30, 2001
      n/a
      n/aFebruary 28, 2002
      n/a
      n/aMay 31, 2002
      n/a
      n/aAugust 31, 2002
      0.05
      0.05November 30, 2002
      0.01
      0.05February 28, 2003
      0.01
      0.01May 31, 2003
      0.01
      0.25August 31, 2003
      0.01
      0.01November 30, 2003
      0.01
      0.60February 29, 2004
      0.60
      3.25May 31, 2004
      1.10
      2.10August 31, 2004
      0.80
      1.50November 30, 2004
      0.62
      1.55February 29, 2005
      0.45
      1.11May 31, 2005
      0.73
      0.75August 31, 2005
      0.54
      0.72


Holders

****As of November 10, 2005, we had approximately 127 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.

12

---

Recent Sales of Unregistered Securities.

1. ****In
March 2005, we sold an aggregate of 1,046,667 units at a price of $0.75 per unit
for gross proceeds of $785,000. Each unit consisted of one share of common stock
and one whole warrant, each whole warrant exercisable to purchase one share of
common stock at a price of $1.00 per share, for a period of one year, after
which each whole warrant is exercisable to purchase one share of common stock at
a price of $1.40 per share, for a further period of one year. The issuance was
to six investors that qualified as non US Persons within the meaning of Rule
902, each of whom 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 2005, we sold an aggregate of 400,000 units at a price of $0.75 per unit
for gross proceeds of $300,000. Each unit consisted of one share of common stock
and one whole warrant, each whole warrant exercisable to purchase one share of
common stock at a price of $1.00 per share, for a period of one year, after
which each whole warrant is exercisable to purchase one share of common stock at
a price of $1.40 per share, for a further period of one year. The issuance was
to one investor that qualified as non US Persons within the meaning of Rule 902,
whom acquired the securities in an offshore transaction. 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.

EQUITY COMPENSATION PLAN INFORMATION

Number of securities
      to be issued upon exercise of outstanding options,
      warrants and rights (a)
    Weighted average exercise
      price of outstanding options, warrants and rights
      (b)
    Number of securities
      remaining available for future issuances under equity
      compensation plans (excluding securities reflected in column
      (a)) (c)Equity compensation plans approved by    
       security holders
    4,400,000
    $0.93
    -0-Equity compensation plans not approved    
       by security holders(1)
    -0-
    $0.00
    -0-Total
    4,400,000
    $0.93
    -0-


(1) Includes nonqualified options granted to directors.

13

---

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

Plan of Operations

****In the next 12 months, we plan to execute a License Agreement for
royalties from Magna Advanced Technologies ("the Magna Agreement") for the use
of our technology in products in the automotive industry.

****We also plan to complete a new prototype development project with a
Tier One US Defense Contractor . We will receive US$108,000 for the design,
development and customization of a satellite antenna pedestal based on our
patented gear technology platform, process which will take 12 to 14 weeks to
complete. The new pedestal will, at the onset, be limited to government and
military tactical applications. Our agreement to license our intellectual
property also provides our client an option to either purchase additional units
from us, or have units manufactured by a third party using our design. The first
5 production units are to be available to our client at US$60,000 per unit, and
we can provide additional for prices which scale down progressively on annual
orders of 25, 50 or 100 units. At 100 units per year the agreement would result
in revenues of US$ 3 million. A five-year volume commitment, in incremental
annual amounts, totalling to 180 units over the five year term is required to
maintain licensing exclusivity in the military and tactical satellite market.

****In effort to drive immediate revenue and speed time-to-market for
commercial applications, we are selectively choosing high impact vertical
markets on which to focus in-house application development. We are developing a
revolutionary new continuously variable transmission (CVT) based on our patented
Ikona Gear Platform. Our development will enable a new generation of CVTs to be
introduced into dozens of vertical markets including: aerospace, aviation,
military equipment, oil and gas, alternative energy, and industrial
transportation. The new Ikona CVT will boast significant size and weight
reductions while improving performance and increasing efficiency, all while
providing for an infinite number of gear ratios.

****Transmissions operate over a wide range of power conditions, such as
low speed-high torque to high speed-low torque, as well as through a variety of
gear ratios. The new Ikona CVT provides manufacturers with the technology to
enjoy vast improvements including:

|* | significant size and weight reductions in power
      transmissions from existing market solutions                           
|- | -----------------------------------------------------------------------------------------------------------------------------
|* | Increased efficiency, allowing smaller engines to operate
      at broader optimum RPM ranges                                
|* | Lower fuel consumption                                                                                                       
|* | More environmentally friendly                                                                                                
|* | Scalable to high torque industrial applications.                                                                             
|* | Potential to replace expensive Variable Frequency Drives
      (VFDs) with low cost, low power electro-mechanical CVT drives
|* | Decreased development and manufacturing costs                                                                                
|* | Higher quality transmission products with increased
      durability                                                         

****We also plan to complete the manufacturing, testing and sale of gearing
solutions for industrial applications in a limited number of industries for
applications which capitalize on the high torque and low weight attributes of
the Ikona Gearing System, including:

| | * | Aerospace, aviation and military equipment;
| | - | -------------------------------------------
| | * | Oil and gas exploration technologies       
| | * | High torque industrial machinery;          

| | * | Alternative energy sources such
        as windmills;
| | - | -----------------------------------------------------
| | * | Robotics and high precision machinery;               

14

---

****To achieve these goals we will be developing a business development
team to pursue clients and manage the orders for prototypes and products in
various vertical markets. The projected budget for the next twelve months of
business development activities is $347,000. Our planned marketing activities
include spending additional funds on travel in order to meet prospective
customers and joint development partners. 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. We
anticipate our annual business development operating costs will increase from
approximately $279,000 to about $347,000 over the next twelve months.

****We will be developing a manufacturing team to manage and execute the
orders for prototypes and products in various vertical markets. The projected
budget for the next twelve months of manufacturing activities is $200,215. Our
planned manufacturing activities include spending additional funds on recruiting
and miscellaneous shop expenses in order to scale up our manufacturing
operations. We anticipate our annual manufacturing costs will increase from
approximately $0 to about $200,000 over the next twelve months.

****We will be continuing our engineering development activities while
  trying to secure joint development arrangements with gearing application providers
  who wish to incorporate the Ikona Gear design into their applications. We will
  also be trying to secure partnering relationships with gear manufacturers who
  can manufacture gears under license from Ikona Gear based on our design specifications.
  Our objective is to maintain our focus as a gear design specialist and engineering
  solution provider of patented gearing products, while delegating component fabrication
  to third parties and keeping final assembly and testing in house. The estimated
  cost of our internal development program for the next twelve months is $300,000.

****We expect to purchase engineering light manufacturing and assembly
  equipment in the next 12 months as we scale up manufacturing and associated
  CAD-CAM engineering software, hardware and tools. We anticipate that we will
  need to invest approximately $240,000 in new capital equipment for our manufacturing
  division.

****We anticipate that adding three full-time staff over the next twelve
  months in our manufacturing division otherwise staffing will continue at their
  current levels until we have successfully completed significant royalty agreements.
  We presently have twelve full time employees and we expect to increase to seventeen
  employees for the next twelve months.

****If we are successful in our marketing activities, we will likely spend
additional funds on travel in order to meet prospective customers and joint
development partners. We anticipate our annual sales and marketing operating
costs may increase from $350,000 to about $500,000 over the next twelve months.

****We have focused substantially all research and development over the
  past year on our joint development relationship with Magna. We are developing
  new business opportunities to leverage our core intellectual properties in applications
  which we will manufacture into prototypes for our potential clients. Over the
  next twelve months we will be focusing our efforts on developing new prototypes
  for potential clients and on responding to requests for proposals we anticipate
  being presented with over the next 12 months. 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, 2006.

15

---

****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 $239,000 in capital equipment, consisting of $175,000 in
  new manufacturing equipment, and $65,000 in new engineering computers and software
  and associated new furniture for our new hires (engineers and technical salespeople),
  as we add an additional five (5) employees over the next 12 months.

****In general, we anticipate that staffing levels will continue to
increase at a growth rate of approximately 40% per year. We presently have
twelve employees and we expect to grow to seventeen 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 $371,614 available at August
31, 2005. The balance of our cash requirements will need to be raised through
additional financings. We estimate that an additional $1.6 million 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, 2005
and 2004, should be read in conjunction with the financial statements and
related notes attached hereto. (See Financial Statements.)

****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.

16

---

****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.

Operating Results

Fiscal year ended August 31, 2005, compared to fiscal year
  ended August 31, 2004.

REVENUES. Revenues are generated from licensing royalties and
  the provision of engineering services. In the years ended August 31, 2005 and
  2004, we generated revenues of $15,886 and $152,782 respectively. Engineering
  services revenues in the current period relates to $5,463 in licensing royalties
  from one client Aircast Inc., compared to $1,955 in 2004. Also included in revenues
  in the current year are engineering services fees of $8,000 from Starrotor Inc.
  and $2,423 from Universal Gear. We are continuing to negotiate a Licensing Agreement
  with Magna International Inc. (Magna). Magna had a services agreement
  that committed them to provide us monthly fees of $11,175 (CAD$ 15,000) per
  month from May 1, 2003, to August 31, 2004, resulting in $140,827 in engineering
  fees in 2004 with no comparative fees for the period ended August 31, 2005.
  Under the Magna agreement, Magna was required to enter into a licensing agreement
  after testing our technology and prior to commercializing our technology. We
  have been in negotiations with Magna since September 2004 and recently, as of
  late November 2005, executives in Magna's office in Lannach, Austria, have indicated
  their intent to execute in mid December 2005, a form of the licensing agreement
  that is to our mutual satisfaction. However, as of the filing of this report
  our license agreement has not yet been executed, and we cannot provide absolute
  assurance that it will be executed on a timely basis, or in a form that meets
  our satisfaction. If the license agreement is executed, we will at that time
  make disclosures regarding the material nature and substance of the agreement.

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, 2005 and 2004, we recorded
depreciation and amortization expense of $83,067 and $27,643 respectively. The
increase in expense reflects depreciation associated with $80,127 of depreciable
equipment purchased in the current year, and $74,181 of leasehold improvements
installed in August 2004 which began depreciating in September 2004 over a three
year service life.

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 $278,476 and $223,616 respectively
for the years ended August 31, 2005 and 2004. The increase in business
development expense pertains to a combined management fee and car allowance
increase to our CEO from $5,000 to $9,650 per month, effective April 2004.

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 $115,615 and $72,688 respectively for the
years ended August 31, 2005 and 2004. The increase in corporate finance fees
expense resulted from the CFOs term of service beginning on December 1, 2004,
providing nine months of services in 2004 compared to twelve months in 2005.

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 $96,497 and $68,025
  for the years ended August 31, 2005 and 2004. The increase in general and administrative
  expense pertains to the recruitment of a receptionist/administrative assistant
  for the period from July 2004 through to May 2005.

17

---

INVESTOR RELATIONS. Our investor relations expense consists primarily
  of external consulting fees, a portion 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 $284,094 and $106,185 for the years
  ended August 31, 2005 and 2004. The increase in expense is associated public
  awareness campaigns initiated after our company became publicly traded in October
  2004. We increased spending on our European investor relations campaigns to
  $157,556 in fiscal 2005 from $49,675 in fiscal 2004. We decreased spending on
  our Canadian investor relations campaigns to $12,462 in fiscal 2005 from $50,788
  in fiscal 2004.We began a US investor awareness campaign in October 2004 and
  incurred expenses of $98,305 in fiscal 2005 compared to no US investor expenses
  in fiscal 2004. The remaining expenses in 2005 and 2004 are miscellaneous costs
  related to news releases and investor meetings and they consisted of $15,771
  in 2005 and $5,722 in 2004. Included in the August 31, 2005, expense is an amount
  of $33,042 of non-cash compensation attributed under the Black-Scholes option
  pricing model to stock options issued to one investor relations consultant in
  2005, the comparative amount for the year ended August 31, 2004, was $38,758.

PROFESSIONAL FEES. Our professional fees expense consists
primarily of external fees associated with our auditors, our securities
attorneys and our corporate contractual counsel. Professional fees expenses were
$114,914 and $140,609 for the years ended August 31, 2005 and 2004 respectively.
The decrease in expense is associated with audit and legal fees for our company
getting publicly traded as of in the year ended August 31, 2004. Included in the
professional fees for the year ended August 31, 2005 is an amount of $37,471 in
contractual legal fees related to our negotiations with Magna.

RENT. Rent relates to a three year lease agreement, and
associated operating costs, entered into effective August 1, 2004 for 7,089
square feet of combined office and light industrial assembly space, located in
Coquitlam, BC, Canada. Rent was $70,570 and $23,546 respectively for the years
ended August 31, 2005 and 2004. The increase in rent expense relates to
increased rent and operating costs our relocation for two small premises, into
much larger premises, in August 2004.

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 $581,540 and $216,329 respectively for the years ended
August 31, 2005 and 2004. The increase in research and development expense
relates the recruitment of two new employees and an external consultant early in
the current year.

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 $74,168 and $98,598
respectively for the years ended August 31, 2005 and 2004. In the prior year,
there was an increase in travel and related expense associated with joint
development partnerships with Magna, 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.

18

---

Liquidity and Capital Resources

****As at August 31, 2005, our total cash was $371,614, our working capital
  was $289,020, and our stockholders' equity was $440,201. Since inception in
  August 2001, we have incurred cumulative losses of $3,438,587. In March 2005,
  we closed a private placement of $785,000 ($730,050 net of finders fees) to
  address current operating requirements. Since our fiscal year-end we have also
  closed a private placement of $300,000 ($276,000 net of finders fees)
  in October 2005. We are continuing to actively pursue significant investments
  from a number of potential sources.

****We anticipate our total cash requirements for the next twelve months
  will be approximately $1.8 million, of which we had $370,000 available at August
  31, 2005. The balance of our cash requirements will need to be raised through
  additional financings. We estimate that an additional $1.6 million will be required
  to support our current operating needs over the next twelve 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 financings involve the sale of our equity securities, our then existing
  stockholders could be substantially diluted.

****In the year ended August 31, 2005, our operations consumed $1,402,760.
Our net loss of $1,691,204 was partially offset by depreciation and amortization
of $83,067, and by $186,145 of non-cash stock-based compensation. Our working
capital provided $15,301, for net cash consumed by operations of $1,402,760. In
the year ended August 31, 2004, our operations consumed $668,830.

****In the year ended August 31, 2005, we spent $81,475 on machinery and
  equipment (net of disposals). In the year ended August 31, 2004, we spent $169,910
  on machinery and equipment.

****In the year ended August 31, 2005, we generated $730,050 from financing
  activities, all of which was generated from the sale of equity securities. In
  the year ended August 31, 2004, we generated $1,962,313 from financing activities.

****In total, our cash and cash equivalents decreased by $754,185 to
$371,614 for the year ended August 31, 2005. Our cash and cash equivalents was
$1,125,799 as at the August 31, 2004.

****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
  more than doubled its operating cash requirements. We believe that operating
  costs will stabilize at roughly 40% more than the current levels, consistent
  with our expected increase in staffing levels, subject to financing and the
  uncertainty of raising additional capital resources through private or public
  placements, and associated financing expenses. 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.

19

---

We expect engineering service fees and eventual royalties to
  increase as we conclude testing of prototypes with existing clients (Andrew
  Corporation and StarRotor) and prospective clients. Our agreement with Andrew
  Corporation assures us of $108,000 of revenue over a 14-16 week period beginning
  in late October 2005. We also expect royalties to increase as we began to offer
  our engineering manufacturing services and light industrial assembly in October
  2005. Our agreement with Andrew Corporation allows for the first four additional
  prototypes to be sold to them at $60,000 per unit and also provides for increasing
  numbers of annual purchases and reducing prices (from 5 to 25, 50 and 100 units
  each year) to maintain exclusive rights to the patented Ikona technology new
  royalty agreements and as our joint development partners establish sales of
  their products which incorporate our gears. At 100 units per year, the Andrew
  Corporation agreement would provide a potential for $3 million in revenue per
  year. There are, however, no assurances that Andrew Corporation will place orders
  beyond the first prototype. At present we have one royalty agreement with Aircast
  Inc. for which we receive on average $1,400 of royalty per quarter. We expect
  these royalties will continue.

We have been attempting to conclude and execute a License
Agreement with Magna International Inc. for over a year, for limited exclusive
rights in the automotive industry. Although we believe this process to be
virtually complete, we have no assurances that the agreement will be executed on
terms that will be acceptable to us, or at all.

CRITICAL ACCOUNTING PRONOUNCEMENTS

In December 2004, FASB issued Statement of Financial Accounting
  Standards No. 123R, Share Based Payment (SFAS 123R).
  SFAS 123R supersedes APB 25 and its related implementation guidance by requiring
  entities to recognize the cost of employee services received in exchange for
  awards of equity instruments based on the grant-date fair value of those awards
  (with limited exceptions) and revises SFAS 123 as follows:

i. ****Public entities are required to measure liabilities incurred to employees
  in share-based payment transactions at fair value and nonpublic entities may
  elect to measure their liabilities to employees incurred in share-based payment
  transactions at their intrinsic value whereas under SFAS 123, all share-based
  payment liabilities were measured at their intrinsic value. 
  ii. ****Entities
  are required to estimate the number of instruments for which the requisite service
  is expected to be rendered as opposed to accounting for forfeitures as they
  occur. 
  iii. ****Incremental
  compensation cost for a modification of the terms or conditions of an award
  is measured by comparing the fair value of the modified award with the fair
  value of the award immediately before the modification whereas SFAS 123 required
  that the effects of a modification be measured as the difference between the
  fair value of the modified award at the date it is granted and the awards
  value immediately before the modification determined based on the shorter of
  (1) its remaining initially estimated expected life or (2) the expected life
  of the modified award.

20

---

SFAS 123R also clarifies and expands guidance in several areas,
including measuring fair value, classifying an award as equity or as a liability
and attributing compensation cost to reporting periods. SFAS 123R does not
change the accounting guidance for share-based payment transactions with parties
other than employees provided in SFAS 123 as originally issued and EITF 96-18.
SFAS 123R also does not address the accounting for employee share ownership
plans which are subject to Statement of Position 93-6, Employers Accounting
for Employee Stock Ownership Plans. Public entities (other than those filing as
small business issuers) will be required to apply SFAS 123R as of the first
annual reporting period that begins after June 15, 2005. Public entities that
file as small business issuers will be required to apply SFAS 123R in the first
annual reporting period that begins after December 15, 2005. For nonpublic
entities, SFAS 123R must be applied as of the beginning of the first annual
reporting period beginning after December 15, 2005.

In May 2005, FASB issued Statement of Financial Accounting
Standards No. 154, Accounting Changes and Error Corrections  A Replacement of
APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154) which is effective for
fiscal years ending after December 15, 2005. SFAS 154 requires that changes in
accounting policy be accounted for on a retroactive basis.

The adoption of these new pronouncements are not expected to
have a material effect on the Company's consolidated financial position or
results of operations, with the exception of SFAS 123R, which we will be
required to adopt for our fiscal year ending August 31, 2007, and which will
have a material impact on compensation expense if stock options are issued in
subsequent years.

Item
7           Financial
Statements

21

---



IKONA GEAR INTERNATIONAL, INC.(A Development Stage Company)

Consolidated Financial Statements(Expressed in United States Dollars)

August 31, 2005 and 2004



F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
  Ikona Gear International, Inc. (a Development Stage Company)
  Vancouver, British Columbia

We have audited the accompanying consolidated balance sheets
  of Ikona Gear International, Inc. (A Development Stage Company) (the Company)
  as of August 31, 2005 and 2004, and the related consolidated statements of operations,
  stockholders’ equity, and cash flows for the years then ended and for
  the period from August 16, 2001 (inception) to August 31, 2005. 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, 2005 and 2004, and the results of its operations and its cash
  flows for the years then ended and from August 16, 2001 (inception) to August
  31, 2005, 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 $3,438,587 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
  November 19, 2005



F-2

---

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

|                                                                                           |   |            |   |   |            |  
|------------------------------------------------------------------------------------------ | - | ---------- | - | - | ---------- | -
|                                                                                           |   | 2005       |   |   | 2004       |  
|                                                                                           |   |            |   |   |            |  
|ASSETS                                                                                     |   |            |   |   |            |  
|                                                                                           |   |            |   |   |            |  
|Current:                                                                                   |   |            |   |   |            |  
|Cash                                                                                       | $ | 371,614    |   | $ | 1,125,799  |  
|Accounts
      receivable                                                                  |   | 14,612     |   |   | 14,272     |  
|Prepaid expenses                                                                           |   | 17,138     |   |   | 16,822     |  
|Deferred taxes, net of
      valuation allowance of $1,169,100 (2004 - $594,100) (Note 11) |   | -          |   |   | -          |  
|                                                                                           |   |            |   |   |            |  
|Total current
      assets                                                                 |   | 403,364    |   |   | 1,156,893  |  
|                                                                                           |   |            |   |   |            |  
|Property and equipment (Note 5)                                                            |   | 151,181    |   |   | 156,704    |  
|                                                                                           |   |            |   |   |            |  
|Total assets                                                                               | $ | 554,545    |   | $ | 1,313,597  |  
|                                                                                           |   |            |   |   |            |  
|LIABILITIES ANDSTOCKHOLDERSEQUITY                                                         |   |            |   |   |            |  
|                                                                                           |   |            |   |   |            |  
|Current liabilities:                                                                       |   |            |   |   |            |  
|Accounts payable and accrued
      liabilities                                             | $ | 107,628    |   | $ | 98,226     |  
|Due to related party (Note
      6)                                                        |   | 6,716      |   |   | 161        |  
|                                                                                           |   |            |   |   |            |  
|Total current liabilities                                                                  |   | 114,344    |   |   | 98,387     |  
|                                                                                           |   |            |   |   |            |  
|Commitments (Note 14)                                                                      |   |            |   |   |            |  
|                                                                                           |   |            |   |   |            |  
|Stockholders' equity                                                                       |   |            |   |   |            |  
|Common stock (Note 7)                                                                      |   |            |   |   |            |  
|Authorized                                                                                 |   |            |   |   |            |  
|100,000,000 common shares,
      $0.00001 par value                                        |   |            |   |   |            |  
|25,149,292
      common shares (2004  24,090,325 shares) issued and outstanding           |   | 251        |   |   | 241        |  
|Additional paid-in capital                                                                 |   | 3,878,537  |   |   | 2,962,352  |  
|Accumulated deficit during
      the development stage                                     |   | (3,438,587 | ) |   | (1,747,383 | )
|                                                                                           |   |            |   |   |            |  
|Total stockholders' equity                                                                 |   | 440,201    |   |   | 1,215,210  |  
|                                                                                           |   |            |   |   |            |  
|Total liabilities and stockholders' equity                                                 | $ | 554,545    |   | $ | 1,313,597  |  

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, 2005   |   |   | 2005                  |   |   | 2004       |  
|                                                     |   |                   |   |   |                       |   |   |            |  
|REVENUES                                             |   |                   |   |   |                       |   |   |            |  
|Engineering services                                 | $ | 212,975           |   | $ | 15,886                |   | $ | 152,782    |  
|                                                     |   |                   |   |   |                       |   |   |            |  
|EXPENSES                                             |   |                   |   |   |                       |   |   |            |  
|Amortization
      and depreciation                  |   | 143,724           |   |   | 83,067                |   |   | 27,643     |  
|Business development                                 |   | 621,736           |   |   | 278,476               |   |   | 223,616    |  
|Corporate
      finance                              |   | 268,056           |   |   | 115,615               |   |   | 72,688     |  
|Foreign exchange loss                                |   | 2,085             |   |   | 2,085                 |   |   | -          |  
|General and
      administrative                     |   | 204,212           |   |   | 96,497                |   |   | 68,025     |  
|Investor relations                                   |   | 390,279           |   |   | 284,094               |   |   | 106,185    |  
|Listing and
      filing fees                        |   | 24,274            |   |   | 12,794                |   |   | 11,480     |  
|Professional fees                                    |   | 261,023           |   |   | 114,914               |   |   | 140,609    |  
|Rent                                                 |   | 107,675           |   |   | 70,570                |   |   | 23,546     |  
|Research and development                             |   | 1,256,217         |   |   | 581,540               |   |   | 216,329    |  
|Travel and related                                   |   | 198,308           |   |   | 74,168                |   |   | 98,598     |  
|                                                     |   |                   |   |   |                       |   |   |            |  
|TOTAL EXPENSES                                       |   | (3,477,589        | ) |   | (1,713,820            | ) |   | (988,719   | )
|                                                     |   |                   |   |   |                       |   |   |            |  
|OTHER INCOME/(EXPENSES)                              |   |                   |   |   |                       |   |   |            |  
|Interest income                                      |   | 13,721            |   |   | 10,661                |   |   | 3,060      |  
|Impairment
      of patents and trademark (Note 4)   |   | (183,763          | ) |   | -                     |   |   | (183,763   | )
|Loss on disposal of assets                           |   | (3,931            | ) |   | (3,931                | ) |   | -          |  
|                                                     |   |                   |   |   |                       |   |   |            |  
|TOTAL OTHER INCOME/(EXPENSES)                        |   | (173,973          | ) |   | 6,730                 |   |   | (180,703   | )
|                                                     |   |                   |   |   |                       |   |   |            |  
|Loss before income taxes                             |   | (3,438,587        | ) |   | (1,691,204            | ) |   | (1,016,640 | )
|Income taxes                                         |   | -                 |   |   | -                     |   |   | -          |  
|                                                     |   |                   |   |   |                       |   |   |            |  
|Net loss for the period                              | $ | (3,438,587        | ) | $ | (1,691,204            | ) | $ | (1,016,640 | )
|                                                     |   |                   |   |   |                       |   |   |            |  
|Basic and diluted net loss per share                 |   |                   |   | $ | (0.07                 | ) | $ | (0.05      | )
|                                                     |   |                   |   |   |                       |   |   |            |  
|Weighted average number of common shares outstanding |   |                   |   |   | 24,534,187            |   |   | 21,660,390 |  

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  |  
|Issuance of common shares for cash at $0.75
      per share |  |              |   |   |        |   |   |            |  |   |             |   |   |            |  
|(gross proceeds $785,000, net of issuance costs of          |  |              |   |   |        |   |   |            |  |   |             |   |   |            |  
|$54,950), March 2005                                        |  | 1,046,667    |   |   | 10     |   |   | 730,040    |  |   | -           |   |   | 730,050    |  
|Issuance of common shares for corporate finance fees        |  |              |   |   |        |   |   |            |  |   |             |   |   |            |  
|at $0.65 per share, April 2005                              |  | 12,300       |   |   | -      |   |   | 7,995      |  |   | -           |   |   | 7,995      |  
|Stock based compensation expense                            |  | -            |   |   | -      |   |   | 178,150    |  |   | -           |   |   | 178,150    |  
|Net loss for the year                                       |  | -            |   |   | -      |   |   | -          |  |   | (1,691,204  | ) |   | (1,691,204 | )
|Balance at August
      31, 2005                            |  | 25,149,292   |   | $ | 251    |   | $ | 3,878,537  |  | $ | (3,438,587  | ) | $ | 440,201    |  

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, |  
|                                                                  |   | 2005              |   |   | 2005                  |   |   | 2004       |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                             |   |                   |   |   |                       |   |   |            |  
|Net loss                                                          | $ | (3,438,587        | ) | $ | (1,691,204            | ) | $ | (1,016,640 | )
|Adjustments to reconcile net income to net
      cash used in     |   |                   |   |   |                       |   |   |            |  
|operating activities:                                             |   |                   |   |   |                       |   |   |            |  
|Amortization
      and depreciation                               |   | 143,724           |   |   | 83,067                |   |   | 27,643     |  
|Investor relations fees
      paid by stock options               |   | 71,800            |   |   | 33,042                |   |   | 38,758     |  
|Research
      and development fees paid by stock options         |   | 145,108           |   |   | 145,108               |   |   | -          |  
|Corporate finance fees paid
      by common stock (Note 7)        |   | 43,880            |   |   | 7,995                 |   |   | -          |  
|Impairment
      of patents and trademark                         |   | 183,763           |   |   | -                     |   |   | 183,763    |  
|Loss/(Gain) on disposal
      of assets                           |   | 3,817             |   |   | 3,931                 |   |   | (114       | )
|Change in operating assets and liabilities:                       |   |                   |   |   |                       |   |   |            |  
|Accounts receivable                                               |   | (14,612           | ) |   | (340                  | ) |   | (14,272    | )
|Prepaid
      expenses                                            |   | (17,138           | ) |   | (316                  | ) |   | (14,822    | )
|Advances to related party                                         |   | -                 |   |   | -                     |   |   | 28,467     |  
|Accounts
      payable                                            |   | 107,628           |   |   | 9,402                 |   |   | 98,226     |  
|Due to related party                                              |   | 6,716             |   |   | 6,555                 |   |   | 161        |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|Cash used in operating activities                                 |   | (2,763,901        | ) |   | (1,402,760            | ) |   | (668,830   | )
|                                                                  |   |                   |   |   |                       |   |   |            |  
|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    | )
|Issuance of common stock, net of issuance
      costs             |   | 3,353,000         |   |   | 730,050               |   |   | 1,891,023  |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|Cash provided by financing activities                             |   | 3,386,900         |   |   | 730,050               |   |   | 1,962,313  |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                              |   |                   |   |   |                       |   |   |            |  
|Property
      and equipment                                      |   | (253,320          | ) |   | (81,475               | ) |   | (171,845   | )
|Proceeds on disposal of assets                                    |   | 1,935             |   |   | -                     |   |   | 1,935      |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|Cash used in investing activities                                 |   | (251,385          | ) |   | (81,475               | ) |   | (169,910   | )
|                                                                  |   |                   |   |   |                       |   |   |            |  
|NET INCREASE (DECREASE) IN CASH                                   |   | 371,614           |   |   | (754,185              | ) |   | 1,123,573  |  
|CASH AT BEGINNING OF PERIOD                                       |   | -                 |   |   | 1,125,799             |   |   | 2,226      |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|CASH AT END OF PERIOD                                             | $ | 371,614           |   | $ | 371,614               |   | $ | 1,125,799  |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|CASH PAID FOR:                                                    |   |                   |   |   |                       |   |   |            |  
|Interest                                                          | $ | -                 |   | $ | -                     |   | $ | -          |  
|Income taxes                                                      | $ | -                 |   | $ | -                     |   | $ | -          |  
|                                                                  |   |                   |   |   |                       |   |   |            |  
|Supplemental disclosure with respect to cash
      flow (Note 10) |   |                   |   |   |                       |   |   |            |  

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, 2005 and 2004                      
|                                              

Note 1  The Company and Nature of Operations

Ikona Gear International, 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.

|                                                       |   | 2005       |   |   | 2004       |  
|------------------------------------------------------ | - | ---------- | - | - | ---------- | -
|                                                       |   |            |   |   |            |  
|Accumulated deficit during the development
      stage | $ | (3,438,587 | ) | $ | (1,747,383 | )
|Working capital                                        | $ | 289,020    |   | $ | 1,058,506  |  

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.

F-8



---



|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 3 - Significant Accounting Policies (continued)

(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) Revenue Recognition

Revenue from engineering services is recognized when the service
  has been provided and collection is reasonably assured. Revenues from royalties,
  associated with intellectual property licensing, are recognized when legal entitlement
  has been established and when collection is reasonably assured.

(f) Research and Development Expenses

Costs incurred for research and development are expensed as incurred.

(g) 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.

F-9

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 3 - Significant Accounting Policies (continued)

(g) Stock-Based Compensation (continued)

|                                                              | Cumulative    |               |              
|------------------------------------------------------------- | ------------- | ------------- | -------------
|                                                              | Amounts       |               |              
|                                                              | From          |               |              
|                                                              | Inception     |               |              
|                                                              | (August 16,   | Year          | Year         
|                                                              | 2001) to      | Ended         | Ended        
|                                                              | August 31,    | August 31,    | August 31,   
|                                                              | 2005          | 2005          | 2004         
|                                                              |               |               |              
|Net loss, as reported                                         | $ (3,438,587) | $ (1,691,204) | $ (1,016,640)
|                                                              |               |               |              
|Deduct: Total stock-based employee compensation
      expense |               |               |              
|determined under fair value based method
      for all        |               |               |              
|awards, net of related tax effects                            | (1,278,683)   | (511,102)     | (767,581)    
|                                                              |               |               |              
|Pro-forma net loss                                            | $ (4,717,270) | $ (2,202,306) | $ (1,784,221)
|                                                              |               |               |              
|Basic and diluted net loss per share, as reported             |               | $ (0.07)      | $ (0.05)     
|                                                              |               |               |              
|Basic and diluted net loss per share, pro-forma               |               | $ (0.09)      | $ (0.08)     
|                                                              |               |               |              
|Weighted average number of common shares outstanding          |               | 24,534,187    | 21,660,390   

(h) 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, 2005,
  the total number of potentially dilutive shares of common stock excluded from
  basic net loss per share was 4,793,016 (August 31, 2004  3,171,349).

(i) 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.

j) 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 $(2,085) (2004
  - $3,217) are included in the operating statement within the General and
  administrative expenses account.

F-10

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 3 - Significant Accounting Policies (continued)

(k) Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB)
  issued Statement of Financial Accounting Standards No. 153, Exchanges
  of Nonmonetary Assets  an amendment of APB Opinion No. 29 (SFAS
  153) which amends Accounting Principles Board Opinion No. 29, Accounting
  for Nonmonetary Transactions to eliminate the exception for nonmonetary
  exchanges of similar productive assets and replaces it with a general exception
  for exchanges of nonmonetary assets that do not have commercial substance. A
  nonmonetary exchange has commercial substance if the future cash flows of the
  entity are expected to change significantly as a result of the exchange. SFAS
  153 is effective for nonmonetary asset exchanges occurring in fiscal periods
  beginning after June 15, 2005.

In December 2004, FASB issued Statement of Financial Accounting
  Standards No. 123R, Share Based Payment (SFAS 123R).
  SFAS 123R supersedes APB 25 and its related implementation guidance by requiring
  entities to recognize the cost of employee services received in exchange for
  awards of equity instruments based on the grant-date fair value of those awards
  (with limited exceptions) and revises SFAS 123 as follows:

| | i.   | Public entities are required to measure liabilities
        incurred to employees in share-based payment transactions at fair value
        and nonpublic entities may elect to measure their liabilities to employees
        incurred in share-based payment transactions at their intrinsic value
        whereas under SFAS 123, all share-based payment liabilities were measured
        at their intrinsic value.                                                                                                                                                                                                                                     
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ii.  | Nonpublic entities are required to calculate fair value
        using an appropriate industry sector index for the expected volatility
        of its share price if it is not practicable to estimate the expected volatility
        of the entitys share price.                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | iii. | Entities are required to estimate the number of instruments
        for which the requisite service is expected to be rendered as opposed
        to accounting for forfeitures as they occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | iv.  | Incremental compensation cost for a modification of
        the terms or conditions of an award is measured by comparing the fair
        value of the modified award with the fair value of the award immediately
        before the modification whereas SFAS 123 required that the effects of
        a modification be measured as the difference between the fair value of
        the modified award at the date it is granted and the awards value
        immediately before the modification determined based on the shorter of
        (1) its remaining initially estimated expected life or (2) the expected
        life of the modified award.

SFAS 123R also clarifies and expands guidance in several areas,
  including measuring fair value, classifying an award as equity or as a liability
  and attributing compensation cost to reporting periods. SFAS 123R does not change
  the accounting guidance for share-based payment transactions with parties other
  than employees provided in SFAS 123 as originally issued and EITF 96-18. SFAS
  123R also does not address the accounting for employee share ownership plans
  which are subject to Statement of Position 93-6, Employers Accounting
  for Employee Stock Ownership Plans. Public entities (other than those
  filing as small business issuers) will be required to apply SFAS 123R as of
  the first annual reporting period that begins after June 15, 2005. Public entities
  that file as small business issuers will be required to apply SFAS 123R in the
  first annual reporting period that begins after December 15, 2005. For nonpublic
  entities, SFAS 123R must be applied as of the beginning of the first annual
  reporting period beginning after December 15, 2005.

In May 2005, FASB issued Statement of Financial Accounting Standards
  No. 154, Accounting Changes and Error Corrections A Replacement
  of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154)
  which is effective for fiscal years ending after December 15, 2005. SFAS 154
  requires that changes in accounting policy be accounted for on a retroactive
  basis.

The adoption of these new pronouncements are not expected to
  have a material effect on the Company's consolidated financial position or results
  of operations, with the exception of SFAS 123R which will have a material impact
  on compensation expense if stock options are issued in subsequent years.

F-11

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

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.

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.

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 wrote-down the entire value of intangible assets
  resulting in a charge of $183,763 to operations in the year-end August 31, 2004.

Note 5  Property and Equipment

|                         |   |         |  |   | August 31,   |  |   |            |  |   |         |  |   | August 31,   |  |   |            | 
|------------------------ | - | ------- |  | - | ------------ |  | - | ---------- |  | - | ------- |  | - | ------------ |  | - | ---------- | 
|                         |   |         |  |   | 2005         |  |   |            |  |   |         |  |   | 2004         |  |   |            | 
|                         |   |         |  |   |              |  |   |            |  |   |         |  |   |              |  |   |            | 
|                         |   |         |  |   | Accumulated  |  |   | Net        |  |   |         |  |   | Accumulated  |  |   | Net        | 
|                         |   | Cost    |  |   | Depreciation |  |   | Book Value |  |   | Cost    |  |   | Depreciation |  |   | Book Value | 
|                         |   |         |  |   |              |  |   |            |  |   |         |  |   |              |  |   |            | 
|Computers and Software   | $ | 50,468  |  | $ | 34,577       |  | $ | 15,891     |  | $ | 54,542  |  | $ | 10,460       |  | $ | 44,082     | 
|Furniture                |   | 29,542  |  |   | 6,980        |  |   | 22,562     |  |   | 17,184  |  |   | 1,062        |  |   | 16,122     | 
|Research and Development |   |         |  |   |              |  |   |            |  |   |         |  |   |              |  |   |            | 
|Equipment                |   | 85,096  |  |   | 19,548       |  |   | 65,548     |  |   | 23,935  |  |   | 1,616        |  |   | 22,319     | 
|Leasehold Improvements   |   | 74,181  |  |   | 27,001       |  |   | 47,180     |  |   | 74,181  |  |   | -            |  |   | 74,181     | 
|                         |   |         |  |   |              |  |   |            |  |   |         |  |   |              |  |   |            | 
|                         | $ | 239,287 |  | $ | 88,106       |  | $ | 151,181    |  | $ | 169,842 |  | $ | 13,138       |  | $ | 156,704    | 

On August 31, 2005, the Company experienced a theft of computers
  and software with a net book value of $3,931. The Company has removed computers
  and software with an historical cost of $12,029 and accumulated depreciation
  of $8,098 from its records and has recorded a loss on disposal of $3,931. The
  computers and software were insured, and subsequent to August 31, 2005, the
  Company received insurance proceeds of $18,160 and recorded an associated gain
  on recovery of $18,160.

F-12

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

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, 2005, amounts due to related party consisted
  of the following:

August
        31,
      August
        31,2005
      2004Due to Director
      $ 6,716
      $ 161


The Company entered into the following transactions with related
  parties during the year ended August 31, 2005:

|a) | Paid or accrued business development fees of $72,676
        (2004 - $55,672) to a company controlled by a relative of a director of
        the Company.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                          
|b) | Paid or accrued business development fees of $110,632
        (2004 - $71,545) to a company controlled by a director of the Company.                     
|   |                                                                                                                                                          
|c) | Paid or accrued corporate finance fees of $97,620 (2004
        - $65,188) to a company controlled by a director 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  Common 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.

F-13

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 7  Common Stock (continued)

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.

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.

In March 2005, the Company issued 1,046,667 units at a price
  of $0.75 per unit for cash proceeds of $730,050 (gross proceeds of $785,000
  net of finders fees of $54,950). Each unit consists of one share of common
  stock and 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 $1.00 per share for a period of one year, or at a price of $1.40 per share
  if exercised after one year but before March 31, 2007.

In Apri1 2005, the Company issued 12,300 shares of common stock
  for services at a price of $0.65 per share in payment of corporate finance consulting
  fees of $7,995.

In March 2005, the Company issued 50,000 warrants at a price
  of $0.75 per warrant in payment of investor relations consulting fees. These
  warrants were valued at $16,408 and will be recognized over twelve months, being
  the period of the service contract.

F-14

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

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.

|                                                           |  | August 31, 2005 |  
|---------------------------------------------------------- |  | --------------- | -
|                                                           |  |                 |  
|                                                           |  | Number of       |  
|                                                           |  | Options         |  
|Options outstanding, August 31, 2003                       |  | 1,974,000       |  
|Issued                                                     |  | -               |  
|Exercised                                                  |  | -               |  
|Expired                                                    |  | -               |  
|Options outstanding, August 31, 2004                       |  | 1,974,000       |  
|Issued                                                     |  | 650,250         |  
|Exercised                                                  |  | -               |  
|Expired                                                    |  | (150,250        | )
|Options outstanding, August 31, 2005                       |  | 2,474,000       |  
|Options exercisable,
      August 31, 2005                 |  | 2,022,737       |  
|Weighted average fair value of options granted in the year |  |                 |  

A summary of stock options outstanding at August 31, 2005, is
  as follows:

|               | Outstanding Options |             | Exercisable Options
|-------------- | ------------------- | ----------- | -------------------
|               |                     | Weighted    |                    
|               |                     | Average     | Weighted           
|               |                     | Remaining   | Average            
|               |                     | Contractual | Exercise           
|Exercise Price | Number              | Life        | Price              
|$0.50          | 40,000              | 2.38 years  | $ 0.50             
|$0.52          | 55,000              | 1.38 years  | $ 0.52             
|$0.56          | 230,000             | 5.87 years  | $ 0.56             
|$0.58          | 50,000              | 1.96 years  | $ 0.58             
|$0.60          | 341,000             | 5.34 years  | $ 0.60             
|$0.66          | 50,000              | 1.58 years  | $ 0.66             
|$0.75          | 100,000             | 5.75 years  | $ 0.75             
|$1.00          | 50,000              | 0.25 years  | $ 1.00             
|$1.10          | 1,558,000           | 4.83 years  | $ 1.10             

F-15

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 8  Stock Options and Warrants (continued)

Stock Options (continued)

The Company uses 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
      119.7 %Weighted average expected life of options
      4.69 years


A summary of stock-based compensation expenses related to non-employee
  consultants recorded as at August 31, 2005, is as follows:

|                         |   | Cumulative  |  |   |            |  |   |            | 
|------------------------ | - | ----------- |  | - | ---------- |  | - | ---------- | 
|                         |   | Amounts     |  |   |            |  |   |            | 
|                         |   | From        |  |   |            |  |   |            | 
|                         |   | Inception   |  |   |            |  |   |            | 
|                         |   | (August 16, |  |   | Year       |  |   | Year       | 
|                         |   | 2001)to     |  |   | Ended      |  |   | Ended      | 
|                         |   | August 31,  |  |   | August 31, |  |   | August 31, | 
|                         |   | 2005        |  |   | 2005       |  |   | 2004       | 
|                         |   |             |  |   |            |  |   |            | 
|Corporate finance        | $ | 43,880      |  | $ | 7,995      |  | $ | -          | 
|Research and development |   | 145,108     |  |   | 145,108    |  |   | -          | 
|Investor relations       |   | 71,800      |  |   | 33,042     |  |   | 38,758     | 
|                         |   |             |  |   |            |  |   |            | 
|                         | $ | 260,788     |  | $ | 186,145    |  | $ | 38,758     | 

Warrants

On February 28, 2005, the board of directors approved an extension
  and re-pricing of the outstanding warrants. The revised summary of warrants
  outstanding is as follows:

2006
      2007Exercise
      Exercise
      ExpiryIssuances
      Issued
      Outstanding
      Price
      Price
      DateFebruary 29, 2004
      310,332
      310,332
      $1.00
      $1.40
      February 28, 2007March 29, 2004
      677,469
      677,469
      $1.00
      $1.40
      March 29, 2007April 30, 2004
      231,215
      231,215
      $1.00
      $1.40
      April 30, 2007July 31, 2004
      3,333
      3,333
      $1.00
      $1.40
      July 31, 2007March 31, 2005
      1,046,667
      1,046,667
      $1.00
      $1.40
      March 31, 2007March 31, 2005
      50,000
      50,000
      $0.75
      $0.75
      March
        31, 2010Total outstanding
      2,319,016
      2,319,016 F-16


---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 9  Revenue

Revenues are generated from royalties and the provision of engineering
  services to Aircast Inc. (Aircast), StarRotor Corporation (StarRotor)
  and United Gear and Machine Works Ltd. (United Gear).

The Company entered into an agreement dated April 8, 2003, with
  Magna Advanced Technologies (MAT). Under phase 1 of the agreement,
  the Company assisted MAT, on a sole and exclusive basis, with its research and
  investigation of the Acquired Technology, and its appropriateness for further
  development into automotive applications. During phase I, the Company received
  a monthly engineering fee of approximately $10,750 (C$15,000). In September
  2004, the Company agreed with MAT to proceed to phase II, to pursue the commercialization
  of automotive applications, including the demonstration of application prototypes
  to Magna International Inc.s (Magnas) OEM and partner network.
  Ikona agreed to waive the requirement for Magna to pay continuing C$20,000 (US$15,400)
  monthly engineering fees.

In the original agreement between Ikona and MAT, there was a
  requirement for MAT to pay a mandatory lump sum of C$1 million (US$770,000)
  to advance to phase II commercialization investigations. In September 2004,
  Ikona agreed to waive the lump sum requirement, and to negotiate a limited exclusive
  Licensing Agreement between Ikona and Magna, with lump sums and unit royalties
  determined on an application by application basis. Since August 2004, the Company
  has received no additional revenues from Magna, although it has been actively
  negotiating the terms the Licensing Agreement. The impact of these changes is
  to make revenues from this agreement indeterminate until a Licensing Agreement
  is executed between the two parties.

Note 10  Supplemental Disclosure with Respects to Cash
  Flows

Other than those already disclosed in the statement of cash flows,
  there were no significant non-cash transactions for the year ended August 31,
  2005.

The significant non-cash transaction 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.

Note 11 - Income Taxes

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

2005
      
      
      2004Loss before income taxes
      $
      (1,691,204
      )
      $
      (1,016,640
      )Expected income tax benefit
      $
      575,000
      
      $
      345,660Unrecognized benefit
        of operating loss carryforwards
      
      (575,000
      )
      
      (345,660
      )Income tax benefit
      $
      -
      
      $
      - F-17


---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 11 - Income Taxes (Continued)

Significant components of the Companys deferred tax assets
  based on statutory tax rates are as follows:

2005
      
      
      2004Deferred tax assets:Tax effect of operating loss carryforwards
      $
      1,169,100
      
      $
      594,100Valuation allowance
      
      (1,169,100
      )
      
      (594,100
      )Net deferred tax assets
      $
      -
      
      $
      -


The Company has approximately $3,450,000 of net operating loss
  carryforwards which expire beginning in 2023.

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 and USA.

|                  |   |        |  |   | Year            |  |  |         | 
|----------------- | - | ------ |  | - | --------------- |  |  | ------- | 
|                  |   |        |  |   | Ended           |  |  |         | 
|                  |   |        |  |   | August 31, 2005 |  |  |         | 
|                  |   | U.S.A. |  |   | Canada          |  |  | Total   | 
|                  |   |        |  |   |                 |  |  |         | 
|REVENUES          | $ | 10,661 |  | $ | 15,886 $        |  |  | 26,547  | 
|                  |   |        |  |   |                 |  |  |         | 
|LONG-LIVED ASSETS | $ | -      |  | $ | 151,181 $       |  |  | 151,181 | 

Note 13  Financial Instruments

a) Fair Value

The Company's financial instruments consist of cash, accounts
  receivable, accounts payable and accrued liabilities and due to related party.
  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.

F-18

---

|IKONA GEAR INTERNATIONAL, INC.                
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in United States Dollars)          
|August 31, 2005 and 2004                      
|                                              

Note 13  Financial Instruments (continued)

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 $40,368 (C$49,623) and additional operating costs estimated at $19,951 (C$24,525)
  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

Subsequent to August 31, 2005, the Company:

| | a) | Completed a private placement of 400,000 shares of common
        stock at $0.75 per share for total proceeds of $300,000.      
| | -- | --------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                 
| | b) | Settled corporate finance fees payable with the issuance
        of 10,000 common shares at $0.55 per share.                    
| |    |                                                                                                                                 
| | c) | Approved the issuance of 450,000 stock options to employees
        to purchase common shares of the company at $0.45 per share.

F-19

---

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 as of August 31, 2005,
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.

22

---

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  | 57  | President, Chief Executive
      Officer and Director
|Dal Brynelsen  | 58  | Executive Vice President                             
|Raymond Polman | 45  | Secretary, Chief Financial
      Officer and Director
|George Stefan  | 40  | Chief Operating Officer                              
|Sasa Tesic     | 38  | Chief Engineer                                       
|Joe Vosburgh   | 37  | Director                                             
|Nicola Simon   | 37  | Director                                             

Nicola Simon and Joe Vosburgh 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
OfficerMr. 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 PresidentMr.
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.

George Stefan, Chief Operating OfficerMr. George Stefan B.Sc.(Eng), MBA, PMP has been with Ikona Gear International
  since September 2005, first in the role of Director of Manufacturing and recently
  joined the management team, as Chief Operating Officer. Stefan is an engineering,
  project management and operations management professional with more than 15
  years experience in the design, development, and management of new products
  and new operational processes with applications in the oil and gas, marine,
  heavy machinery, and boat building industries.

23

---

For the past 8 years Stefan has led development for Pacific
  Rim Engineered Products, a designer and manufacturer of mechanical power transmission
  equipment. Previously, Stefan has held various operation management positions
  with Pacific Rim Engineered Products, WestBay Sonship Yachts, Bel-Air Enterprises,
  and the Romanian Navy. Stefan has an MBA (2004), as well as Master's Degree
  in Project Management (2003) from City University in Vancouver, Canada. He also
  has a Bachelor of Science Degree in Engineering (1987), with a focus on electro-mechanical
  systems and operations management from Romania. Stefan is a registered Project
  Management Professional (PMP®), a member of the Project Management Institute,
  the Society of Project Management Professionals of Greater Vancouver, and the
  Society of Internationally Trained Engineers of British Columbia.

Sasha Tesic,Chief Engineer Mr. Sasha Tesic, B.Eng.,
has been part of Ikona Gear International executive team since October 2005, in
the role of Chief Engineer. Tesic is an engineering professional with 15 years
experience in mechanical and industrial engineering, and software development,
with applications in the oil and gas, automotive, marine, mining, dredging, and
medical industries. For the past 8 years Tesic has been employed by Pacific Rim
Engineered Products, a designer and manufacturer of mechanical power
transmission equipment. Previously, Tesic has held various engineering and
design positions with Pacific Rim Engineered Products, Cassola Management
(Canada), Spectar, and Cobra System Engineering (Yugoslavia), and has extensive
technical experience in engineering using various CAD packages, especially
Pro/Engineer. Tesic has a Bachelor of Engineering Degree in Mechanical
Engineering (1992) from Yugoslavia (Serbia and Montenegro). He is also a
published author, with articles in The Scientific Technical Review in
Yugoslavia.

Raymond L. Polman, CA, Director, Chief Financial OfficerMr. 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, a Corporate Finance consultancy in
Vancouver, Canada. 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, Rescan Consulting Inc. 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. From
1985 to 1992, Mr.Polmanwas a chartered accountant with Deloitte
where he specialized in Information Technology Consulting and Computerized Audit
Services. Mr. Polman's academic qualifications include a designation as a
(Canadian) Chartered Accountant (1990) and he holds a Bachelor of Sciences
degree in Economics from the University of Victoria (1985) in Victoria, BC,
Canada.

Nicola Simon, DirectorMs. Simon has served as one of our directors since April 2005. Ms. Simon
  joined Ikona's board after an almost 15 year career in engineering, international
  manufacturing, product development, and project management. Presently and for
  the past eight years, Ms. Simon has been employed with Ballard Power Systems,
  a global leader in fuel cell development and manufacture. In her current role
  as Platform Manager for Fuel Cell Development (Vancouver, Canada & Nabern,
  Germany), Nicola manages multimillion dollar project budgets and is responsible
  for product and process development of fuel cells intended for automotive applications.
  Nicola's past projects have led to the development and implementation of fuel
  cells for fleet vehicles, buses and stationary applications. Previously, Nicola
  held production management, project and manufacturing engineering positions
  at T&N (automotive part producer) and was a development engineer with IBM,
  France. She holds a Bachelor's Degree, First Class (Honors), in Mechanical Engineering
  from Brunel University in the United Kingdom.

24

---

Joe Vosburgh, DirectorMr. Vosburgh has served as an independent director since July, 2005. Mr.
  Vosburgh joined Ikona's board after more than 12 years experience in product
  strategy, product marketing and development, global product portfolio planning,
  and risk analysis. Presently, Mr. Vosburgh is senior product manager, strategic
  marketing, for Ballard Power Systems, a global leader in fuel cell development
  and manufacture. In this role, Joe has redefined Ballard's international product
  strategy for light-duty fuel cell products, developed global portfolio strategies,
  and spearheaded corporate-wide business realignment and product cost reduction
  projects. From 1997-2001 Mr. Vosburgh held senior level product management positions
  in marketing, business development and professional services positions with
  CREO Inc. (now owned by Kodak). From 2001 to 2002, Joe was Director, Professional
  Services with INFOWAVE SOFTWARE INC. From 2002 to 2003, he was a Product Marketing
  Director with NORSAT INTERNATIONAL INC., and from 2003 to 2004 he was Senior
  Product Manager for CHANCERY SOFTWARE INC. Mr. Vosburgh holds a Master's of
  Business Administration (MBA) in marketing and accounting from Queen's University
  (1995), and a Bachelor's Degree of Engineering from the University of Victoria
  (1993). Joe has also received certification in managing new product development
  from Kellogg Graduate School of Management (2001), and lectures on Strategic
  Marketing and Business Strategy at the University of Phoenix.

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, 2005, the Board of Directors
  held eleven meetings, including regularly scheduled and special meetings. Nosh
  and Polman attended 100% of the board meetings, Anderson attended 91% (ten),
  Brynelsen attended 82% (nine), Freeke attended 73% (eight), Simon attended 27%
  (three) and Vosburgh attended 9% (one) of the 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.

25

---

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, 2005, the Board established the
following committees:

Audit Committee

****The audit committee was composed of Simon Anderson, CA and Laith Nosh
  for the full fiscal year to August 31, 2005. Since year end, Simon Anderson
  resigned from the board on September 28, 2005, and left the audit committee
  on that date. Efforts are under way to replace Mr. Anderson with a suitable
  independent financial expert.

****Laith Nosh

****The Board of Directors has determined that Laith Nosh is 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, 2005, Simon Anderson was a
member of the audit committee who would be deemed a financial expert within the
meeting of Item 401(e)(2) of regulation SB. In the period since his resignation
from the board of directors on September 28th, and to present the
audit committee is without a member who would be deemed a financial expert. The
reason is insufficient advance notice and time to recruit a replacement director
for Mr. Anderson, someone who would fulfill the services of a financial expert.

****During
the fiscal year ended August 31, 2005, 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.

26

---

****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.

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, 2005 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, 2005, 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,

27

---

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, 2006.

****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.

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

****In 2004, our Board of Directors adopted a Code of Business Conduct
  and Ethics for all of our directors, officers and employees. The independent
  directors of our current board are reviewing the Code of Ethics and we expect
  to adopt a revised version of the Code of Ethics subsequent to fiscal year ended
  August 31, 2005, and we expect to file the revised Code of Ethics with our next
  interim financial report. 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 was previously filed as
  an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended August
  31, 2004.

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.

28

---

TABLE 1

SUMMARY COMPENSATION TABLE

|                                       |                     |            |           |                                      | Long Term
      Compensation
|-------------------------------------- | ------------------- | ---------- | --------- | ------------------------------------ | ----------------------------
|                                       | Annual
Compensation | Awards     | Payouts  
|Name and
      Principal Position      | Year                | Salary ($) | Bonus ($) | OtherAnnual
      Compen- sation ($) | RestrictedStock Award(s) ($)
|
|
|
|
|                                       |                     |            |           |                                      |                             
|Laith I. Nosh, President & CEO
      1 | 2005                | $110,632   | -0-       | 13,700                               | -0-                         
|
|
|Laith I. Nosh, President & CEO         | 2004                | $82,500    | -0-       | 8,855                                | -0-                         
|
|

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.2 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. 3 On July 13, 2005, pursuant to our 2003 Equity Incentive Plan, Mr.
  Nosh was granted 40,000 options with an exercise price of $0.65 per share pursuant
  to his services as a director and committee member. Of the options granted,
  all 40,000 shares shall be deemed vested immediately

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, 2005, to any of the named executive officers.
No options were exercised during the year ended August 31, 2005.

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.

29

---

Options are priced based on a 100% of their market value on
  the date of the grant. Options terminate ninety (90) days after services as
  a director or committee member are terminated.

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.

In a
grant on June 29, 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 29, 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 29, 2004, Mr. Anderson was granted an option to purchase 115,000
shares of common stock at a purchase price of $1.10 of which 115,000 relate to
his services as a director and vest upon issuance.

In a
grant on June 2, 2005, Ms. Simon was granted an option to purchase 100,000
shares of common stock at a purchase price of $0.75 and fully vested upon
issuance, related to her services as a director.

In a
grant on July 13, 2005, Mr. Nosh was granted an option to purchase 40,000 shares
of common stock at a purchase price of $0.56 and fully vested upon issuance,
related to his services as a director and an audit committee member.

In a
grant on July 13, 2005, Mr. Polman was granted an option to purchase 25,000
shares of common stock at a purchase price of $0.56 and fully vested upon
issuance, related to his services as a director.

In a
grant on July 13, 2005, Mr. Freeke was granted an option to purchase 25,000
shares of common stock at a purchase price of $0.56 and fully vested upon
issuance, related to his services as a director.

In a
grant on July 13, 2005, Mr. Anderson was granted an option to purchase 25,000
shares of common stock at a purchase price of $0.56 and fully vested upon
issuance, related to his services as a director.

In a
grant on July 13, 2005, Mr. Vosburgh was granted an option to purchase 100,000
shares of common stock at a purchase price of $0.56 and fully vested upon
issuance, related to his services as a director.

30

---

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 2,474,000 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 2,474,000 options of which 2,474,000
remain unexercised. The options have a weighted average exercise price of $0.93
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.

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 only to
upward review. 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 CAD$7,500 per year ($5,625). Mr. Brynelsen is also eligible to receive
  stock options.

31

---

Our
consulting agreement with Raymond L. Polman, CA, our Chief Financial Officer,
Corporate Secretary 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 $7,500 (or CAD$10,000) per month.

**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 10,
  2005, and the percentage of outstanding common stock owned as of November 10,
  2005. Each person has sole voting and investment power with respect to the shares
  shown, except as noted.

|Name and Address of Beneficial Owner                                                       | Number of Shares 
      Of Common Stock 
      Beneficially Owned(1) | Percentage of Outstanding 
      Shares Owned 
      Current (as of 11/22/2005)(2)
|------------------------------------------------------------------------------------------ | -------------------------------------------------------------------- | ----------------------------------------------------------------------------------
|
|
|
|                                                                                           |                                                                      |                                                                                   
|Laith Nosh 
      1041 Millstream Road 
      West Vancouver, BC 
      Canada V7S2C6      | 6,590,000(3)                                                         | 25.8                                                                              
|
|
|
|                                                                                           |                                                                      |                                                                                   
|Dal Brynelsen 
      5825 San Soucie Road, RR 1, S11 
      Halfmoon Bay, BC 
      Canada | 1,993,416(4)                                                         | 7.8                                                                               
|
|
|
|                                                                                           |                                                                      |                                                                                   
|Raymond Polman 
      4649 West 13thAvenue 
      Vancouver, BC 
      Canada V6R 2V6      | 366,000(5)                                                           | 1.4                                                                               
|
|
|
|                                                                                           |                                                                      |                                                                                   
|Vladimir Scekic 
      411 - 7th Avenue 
      New Westminster, BC 
      Canada, V3L 1W6  | 150,000(6)                                                           | 0.6                                                                               
|
|
|
|                                                                                           |                                                                      |                                                                                   
|George Stefan 
      840 Vedder Place 
      Port Coquitlam, BC 
      Canada, V3B 8G4     | 150,000(7)                                                           | 0.6                                                                               
|
|

32

---

|Sasha Tesic 
      307  15210 Pacific Avenue 
      White Rock, BC, 
      Canada, V4B 5L2 | 150,000(8)  | 0.6 
|------------------------------------------------------------------------------------------- | ----------- | ----
|
|
|
|                                                                                            |             |     
|Nicola Simon 
      2115 Ferndale Ave 
      Vancouver, BC 
      Canada, V5L 1Y3           | 120,000(9)  | 0.5 
|
|
|
|                                                                                            |             |     
|Joe Vosburgh 
      10766 164b Street 
      Surrey, BC V4N5J3                              | 100,000(10) | 0.4 
|
|
|                                                                                            |             |     
|All Officers and Directors as a Group 
        
      (5 persons)                           | 9,619,416   | 37.7
|
|

|(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 25,559,292
        shares of common stock outstanding on November 10, 2005. 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 6,590,000 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 590,000 shares of common stock
        that are subject to an option. Of the shares subject to an option, 477,500
        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. Mr. Brynelsen
        holds 400,000 shares of common stock that are subject to an option. Of
        the shares subject to an option, 343,750 are fully vested and could be
        purchased within 60 days from the date of this report.                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(5) | Mr. Polman is a director and our 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.                                                                                                                                                                                                                                                                                                                                                                                                                               

33

---

|     | An option to purchase up to 241,000 is subject to monthly
        vesting provisions between December 1, 2003 and December 1, 2005. An option
        to purchase 25,000 shares is fully vested and may be exercised in whole
        or in part at any time before December 1, 2010. Of the shares subject
        to an option, 366,000 are fully vested and could be purchased within 60
        days from the date of this report.                                                                                    
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(6)  | Mr. Scekic will be our Vice President of Business
      Development as at January 1, 2006. This represents a grant of shares of
      common stock that are subject to option An option to purchase up to
      150,000 shares is subject to quarterly vesting over a period of three
      years, and may be exercised in whole or in part at any time before
      November 3, 2011. Of the shares subject to an option, none are fully
      vested and could be purchased within 60 days from the date of this report.
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(7)  | Mr. Stefan is our Chief Operating Officer. This
      represents a grant of shares of common stock that are subject to option.
      An option to purchase up to 150,000 shares is subject to quarterly vesting
      over a period of three years, and may be exercised in whole or in part at
      any time before November 3, 2011. Of the shares subject to an option, none
      are fully vested and could be purchased within 60 days from the date of
      this report.                                         
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(8)  | Mr. Tesic is our Chief Engineer. This represents a grant
      of shares of common stock that are subject to option. An option to
      purchase up to 150,000 shares is subject to quarterly vesting over a
      period of three years, and may be exercised in whole or in part at any
      time before November 3, 2011. Of the shares subject to an option, none are
      fully vested and could be purchased within 60 days from the date of this
      report.                                                   
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(9)  | Ms. Simon is one of our directors. This represents 20,000
      shares of common stock that were held by her as an investment at the time
      she became a director, as well as an option to purchase 100,000 shares of
      common stock that is fully vested and may be exercised in whole or in part
      at any time before June 2, 2011. 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.                            
|
|
|
|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(10) | Mr. Vosburgh is one of our directors. This represents an
      option to purchase 100,000 shares of common stock that is fully vested and
      may be exercised in whole or in part at any time before June 2, 2011. 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.                                                                                                                                                        
|
|
|

**Item
12.**        **Certain
Relationships and Related Transactions**

Diversified Sciences Limited., a consulting firm that is 100% owned Ikona Gear
Technologies, Inc. which is in 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, 2004 to
August 31, 2005 were $110,632, all of which was payment for Mr. Nosh's
services.

Nomadic
Financial Corp., a consulting firm that is 100% owned by our Chief Financial
Officer, provides Corporate Finance services to us including the services of
Raymond L. Polman, CA as Chief Financial Officer. Total payments to Nomadic
Financial Corp. in the period September 1, 2004 to August 31, 2005 were $97,620,
all of which was payment for Mr. Polmans services.

34

---

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, 2004, to August 31, 2005 were $72,676, all of
which was payment for Mr. Brynelsen's services.

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

|(a)     | Exhibit No. | Title                                                                                                                                                                                                
|------- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |             |                                                                                                                                                                                                      
|*       | 2.1         | Agreement and Plan
        of Reorganization, dated effective as of October 10, 2003, between Oban
        Mining, Inc. and Ikona Gear International, Inc.                                           
|
|**      | 3.1         | Articles of Incorporation effective
        September 19, 2000                                                                                                                                       
|X       | 3.1.1       | Amendment to Articles of Incorporation
        effective December 1, 2003                                                                                                                            
|***     | 3.2         | Amended Bylaws effective July
        8, 2004                                                                                                                                                        
|*****   | 10.1        | 2003 Equity Incentive Plan                                                                                                                                                                           
|****    | 10.2        | Consulting Agreement dated November
        1, 2002 with Laith I. Nosh                                                                                                                               
|****    | 10.3        | Consulting Agreement dated March
        1, 2003 with 110980 Investments Ltd.                                                                                                                        
|****    | 10.4        | Consulting Agreement dated December
        1, 2004 with Raymond L. Polman                                                                                                                           
|****    | 10.7        | Magna Advanced Technologies
        Letter Agreement dated April 8, 2003, and amendment dated April 30, 2004                                                                                         
|
|******  | 10.8        | Aircast Letter Agreement dated
        April 8, 2003, and amendment dated April 30, 2004                                                                                                             
|******* | 16.0        | Letter on change in certifying
        accountant                                                                                                                                                    
|******  | 21.0        | List of Subsidiaries                                                                                                                                                                                 
|        | 31.1        | Certification
        of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002                                                                                   
|        | 31.2        | Certification of Chief Financial
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                             
|        | 32.1        | Certification
        of Chief Executive Officer and Chief Financial Officer pursuant to 18
        U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002

|*       | Incorporated by reference from
      Quarterly Report on Form 10-QSB, filed with the Commission on October 23,
      2003        
|------- | ---------------------------------------------------------------------------------------------------------------------------------
|
|**      | 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 on Form 8-K dated July 14, 2005: Item 5.02: Election
  of Director; Item 3.02: Unregistered Sale of Equity Securities.

Current Report on Form 8-K dated August 17, 2005: Item 5.02: Departure of Directors
  or Principal Officers.

Current Report on Form 8-K dated September 28, 2005: Item 5.02: Departure of
  Directors or Principal Officers.

35

---

**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:

2005
      2004Audit Fees
      $ 28,900
      $ 33,500Audit-Related Fees
      2,090
      -0-Tax Fees
      -0-
      -0-All Other Fees
      -0-
      -0-Total
      $ 30,990
      $ 33,500


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.

36

---

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: November 29, 2005 | By:/s/ Laith I. Nosh          
|                        | Laith I. Nosh, President      

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                       | November 29, 2005
|Laith I. Nosh             | (Principal Executive Officer)                |                  
|                          |                                              |                  
|/s/ Raymond L. Polman, CA | Chief Financial Officer and Director, and    | November 29, 2005
|Raymond L. Polman         | Corporate Secretary                          |                  
|                          | (Principal Financial and Accounting Officer) |                  
|                          |                                              |                  
|/s/ Nicola Simon          | Director                                     | November 29, 2005
|Nicola Simon              |                                              |                  
|                          |                                              |                  
|/s/ Joe Vosburgh          | Director                                     | November 29, 2005
|Joe Vosburgh              |                                              |                  

37

---