Mail Stop 0510
February 11, 2005
Via U.S. mail and facsimile
Laith I. Nosh, President and Chief Executive Officer
Ikona Gear International, Inc.
1850 Hartely Avenue, Unit #1
Coquitlam, British Columbia, Canada V3K 7A1
RE: Form 10-KSB for the fiscal year ended August 31, 2004
Form 10-QSB for the period ended November 30, 2004
File No. 0-49664
Dear Mr. Nosh:
We have reviewed these filings and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-KSB FOR THE YEAR ENDED AUGUST 31, 2004
Comment applicable to your overall filing
1. Where a comment below requests additional disclosures or other
revisions to be made, please show us in your supplemental response
what the revisions will look like. With the exception of the
comments below that specifically request an amendment, all other
revisions may be included in your future filings.
Item 1. Description of Business
General, page 4
2. You have disclosed that your goal is to enter into licensing
agreements in three different vertical markets. Please expand
your
disclosure to describe what you refer to as vertical markets. In
addition, please disclose how differences in these markets could
have
an effect on the licensing agreements entered into and any
significant effect it may have on revenues.
3. Please expand your disclosure to include the sources and
availability of raw materials necessary in the manufacturing of
your
product. Please also include the names of any principal
suppliers.
Refer to Item 101(b)(5) of Regulation S-B.
Item 5. Market for Common Equity and Related Stockholder Matters
Recent Sales of Unregistered Securities, page 11
4. The information you have disclosed regarding your January 2004
private placement indicates shares totaling 290,000 were sold at
$0.50 per share. The trading highs and lows for your stock on the
OTC Bulletin Board for January 2004 ranged from $1.10 to $3.25.
You
have further disclosed between February and April 2004, you
completed
private placements, where 2,438,206 shares were sold at $0.75 per
share. The trading highs and lows for your stock on the OTC
Bulletin
Board for this period ranged from $1.45 to $2.30. Please expand
your
disclosure to describe the accounting treatment used to record
these
transactions. Please include the amounts, if any, charged to
compensation expense and where these charges were recorded in the
financial statements. Please also include this information in
Note
7.
Item 6. Management`s Discussion and Analysis or Plan of
Operations
Plan of Operations, page 12
5. Your disclosure indicates that you will be "developing and
refining joint venture and licensing agreements." Please confirm
to
us that you currently do not have any joint venture agreements.
If
joint ventures do exist at August 31, 2004, please expand your
disclosure here and in the footnotes to the financial statements
to
disclose the nature of the agreements and describe the accounting
treatment used relating to the joint venture transactions.
Item 7. Financial Statements
Report of Independent Registered Public Accounting Firm, page F-2
6. The audit opinion included in your Form 10-KSB for the year
ended
August 31, 2004 does not include your auditor`s opinion on the
cumulative since inception period for your statements of
operations,
statement of stockholders` equity (deficiency), and statements of
cash flows. Please obtain an audit opinion from your auditors,
which
also includes their opinion on the aforementioned financial
statements. In doing so, please file an amended Form 10-KSB.
Note 3 - Significant Accounting Policies
(b) Property and Equipment, page F-9
7. Please expand your disclosure to include the useful lives for
each
of the fixed assets categories you have disclosed in Note 5.
(f) Revenue Recognition, page F-9
8. Please expand your revenue recognition disclosure to include
how
you recognize revenue in accordance with SAB 104.
(k) Foreign Currency Translation, page F-11
9. Please revise your disclosure or state separately on the
consolidated statements of operations the transaction gain or loss
for each period presented. Refer to paragraph 30 of SFAS 52.
Note 8 - Stock Options and Warrants
Stock Options, page F-14
10. You have disclosed you recorded $38,758 relating to the fair
value of options granted to a consultant during the year ended
August
31, 2004. Please expand your disclosure to include the date of
the
grant, the number of options granted and the exercise price of the
options.
Note 15 - Subsequent Events, page F-17
11. Did the execution of the contract with Magna Advanced
Technologies, which waived the monthly engineering fees and the
mandatory lump sum advance royalty, have an impact on the revenue
recorded in the years ended August 31, 2004 and 2003? If so,
please
describe to us in detail how. Please also discuss this in your
MD&A.
Item 8A. Controls and Procedures, page 17
12. Your disclosure controls and procedures should have been
evaluated as of the end of the period as opposed to within 90 days
of
the filing being made. Please amend your disclosure to disclose
the
effectiveness of your disclosure controls and procedures as of the
end of the period. See Item 307 of Regulation S-B.
Item 10. Executive Compensation, page 22
13. Please expand your disclosure to include information relating
to
Option/SAR grants made during the fiscal year. Refer to Item
402(c)
of Regulation S-B.
FORM 10-QSB FOR THE PERIOD ENDED NOVEMBER 30, 2004
Comments applicable to your overall filing
14. Please address the comments above in your interim Forms 10-Q
as
well.
15. Your Form 10-KSB for the year ended August 31, 2004 includes
disclosure relating to material correspondences with the European
Patent Office that were not disclosed to the U.S. Patent Office
during the application period for your US Patent. Please expand
your
disclosures to provide an update on the status of this oversight
and
any changes to your outlook.
16. You have disclosed on page 12 of Form 10-KSB for the year
ended
August 31, 2004 certain objectives, including developing and
refining
joint venture and licensing agreements for existing and potential
customers and developing alliances with gear manufacturers.
Please
expand your disclosure to include an update on the status of these
objectives and changes in your outlook on these objectives.
* * * *
Please respond to these comments within 10 business days, or
tell us when you will provide us with a response. Please provide
us
with a supplemental response letter that keys your responses to
our
comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct
them to Meagan Caldwell, Staff Accountant, at (202) 824-5578 or,
in
her absence, to the undersigned at (202) 942-1774.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Laith I. Nosh
February 11, 2005
Page 1 of 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE