UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                   ------------------------------------------

                                   FORM 10-QSB


|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended September 30, 2002

                                       OR

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For    the     transition     period    from     ___________________     to
     ______________________.

                        Commission file number 000-26165


                            IQ POWER TECHNOLOGY INC.
        (Exact name of small business issuer as specified in its charter)


               CANADA                                  NOT APPLICABLE
   (Jurisdiction of incorporation)          (I.R.S. Employer Identification No.)

                                  Erlenhof Park
                              Inselkammer Strasse 4
                          D-82008 Unterhaching, Germany
                    (Address of principal executive offices)


                               + 49 89 614 483 10
                           (Issuer's telephone number)

                                 Not Applicable

(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

     Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 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
          ----     ----

     The  number  of  outstanding  common  shares,  without  par  value,  of the
registrant at November 1, 2002 was 18,775,374.

     Transitional  Small Business  Disclosure Format (check one): Yes  ; No  X
                                                                     ---   -----


                                       1
<PAGE>


Item 1. Financial Statements


                                       2
<PAGE>


<TABLE>
iQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Balance Sheets
(Expressed in United States Dollars; all amounts in thousands,  except per share
data)
(Unaudited)
--------------------------------------------------------------------------------
                                                September 30,      December 31,
                                                         2002              2001
--------------------------------------------------------------------------------
    ASSETS
      <S>                                                 <C>               <C>
      Current Assets
        Cash and cash equivalents                         258               451
        Receivable from original shareholders              76                78
        Other receivables                                 122               129
        Prepaids and deposits                             260               160
        Other current assets                              132                83
      --------------------------------------------------------------------------
      Total current assets                                848               901

      Non-current Assets
        Equipment, net                                    448               459
      --------------------------------------------------------------------------
      Total non-current assets                            448               459

    TOTAL ASSETS                                        1,296             1,360
    ----------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

      LIABILITIES
        Current liabilities
          Bank overdraft                                   59                 -
          Accounts payable                                384               430
          Accrued payroll and employees benefits           39               101
          Advances                                          4                 -
          Accrued liabilities                             203               225
                                                                            263
        ------------------------------------------------------------------------
        Total current liabilities                         689               756

        Total non-current liabilities                       -                 -
      --------------------------------------------------------------------------
      TOTAL LIABILITIES                                   689               756

      SHAREHOLDERS' EQUITY
        Authorized:
          An unlimited number of common shares
            of no par value
        Issued and outstanding:
             15,952,124 common shares at
                December 31, 2001
             18,733,474 common shares at
                September 30, 2002                     10,041             8,574
        Capital surplus/Additional paid-in              1,571             1,850
        Accumulated other comprehensive
         (loss) income                                   (235)               26
        Accumulated deficit, during
         development stage (after loss
         allocation to silent partners)               (10,770)           (9,846)

      --------------------------------------------------------------------------
      TOTAL SHAREHOLDERS' EQUITY                          607               604

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          1,296             1,360
    ----------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>


<TABLE>
iQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statements of Shareholders' Equity (Deficit)
(Expressed in United States dollars;  all amounts in thousands  except per share
data)
(Unaudited)
---------------------------------------------------------------------------------------------------------------------
                                                        Accumulated   Accumulated                       Total
                                    Common shares       Additional    Other                             Shareholders'
                                   -----------------    Paid-In       Comprehensive     Accumulated     Equity
                                    Shares   Amount     Capital       Income (Loss)     Deficit         (Deficit)
                                   --------- -------  -------------- ---------------- --------------- ---------------

<S>                                    <C>   <C>        <C>           <C>               <C>             <C>
Balance at December 31, 1991           40    $   60     $     -       $          -      $       (1)     $    59
Issue of shares                                                                                               -
Net loss                                                                                        (9)          (9)
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992           40        60           -                  -             (10)          50
Issue of shares                                                                                               -
Net loss                                                                                        (7)          (7)
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993           40        60           -                  -             (17)          43
Issue of shares                                                                                               -
Net loss                                                                                      (193)        (193)
Allocation of loss to
  atypical shares                                                                               37           37
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994           40        60           -                  -            (173)        (113)
Issue of shares                                                                                               -
Net loss                                                                                      (341)        (341)
Allocation of loss to
  atypical shares                                                                              379          379
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995           40        60           -                  -            (135)         (75)
Issue of shares                                                                                               -
Net loss                                                                                      (496)        (496)
Allocation of loss to
  atypical shares                                                                              139          139
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996           40        60           -                  -            (492)        (432)
Issue of shares                                                                                               -
Net loss                                                                                      (597)        (597)
Allocation of loss to
  atypical shares                                                                              312          312
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997           40        60           -                  -            (777)        (717)
Issue of shares                                                                                               -
Net loss                                                                                    (1,027)      (1,027)
Allocation of loss to
  atypical shares                                                                              228          228
Other comprehensive (loss)                                                                                    -
  foreign currency translation
  adjustments                                                                  (94)                         (94)
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998           40         60          -                (94)         (1,576)      (1,610)
Reorganization of capital on
  reverse acquisition           5,119,960
Deemed issuance of shares on
  acquisition of iQ Power
  Technology Inc.               4,471,770      5,495                                                     5,495
Stock based compensation                                    396                                            396
Exercise of warrants              139,850        349                                                       349
Net loss                                                                                    (2,157)     (2,157)
Other comprehensive (loss)
  foreign currency translation
  adjustments                                                                  176                         176
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999    9,731,620      5,904        396                 82          (3,733)      2,649
Net loss                                -          -          -                  -          (2,359)     (2,359)
Other comprehensive (loss)
  foreign currency translation
  adjustments                           -          -          -                (98)              -         (98)
Exercise of options                15,000         37          -                  -               -          37
Stock based compensation                -          -         10                  -               -          10
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000    9,746,620      5,941        406                (16)         (6,092)        239
Net loss                                -          -          -                  -          (3,754)     (3,754)
Other comprehensive (loss)
  foreign currency translation
  adjustments                           -          -          -                 42               -          42
Issue of shares                 5,203,004      2,132          -                  -               -       2,132
Stock based compensation                       1,444                                                     1,444
Exercise of options              1,002,500       501          -                  -               -         501
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001    15,952,124   $ 8,574    $ 1,850       $         26      $   (9,846)     $  604
Net loss                                  -        -          -                  -            (924)       (924)
Other comprehensive (loss)
  foreign currency translation
  adjustments                             -        -                          (261)              -        (261)
Issue of shares                   2,761,350    1,457          -                  -               -       1,457
Stock based compensation                                   (279)                                          (279)
Exercise of options                  20,000       10          -                  -               -          10
---------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2002    18,733,474  $10,041    $ 1,571       $       (235)     $  (10,770)     $  607
---------------------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

<TABLE>
iQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)
(Expressed in United States Dollars; all amounts in thousands,  except per share
data)
(Unaudited)
----------------------------------------------------------------------------------------------------------------------
                                                     Cumulative from
                                                     date of inception     Three months ended        Nine months ended
                                                     to September 30,        September 30,             September 30,
                                                           2002            2002          2001        2002         2001
   ------------------------------------------------------------------  ------------------------- ---------------------
   SALES AND OTHER REVENUE                                     182           -             -           -            -
   ------------------------------------------------------------------  ------------------------- ---------------------
   EXPENSES
     Research and development expenses
   <S>                                                       <C>           <C>           <C>         <C>          <C>
       Personnel                                             2,930         144           115         439          442
       Laboratory                                            1,435          71            80         197          215
       Office                                                  582          11            14          40           46
       Consulting services                                     626           -             -          25            1
       Professional fees                                       857           -            11          36           37
     ----------------------------------------------------------------  ------------------------- ---------------------
     Total Research & Development expenses                   6,430         226           220         737          741

     Marketing and general & administrative expenses
       Personnel                                               736          47            40         134          123
       Financing                                               279           1             5           3            6
       Office & Travel                                         546          17            67          67          113
       Consulting services                                     518          44            16          92           71
       Professional fees                                       731          39            64         165          186
       Management fees                                         234          18            18          54           54
       Marketing activities                                    300          21            48          82           59
       Investor relations                                      762          18           113         143          230
       Research memberships                                    100           -             -           -            -
       Other                                                   187           2            11           6           16
     ----------------------------------------------------------------  ------------------------- ---------------------
     Total Marketing and G&A expenses                        4,393         207           382         746          858

     Stock based compensation                                1,543        (170)         (702)       (279)       1,627
     ----------------------------------------------------------------  ------------------------- ---------------------
     TOTAL OPERATING EXPENSES                               12,366         263          (100)      1,204        3,226

     Interest expense                                          173           -             8           1           32
   ------------------------------------------------------------------  ------------------------- ---------------------
   TOTAL EXPENSES                                           12,539         263           (92)      1,205        3,258

     Interest and other income                                (143)          -            (1)         (1)          (2)
     (Gain)/loss on foreign exchange                          (419)         27          (115)       (280)         (25)

   INCOME/(LOSS) BEFORE INCOME TAX                         (11,795)       (290)          208        (924)      (3,231)

     Income tax                                                  -           -             -           -            -

   NET INCOME/(LOSS)                                       (11,795)       (290)          208        (924)      (3,231)
   ------------------------------------------------------------------  ------------------------- ----------------------
      Other comprehensive income (loss)                       (235)         25           (95)       (261)          (5)

   COMPREHENSIVE INCOME/(LOSS)                             (12,030)       (265)          113      (1,185)      (3,236)
   ------------------------------------------------------------------  ------------------------- ----------------------
   Basic and diluted loss per share, on net loss                (1)      (0.02)         0.01       (0.05)       (0.28)

   Basic and diluted weighted average
     number of shares outstanding                        7,880,883  18,733,474    14,062,329  17,749,432   11,573,402
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>


<TABLE>
iQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statements of Cash Flows
(Expressed in United States dollars; all amounts in thousands)
(Unaudited)
--------------------------------------------------------------------------------------------------------
                                                       Cumulative from     Nine months    Nine months
                                                      date of inception       ended          ended
                                                       to September 30,   September 30,   September 30,
                                                             2002             2002           2001
------------------------------------------------------------------------ --------------  ---------------
    OPERATING ACTIVITIES
    <S>                                                    <C>                <C>           <C>
    Net loss                                               (11,795)           (924)         (3,231)
    Items not affecting cash
      Depreciation and amortization                            356              79              68
      Stock based compensation                               1,543            (279)          1,627
    Changes in non-cash working capital
      (Increase) decrease in other receivable                 (128)             23              (3)
      (Increase) decrease in prepaids and deposits            (260)           (100)             26
      Increase (decrease) in accounts payable                  358             (81)            152
      Increase (decrease) in accrued liabilities               239             (98)            (85)
      (Increase) decrease in other assets                     (122)            (38)            (83)
    -------------------------------------------------------------------- --------------  ---------------
                                                            (9,809)         (1,418)         (1,529)

    INVESTING ACTIVITY
      Additions to property, plant and equipment              (793)            (39)            (47)
    -------------------------------------------------------------------- --------------  ---------------
    FINANCING ACTIVITIES
      Increase of bank overdraft                                55              55               -
      Increase (decrease) in due to shareholder                138               -              54
      Advances received from external parties                  300               4               -
      Cash acquired on business combination                  4,718               -               -
      Advances from subsidiary                                 581               -               -
      Issue of capital stock                                 4,347           1,467           1,705
      Issuance of atypical shares                            1,025               -               -
    -------------------------------------------------------------------- --------------  ---------------
                                                            11,164           1,526           1,759

    (DECREASE) INCREASE IN CASH AND
      CASH EQUIVALENTS                                         562              69             183

    EFFECT OF FOREIGN EXCHANGE MOVEMENT                       (304)           (262)             (4)

    CASH AND CASH EQUIVALENTS,
      BEGINNING OF PERIOD                                        -             451             183
------------------------------------------------------------------------ --------------  ---------------
    CASH AND CASH EQUIVALENTS,
      END OF PERIOD                                            258             258             362
------------------------------------------------------------------------ --------------  ---------------
</TABLE>
          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>


1.   NATURE OF OPERATIONS

     iQ Power  Technology  Inc. ("iQ Power") was  incorporated  under the Canada
     Business  Corporations Act on September 20, 1994.  Effective June 17, 1999,
     iQ Power  completed  a  business  combination  with iQ  Battery  Research &
     Development  GmbH  ("iQ  Battery").   The  business  combination  has  been
     accounted for as a reverse  acquisition with iQ Battery being identified as
     the acquirer. Although iQ Battery is deemed to be the acquiring corporation
     for financial  accounting  and reporting  purposes,  the legal status of iQ
     Power as the surviving  corporation does not change.  Herein after iQ Power
     and its subsidiary are referred to as "the Company".

     iQ  Battery,  established  in 1991,  is  conducting  research  and  product
     development  in  the  area  of  intelligent   performance-improved  battery
     systems.  The Company's  first product is an  intelligent  car battery,  in
     which  electronics,  microprocessors  and software  manage the energy.  The
     know-how is based on a patent acquired from the founding shareholders of iQ
     Battery.

     Patents have been granted for Germany,  thirteen other European  countries,
     and for the United States of America.  International  patents  applications
     have been filed in nine additional  countries.  iQ Battery's legal domicile
     is  Chemnitz,  Germany,  and it  maintains  a  branch  near  Munich,  where
     management has its offices.  The Company  intends to grant licenses for its
     technologies to the automotive and related industries in the future.

2.   CONTINUING OPERATIONS

     These  financial  statements  have been prepared on a going concern  basis,
     which  contemplates  the  realization  of assets  and the  satisfaction  of
     liabilities  in the normal  course of  business.  The Company has  incurred
     cumulative losses since inception and as of September 30, 2002, the Company
     has a positive working capital position.  The Company's ability to continue
     as a going  concern is dependent  upon the ability of the Company to attain
     future profitable  operations  and/or to obtain the necessary  financing to
     meet its obligations and repay its liabilities arising from normal business
     operations  when they become due. The  financial  statements do not include
     any   adjustments   to  reflect  the   possible   future   effects  on  the
     recoverability   and   classification   of  assets  or  the   amounts   and
     classification  of  liabilities  that may result  from the  outcome of this
     uncertainty.

In   1999, the Company raised approximately  $4,875,000,  net of commissions and
     costs of issue,  through the issuance of  2,200,000  shares of common stock
     pursuant to a Registration Statement on Form SB-1. In May 2001, the Company
     completed a private placement of 3,000,000 common shares at $0.25 per share
     for proceeds of $750,000. In September 2001, a private placement of 333,333
     common  shares  at $0.75  per  share  for  proceeds  of  $250,000  was also
     completed.  In the fourth quarter of 2001,  the Company  raised  additional
     funds  through the private  placement of 1,019,344  units of the Company at
     US$0.70 per unit for proceeds of $713,541, with each unit consisting of one
     common share of the Company and one  non-transferable  warrant  exercisable
     for a period of six months  following  closing and  entitling the holder to
     purchase one additional common share of the Company for US$1.00. In January
     2002, the Company raised an additional  $617,500 in equity capital  through
     the private  placement of 950,000 units of the Company at US$0.65 per unit,


                                       7
<PAGE>


2.   CONTINUING OPERATIONS (Continued)

     each  such unit  consisting  of one  common  share of the  Company  and one
     non-transferable   warrant  exercisable  for  a  period  of  twelve  months
     following  closing  and  entitling  the holder to purchase  one  additional
     common share of the Company for  US$0.85.  The  subscribers  to the private
     placements were non-U.S.  persons outside the United States of America.  In
     June 2002,  the Company  raised an  additional  $750,000 in equity  capital
     through the private  placement of 1,500,000 units of the Company at US$0.50
     per unit,  each such unit consisting of one common share of the Company and
     one  non-transferable  warrant  exercisable  for a period of twelve  months
     following  closing  and  entitling  the holder to purchase  one  additional
     common share of the Company for  US$0.65.  The  subscribers  to the private
     placements were non-U.S. persons outside the United States of America.

     The Company has used the proceeds to fund  research and  development  of iQ
     Battery's  technology,  expansion  of the  Company's  marketing  and  sales
     activities and general working  capital.  Additional funds are necessary to
     allow the Company to complete its product  development  and marketing plan.
     Additional  financing  will be required and there is no assurance  that the
     Company will be able to secure additional  financing or that such financing
     will be on terms beneficial to the existing shareholders.

     The Company has signed  agreements to jointly develop its applications with
     large  corporations.  Such  alliances  involve the  utilization  of certain
     aspects of the Company's technology.  The ability of the Company to succeed
     in these  alliances  is  dependent  upon the  Company's  ability  to obtain
     additional  financing.  The  Company has been active in its search for such
     financing.  Management believes that the Company will be able to obtain the
     necessary financing.

     As of  September  30,  2002,  the  Company's  current  financial  condition
     requires  the  infusion  of  additional  capital in order to  continue  its
     current  operations.  If the  Company  is unable to obtain  the  additional
     financing,  the  Company  will  be  unable  to  meet  all of its  financial
     obligations.  There is no assurance that the Company will be able to secure
     additional  financing or that such financing will be on terms beneficial to
     the existing shareholders.

3.   BASIS OF PRESENTATION

     The  unaudited  financial  statements  included  herein have been  prepared
     pursuant  to the rules  and  regulations  of the  Securities  and  Exchange
     Commission  for reporting on Form 10-Q.  Certain  information  and footnote
     disclosures   normally  included  in  financial   statements   prepared  in
     accordance  with  accounting  principles  generally  accepted in the United
     States of America have been condensed or omitted pursuant to such rules and
     regulations.  The  statements  should  be  read  in  conjunction  with  the
     accounting policies and notes to consolidated financial statements included
     in the Company's 2001 Annual Report on Form 10-K.

     In  the  opinion  of  management,  the  financial  statements  reflect  all
     adjustments  necessary  for a fair  statement  of the  operations  for  the
     interim periods presented.


                                       8
<PAGE>


4.   SHARE CAPITAL

<TABLE>
     Authorized
     An unlimited number of common shares
     Issued and outstanding

                                                    Number of
                                                Common shares     Amount ($ 000)
                                                -------------     --------------
     <S>                                            <C>                   <C>
     Balance, January 1, 1998 (iQ Power)              787,896               493
     Private placement, issued cash                 1,483,874               927
     ---------------------------------------------------------------------------
     Balance, December 31, 1998                     2,271,770             1,420

     Shares issued for cash                         2,200,000             5,500
     Issue costs                                            -              (653)
     ---------------------------------------------------------------------------
     Balance, June 17, 1999                         4,471,770             6,267
     Adjustment for
     reverse acquisition on June 17, 1999                   -            (6,207)
     ---------------------------------------------------------------------------
                                                    4,471,770                60

     Issued to effect the reverse acquisition       5,120,000             5,495
     Warrants exercised during the year               139,850               349
     ---------------------------------------------------------------------------
     Balance, December 31, 1999                     9,731,620             5,904

     Options exercised during the year                 15,000                37
     ---------------------------------------------------------------------------
     Balance, December 31, 2000                     9,746,620             5,941

     Private placement, issued for cash             4,352,677             1,714
     Other shares issued                              850,327               419
     Options exercised during the year              1,002,500               501
     ---------------------------------------------------------------------------
     Balance, December 31, 2001                    15,952,124             8,574

     Private placement, issued for cash             2,653,000             1,367
     Other shares issued                              108,350                90
     Options exercised during the year                 20,000                10
     ---------------------------------------------------------------------------
     Balance, September 30, 2002                   18,733,474            10,041
</TABLE>


     On April 10, 2000,  the  company's  board of directors  declared a 2.5 to 1
     reverse  stock  split of the  company's  common  stock.  In  addition,  the
     authorized  shares of common stock issued and  outstanding  were  decreased
     from  24,366,550 to 9,746,620  shares.  All references in the  consolidated
     financial statements to shares and related prices,  weighted average number
     of shares,  per share  amounts,  and stock plan data have been  adjusted to
     reflect the reverse split.

     (a) Stock options

          The  Company  has  established  a Stock  Option  Plan  for  employees,
          officers,  directors,  consultants,  and  advisors.  The  Company  has
          reserved  4,714,000  common shares for issuance under the Stock Option
          Plan.  Thereof  30,000  options were granted in the first quarter 2002
          with an exercise price of $1.00. In the second quarter of 2002, 20,000
          shares were issued on the exercise of stock options  granted under the
          stock option plan.  During the third  quarter of 2002,  no shares have
          been issued on the exercise of stock  options  granted under the stock
          option plan.  Options granted for issuance under the Stock Option Plan
          generally  are not  transferable,  and the  exercise  price  of  stock
          options must be at least equal to 100% of the fair market value of the
          common shares on the date of the grant.


                                       9
<PAGE>


4.   SHARE CAPITAL (Continued)

          The Stock Option Plan may be administered by the Board of Directors or
          a committee of the Board (the "Committee").  The Board of Directors or
          the  Committee,  as the case may be,  has the power to  determine  the
          terms of any options granted thereunder, including the exercise price,
          the number of shares  subject to the  option,  and the  exercisability
          thereof.  The term of an option  granted under the Plan may not exceed
          ten years.  The specific  terms of each option grant shall be approved
          by the Board of Directors or the Committee.

          SFAS No. 123,  issued in October  1995,  requires  the use of the fair
          value based method of accounting for stock options. Under this method,
          compensation  cost is  measured at the grant date as the fair value of
          the options granted and is recognised over the exercise period. During
          the years ended December 31, 2001 and 2000, the Company issued options
          to individuals other than employees and directors which under SFAS No.
          123 are recognised as share-based  compensation.  If all services have
          been rendered by the date of grant,  the fair value of the options are
          recognized  as  compensation  expense as of that date.  SFAS No.  123,
          however,  allows the Company to  continue to measure the  compensation
          cost of employee and director related stock options in accordance with
          APB  25.  The  Company  has  therefore  adopted  the   disclosure-only
          provision of SFAS No. 123.

          On June 12, 2000, the Board of Directors  decreased the exercise price
          for the Stock Option Plan; from $2.50 to $1.50 for all options granted
          under and  outside of the plan.  On  January  16,  2001,  the Board of
          Directors decreased again the exercise price for the Stock Option Plan
          from $1.50 to $0.50 for all options  granted  under and outside of the
          plan. Due to the changes, all the options which were granted under the
          plan prior to the change in exercise price will be accounted for using
          variable plan accounting  under APB 25. Variable  accounting  requires
          that the intrinsic value, being the excess of the current market price
          at the end of each reporting period in excess of the exercise price of
          the repriced options, be expensed as non-cash stock based compensation
          expense, until such time as the repriced options are exercised, expire
          or are otherwise forfeited. Any increase in the intrinsic value of the
          repriced options will decrease reported  earnings,  and any subsequent
          decreases in value will increase reported earnings.  For those options
          which were granted outside of the plan prior to the change in exercise
          price, the Company  recognizes  additional  compensation  cost for the
          excess of the fair value of the modified options issued over the value
          of the  original  option  at the  date  of the  modification.  For the
          quarter ending on September 30, 2002, $170,000 of compensation expense
          recovery was recognized in the financial statements.

     (b) Incentive Share Plan

          In July 2001,  the Company  instituted  an  Incentive  Plan  reserving
          shares for issue to officers, directors,  employees of the Company and
          its  subsidiary  and  other  persons,   including  consultants  as  an
          incentive.  The  number  of  shares  set  aside  for  issue  under the
          incentive share plan are 2,500,000 common shares.  No incentive shares
          have been granted under this plan as of September 30, 2002.


                                       10
<PAGE>


4.   SHARE CAPITAL (Continued)

     (c) Loss per share

          Loss per  share  calculations  give  effect  to the  reverse  takeover
          described in Note 1.

     (d) iQ share capital

          The  registered  capital of iQ Battery is EURO 51,129,  which is fully
          paid. All equity  securities  were acquired by iQ Power as part of the
          business combination.

     (e) Issuance of shares due to private placements

          In January 2002, the Company  completed a private placement of 950,000
          units of the Company at $0.65 per unit for proceeds of $617,500,  with
          each  unit  consisting  of one  common  share of the  Company  and one
          non-transferable  warrant  exercisable  for a period of twelve  months
          following  closing and entitling the holder to purchase one additional
          common  share of the  Company  for  US$0.85.  The  subscribers  to the
          private  placement were non-U.S.  persons outside the United States in
          reliance upon an exemption from registration under Regulation S of the
          Securities  Act of 1933, as amended.  The Company paid a finder's fees
          to non-U.S.  persons outside the United States, in connection with the
          offering  consisting of 95,000 common shares.  The cost of the finders
          fee was netted against the proceeds  obtained from the financing.  The
          shares  were  issued  pursuant  to  an  exemption  from   registration
          available under Regulation S of the Securities Act.

          The combined fair value of the attached warrants as of the date of the
          private  placement  was  approximately  $360,000.  The fair  value was
          calculated  using  the  Black-Scholes   option-pricing   model.  These
          warrants  were  offered in the private  placement in order to increase
          investor  interest,  align the interest of prospective  investors with
          shareholders, and potentially allow them to invest in the Company at a
          future date.

          In May 2002,  iQ Power agreed to extend the term of its US$1  warrants
          originally  issued in October and November  2001,  for an additional 6
          months. The original term was 6 months.

          In June 2002, the Company  completed a private  placement of 1,500,000
          units of the Company at $0.50 per unit for proceeds of $750,000,  with
          each  unit  consisting  of one  common  share of the  Company  and one
          non-transferable  warrant  exercisable  for a period of twelve  months
          following  closing and entitling the holder to purchase one additional
          common  share of the  Company  for  US$0.65.  The  subscribers  to the
          private  placement were non-U.S.  persons outside the United States in
          reliance upon an exemption from registration under Regulation S of the
          Securities Act of 1933, as amended.  The Company paid finder's fees to
          non-U.S.  persons  outside the United States,  in connection  with the
          offering  consisting of 108,000 common shares. The cost of the finders
          fee was netted against the proceeds  obtained from the financing.  The
          shares  were  issued  pursuant  to  an  exemption  from   registration
          available under Regulation S of the Securities Act.


                                       11
<PAGE>


4.   SHARE CAPITAL (Continued)

          The combined fair value of the attached warrants as of the date of the
          private  placement  was  approximately  $766,000.  The fair  value was
          calculated  using  the  Black-Scholes   option-pricing   model.  These
          warrants  were  offered in the private  placement in order to increase
          investor  interest,  align the interest of prospective  investors with
          shareholders, and potentially allow them to invest in the Company at a
          future date.

     (f) Issuance of shares due to consulting agreements

          On May 7, 2001, the Company entered into a European Investor Relations
          Consulting  Agreement with  Magdalena,  a non-U.S.  person outside the
          United States. The Company agreed to pay Magdalena a consulting fee in
          the amount of $62,500 for such services,  payable by issuing Magdalena
          a total of  250,000  common  shares  with a deemed  value of $0.25 per
          share, issuable as follows: 20,850 common shares of the Company during
          the first eleven months and 20,650 common shares in the final month of
          the agreement.  As of June 30, 2002, the Company had issued  Magdalena
          all 250,000 common shares under the agreement.  The shares were issued
          to Magdalena  pursuant to an  exemption  from  registration  available
          under Regulation S of the Securities Act.

          On July 1, 2001,  the Company  entered into a German Public  Relations
          Consulting  Agreement with Holtermann & Team GmbH ("H&T"),  a non-U.S.
          person  outside the United  States.  The  Company  agreed to pay H&T a
          consulting  fee in the  amount of EUR 7,500  (approximately  $6,500 to
          $7,500) per month for such services.  Of the consulting fee, EUR 5,000
          is due monthly while the remaining EUR 2,500 is payable by issuing H&T
          common  shares with a deemed  value of $1.48 per share,  issuable on a
          quarterly  basis.  As of June 30,  2002,  the  Company  had issued H&T
          12,900  common  shares  under the  agreement.  The  agreement  was not
          extended beyond the initial term of 12 months ending June 30, 2002.

          In August 2002, the Company entered into a Financial  Public Relations
          Adviser Consulting Agreement with Joerg Schweizer,  a non-U.S.  person
          outside the United States. The Company agreed to pay Joerg Schweizer a
          consulting fee in the amount of EUR 5,000  (approximately  $5,000) per
          month  for such  services.  Of the  consulting  fee,  EUR 2,000 is due
          monthly  while the  remaining  EUR 3,000 is payable  by issuing  Joerg
          Schweizer  common  shares  with a deemed  value of  $0.52  per  share,
          issuable on a quarterly  basis.  The first issuance will take place in
          October 2002. The agreement has an initial term of 12 months.

          In August 2002, the Company entered into a Media Relations  Consulting
          Agreement with Andreas Gloetzl,  a non-U.S.  person outside the United
          States.  The  agreement  has an initial term of August 1, 2002 through
          March 15, 2003. The Company agreed to pay Andreas Gloetzl a consulting
          fee in the amount of $33,800 by issuing  Andreas Gloetzl common shares
          at a deemed value of $0.52 per share,  issuable as follows:  The first
          issuance of 25,000 shares will take place in October 2002,  additional
          20,000 shares are to be issued in December 2002, the last  installment
          of 20,000 shares will be issued in March 2003.


                                       12
<PAGE>


5.   RELATED PARTY TRANSACTIONS

     Related  party  transactions  not  disclosed  elsewhere  in  the  financial
     statements comprised:

     (a)  Management  fees for the three  months  ended  September  30,  2002 of
          $18,000  (2001  -  $18,000)  were  paid  to a  company  with a  common
          director.

     (b)  iQ Battery acquired patents and know-how  improving the current output
          of a chargeable battery at low outside temperatures and the registered
          design  "iQ"  based  on a  contract  dated  March  15,  1995  from two
          shareholders,  of  which  one  is  a  director  of  the  Company.  The
          intangibles  purchased  relate to a German  patent,  an  international
          patent  application as well as the registered design "iQ". The Company
          and the shareholders  agreed that the  shareholders  would receive EUR
          205,000  from  future  income.  Any  amounts  paid will be  charged to
          operations  as a  current  expense.  No other  amounts  are due as the
          Company has not realized any applicable revenues or royalties.

6.   SEGMENT DISCLOSURES

     The  Company  is  currently   marketing  and  developing  its   proprietary
     technology.  In  accordance  with SFAS No. 131 the  Company  considers  its
     business to consist of one reportable  operating  segment.  The majority of
     the Company's significant physical assets are located in Germany.

7.   RECENT TRANSACTIONS

     In September 2002, the Company  announced that it has entered into a letter
     of intent for the  acquisition  of the  business and assets of Gel Electric
     Technologies,  Inc. (Gel) headquartered in Los Angeles, California, USA. In
     the course of this  agreement iQ Power made a prepayment of $75,000 to Gel.
     Gel is obligated to reimburse the prepayment by notice of iQ Power.


                                       13
<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Certain   statements  in  this  Quarterly  Report  on  Form  10-QSB   constitute
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934. Such forward-looking  statements involve known and unknown
risks,  uncertainties  and other  factors  that may cause  the  actual  results,
performance or achievements of iQ Power  Technology Inc. and its subsidiary,  iQ
Battery  Research  and  Development  GmbH   (hereinafter  "iQ  Germany"  or  "iQ
Battery"),  (hereinafter  collectively,  referred  to as  "iQ  Power"  and  "the
Company"),  or developments in the Company's industry, to differ materially from
the anticipated  results,  performance or  achievements  expressed or implied by
such forward-looking  statements.  Such factors include, but are not limited to:
the Company's limited operating  history,  lengthy  development and sales cycles
related  to  the  commercialization  of  battery  technologies,   the  Company's
dependence  upon a relative  concentration  of customers in the  automotive  and
battery  manufacturing  industries,  competition  in the  battery  industry  and
competing battery technologies, risk related to the development of the Company's
battery technologies and acceptance by the automotive and battery  manufacturing
industries;  risks of  technological  change that may be  inconsistent  with the
Company's technologies or the may render its technologies  obsolete,  dependence
on selected  vertical  markets within the  automotive and battery  manufacturing
industries,  general  economic  risks that may affect the demand for  automotive
batteries;  the Company's  reliance on third-party  marketing  relationships and
suppliers,  the Company's  ability to protect its intellectual  property rights,
risks related to the  acquisition  of Gel and the other risks and  uncertainties
described  under  "Business - Risk  Factors" in Part I of the  Company's  Annual
Report on Form  10-KSB  filed with the United  States  Securities  and  Exchange
Commission on April 2, 2002.

Overview

The Company was  organized in 1991 to develop and  commercialize  batteries  and
electric  power  technology for the  automotive  industry and other  industries.
Since that date, the Company has been engaged  primarily in research and product
development  efforts.  The  Company's  primary  product is a "smart"  automotive
starter  battery,  the  MagiQTM  battery,  which  combines  several  proprietary
features designed to optimize automotive starter battery efficiency.

The Company is an early stage  company  and its  principal  activity to date has
been  research  and  development.  The  Company has not  derived  revenues  from
operations.  The Company  initially  planned to begin  manufacturing its MagiQTM
battery  during  the second  half of 2002,  with  plans to begin  marketing  the
battery  in the  fourth  quarter  of 2002.  The  Company  completed  an  initial
production  run of its MagiQTM  battery in April,  2002.  The Company  conducted
tests on this initial  production  run and  determined  that one of the external
components did not meet the Company's quality  standards.  All other performance
criteria for the MagiQTM battery met or exceeded the Company's specifications in
these tests. The manufacturer of the component is currently  re-engineering  its
manufacturing  process, and the Company anticipates that the component will meet
the Company's  quality  standards.  This process has caused a six month delay in
manufacturing  the Company's  initial  commercial run of the MagiQTM battery and
the delivery of  batteries to  automobile  manufacturers  for final  testing The
Company  will be  required  to raise  additional  capital  for  working  capital
purposes  until  sufficient  revenues  can be  generated  from the  sales of the
MagiQTM battery or licensing of the technology.  The Company does not anticipate
it will generate any  significant  revenues  from the sale of MagiQTM  batteries
until at least the second or third quarter of 2003,  assuming adequate financing
is available to commercialize  the Company's  MagiQTM  batteries.  See "Need for
Additional Capital," below.

The Company anticipates that it may, in the future, generate additional revenues
from service  agreements and licensing  agreements  with battery  manufacturers,
although the Company  currently  has no such service or licensing  agreements in
place.

During the third  quarter  2002,  the  Company  entered  into a letter of intent
("LOI") to acquire all of the assets of Gel Electric Technologies, Inc. ("Gel"),
a company engaged in the business of manufacturing  batteries.  Gel manufactures
specialized    automotive    and   storage    batteries    using   sealed   VRLA
gelled-electrolyte (GEL), sealed VRLA starved-electrolyte (AGM), and sealed lead
acid flooded (WET)  technologies.  These  batteries are generally more efficient
than  batteries  that use a  conventional  liquid  acid  compound.  The  Company
believes that it may be able to integrate  its existing iQ battery  technologies
into the batteries  manufactured  by Gel to make them even more  efficient.  The
Company  intends to acquire the assets and  business of Gel as a going  concern.
Under the terms of the


                                       14
<PAGE>


LOI, the Company  would  acquire the assets of Gel for  $2,250,000,  payable (i)
$250,000 in cash at closing;  (ii) a promissory note in the principal  amount of
$1,750,000,  payable in five equal annual  principal  installments  of $350,000,
plus accrued interest on the remaining principal balance of 10% per annum; and a
promissory note in the principal amount of $250,000,  without interest,  payable
on the sixth  anniversary  of the closing.  The Company's  obligations  would be
secured by a security  interest in the assets acquired from Gel. The acquisition
is subject to the completion of due diligence, including an environmental study,
and the negotiation of a definitive  agreement.  In connection with the LOI, the
Company  advanced a bridge loan to Gel in the amount of $75,000 in August  2002.
The  parties  are  continuing  negotiations  and due  diligence  related  to the
proposed  acquisition.  There can be no assurance that the  acquisition  will be
completed  or, if  completed,  that any  synergies  would  exist  between  Gel's
batteries  and the iQ  technologies.  The  Company  anticipates  that it will be
required to raise additional  capital in order to complete the acquisition.  See
"Need for Additional Capital," below.

The  Company  has  incurred  substantial  losses  to date,  and  there can be no
assurance that the Company will attain any particular  level of revenues or that
the Company will achieve  profitability.  The Company believes that its historic
spending  levels are not indicative of future spending levels because it is in a
period in which it will increase  spending on product  research and development,
marketing, staffing and other general operating expenses. For these reasons, the
Company  believes  its  expenses,  losses  and  accumulated  deficit  during the
development  stage will  increase  significantly  before it  generates  material
revenues.

Critical Accounting Policies

Financial   Reporting  Release  (FRR)  No.  60,   "Cautionary  Advice  Regarding
Disclosure  About  Critical  Accounting  Policies,"  requires  all  companies to
include a  discussion  of critical  accounting  policies or methods  used in the
preparation  of  financial  statements.  The  discussion  and  analysis  of  the
Company's  financial  condition  and  results of  operations  are based upon its
consolidated  financial statements,  which have been prepared in accordance with
accounting  principles  generally accepted in the United States. The preparation
of these  financial  statements  requires  the  Company  to make  estimates  and
judgments that affect the reported  amount of assets and  liabilities,  revenues
and expenses, and related disclosure of contingent assets and liabilities at the
date of its financial statements. Actual results may differ from these estimates
under different assumptions or conditions.

Critical  accounting  policies  are  defined  as those  that are  reflective  of
significant  judgments and  uncertainties,  and potentially result in materially
different  results under different  assumptions  and conditions.  The accounting
policy  which  the  Company  believes  are the  most  critical  to aid in  fully
understanding and evaluating its reported  financial results include stock based
compensation.

In accordance with the provisions of the Financial  Accounting Standards Board's
("FASB")  Statement of  Accounting  Standard  ("SFAS") No. 123,  Accounting  for
Stock-Based  Compensation,  the  Company  has  elected to follow the  Accounting
Principles  Board's Opinion No. 25, Accounting for Stock Issued to Employees and
the related  interpretations  ("APB 25") in  accounting  for its employee  stock
based compensation  plans. Under APB 25, if the exercise price of employee stock
options  issued  under a fixed  plan  equals or  exceeds  the fair  value of the
underlying  stock on the date of grant,  no  compensation  expense is recognized
(see  Note  4(a)).  Stock  options  granted  to  non-employees   result  in  the
recognition  of expenses upon the fair value of such stock options as prescribed
under SFAS No.  123.  Due to changes in the  exercise  price for  certain  Stock
Option granted under the Stock Option Plan,  those options will be accounted for
using variable plan accounting under APB 25. Variable  accounting  requires that
the intrinsic value,  being the excess of the current market price at the end of
each reporting  period in excess of the exercise price of the repriced  options,
be expensed as non-cash stock based compensation expense, until such time as the
repriced options are exercised,  expire or are otherwise forfeited. Any increase
in the intrinsic value of the repriced options will decrease reported  earnings,
and any subsequent decreases in value will increase reported earnings. For those
options  which were granted  outside of the plan prior to the change in exercise
price, the Company recognizes additional compensation cost for the excess of the
fair value of the modified  options issued over the value of the original option
at the date of the modification.

The Company's accounting for stock options is significant because the effect the
compensation  expense has on the  Company's  results.  As the Company  begins to
produce their product in the future and begins to earn revenue on


                                       15
<PAGE>


sales of the product,  the  compensation  expense  associated with the Company's
stock  options will have a significant  effect on its ability to incur  positive
net results.

Related Party Transactions

Financial  Reporting Release (FRR) No. 61, "Effects of transactions with related
and certain  other  parties,"  requires all companies to include a discussion of
all material transactions with related and certain other parties to the Company.
As discussed in Note 5 of the financial statements,  the following related party
transactions were noted:

Management fees for the three months ended September 30, 2002 of $18,000 (2001 -
$18,000) were paid to a company with a common director.

iQ Battery  acquired  patents and  know-how  improving  the current  output of a
chargeable  battery at low outside  temperatures and the registered  design "iQ"
based on a contract dated March 15, 1995 from two shareholders of which one is a
director of the Company. The intangibles purchased relate to a German patent, an
international  patent  application  as well as the  registered  design "iQ". The
Company and the  shareholders  agreed that the  shareholders  would  receive EUR
205,000  (approximately  $200,000) from future income.  Any amounts paid will be
charged to  operations  as a current  expense.  No other  amounts are due as the
Company has not realized any applicable revenues or royalties.

The  Company's  Results of Operations  for the Three Months Ended  September 30,
2002 Compared to the Three Months Ended September 30, 2001

Revenues.  No revenues  were  recorded in either the three  month  period  ended
September 30, 2002 or three month period ended  September 30, 2001.  The Company
does not anticipate it will generate any  significant  revenues from the sale of
MagiQTM  batteries until at least the second or third quarter of 2003,  assuming
the Company is able to raise sufficient  financing to commercialize  its MagiQTM
batteries. See "Need for Additional Capital," below.

Total Operating  Expenses.  The Company had total operating expenses of $263,000
for the three month period ended  September  30, 2002,  compared to an operating
income of $100,000  for the same period in 2001,  an increase of  $363,000.  The
primary  factor for the increase was the  non-cash  compensation.  For the three
months  period  ended  September  30,  2002,  the  Company  recorded  a non-cash
compensation income of $170,000 compared to the non-cash  compensation income of
$702,000 for the same period in 2001. Without considering non-cash compensation,
operating  expenses for the third quarter 2002 were  $433,000  ($602,000 - 2001)
including  research and development  expenses of $226,000  ($220,000 - 2001) and
marketing and general and administrative expenses of $207,000 ($382,000 - 2001).
Non-cash  compensation expense will vary from  quarter-to-quarter as a result of
fluctuating  market prices for the Company's  equity  securities.  See "Critical
Accounting Policies."

Research and  Development  Expenses.  Research  and  development  expenses  were
$226,000 for the three months ended  September 30, 2002 compared to $220,000 for
the same period in 2001, an increase of $6,000 or 2.7%. Research and development
personnel costs increased by $29,000 from $115,000 for the third quarter in 2001
to  $144,000  for the third  quarter  in 2002.  Laboratory  expenses  related to
research and development decreased for the three months ended September 30, 2002
to $71,000 from $80,000 for the comparable  period in 2001, a decrease of 11.3%.
Research and development  office  expenses  decreased from $14,000 for the three
month period  ending  September 30, 2001 to $11,000 for the same period in 2002.
No professional  fees associated with research and development  were incurred in
the three month period  ending  September  30, 2002  compared to $11,000 for the
same period in 2001 when an external firm completed rapid  prototyping works for
the Company.

Marketing  and General and  Administration  Expenses.  The  expenses  related to
marketing  and general and  administration  decreased  to $207,000 for the three
month period ended September 30, 2002 from $382,000 for the same period in 2001,
a decrease of $175,000 or 45.8%. The higher expenses in 2001 were due in part to
expenses  related  to the  Company's  participation  in the  2001  International
Automotive  Show (IAA) in  Frankfurt,  which  takes  place  every  other year in
September.  Investor  relations  expenses  decreased from $113,000 for the third
quarter  in 2001 to $18,000  for the third  quarter in 2002.  This  decrease  in
investor relations expense resulted from less


                                       16
<PAGE>


intensive  activity  in investor  relations  and the  restructuring  of investor
relations  agreements in 2002. Marketing expenses decreased from $48,000 for the
third quarter  ended  September 30, 2001 to $21,000 for the same period in 2002.
For the same three month period ended September 30,  professional fees decreased
from $64,000 in 2001 to $39,000 in 2002. Office & travel expenses decreased from
$67,000 in the third quarter 2001 to $17,000 in the third quarter 2002 which was
mainly due to a reduction in  international  traveling.  During the three months
ended September 30, 2002, the Company employed external  resources for strategic
consulting  resulting in an increase in expenses for consulting services $44,000
for the three months ended September 30, 2002,  compared to $16,000 for the same
period in 2001.  Other expenses related to general and  administrative  expenses
for the three month period ended  September 30, 2002 were personnel  expenses at
$47,000 ($40,000 - 2001);  Management fees at $18,000 ($18,000 - 2001) and other
expenses at $2,000 ($11,000 - 2001).

The Company anticipates that the level of expenditures  related to its marketing
expenses will increase during 2003 resulting from its plan to increase marketing
efforts to  introduce  the  MagiQTM  battery,  subject to  obtaining  additional
financing to commercialize  its MagiQTM  batteries.  The Company also expects to
increase  its  efforts to enter  into  service  and  licensing  arrangements  to
commercialize   its  MagiQTM   battery  and  its   related   energy   management
technologies.

Net Loss. The Company incurred a net loss of $290,000 or $0.02 per share for the
third  quarter of 2002,  compared to a net income of $208,000 or $0.01 per share
during the same period in 2001.  The difference  was  attributable  to a loss on
foreign  exchange of $27,000 for the three month  periods  ending  September 30,
2002,  compared  to a foreign  exchange  gain of  $115,000  for the three  month
periods ending September 30, 2001, and non-cash stock based compensation  income
of $702,000  recognized  in the three month periods  ending  September 30, 2001,
compared to non-cash compensation income of $170,000 in the same period in 2002.
Without considering non-cash compensation, the Company would have realized a net
loss in the third quarter of 2001. Non-cash  compensation expense will vary from
quarter-to-quarter  as a result of  fluctuating  market prices for the Company's
equity securities. See "Critical Accounting Policies."

The Company  anticipates that it will continue to incur losses in future periods
until the Company is able to successfully  commercialize its MagiQTM battery and
energy management technologies.  There can be no assurance that the Company will
have  sufficient  capital  to  commercialize  its  MagiQTM  battery  and  energy
management technologies or that such products will be commercially successful.

The Company's Results of Operations for the Nine Months Ended September 30, 2002
Compared to the Nine Months Ended September 30, 2001

Revenues.  No  revenues  were  recorded  in either the nine month  period  ended
September 30, 2002 or nine month period ended  September  30, 2001.  The Company
does not anticipate it will generate any  significant  revenues from the sale of
MagiQTM  batteries until at least the second or third quarter of 2003,  assuming
that the Company can raise  sufficient  financing to  commercialize  its MagiQTM
batteries. See "Need for Additional Capital," below.

Total Operating Expenses. The Company had total operating expenses of $1,204,000
for the nine month period ended  September 30, 2002,  compared to $3,226,000 for
the same period in 2001, a decrease of $2,022,000 or 62.7%.  The primary  factor
for the decrease was the non-cash compensation. For the nine months period ended
September  30,  2002,  the Company  recorded a non-cash  compensation  income of
$279,000  compared to the non-cash  compensation  expense of $1,627,000  for the
same  period  in 2001.  Without  considering  non-cash  compensation,  operating
expenses  for the nine month  period ended  September  30, 2002 were  $1,483,000
($1,599,000  - 2001)  including  research and  development  expenses of $737,000
($741,000)  and  marketing and general and  administrative  expenses of $746,000
($858,000). Non-cash compensation expense will vary from quarter-to-quarter as a
result of fluctuating  market prices for the Company's  equity  securities.  See
"Critical Accounting Policies."

Research and Development  Expenses.  Research and development  expenses in total
were $737,000 for the nine months ended September 30, 2002, compared to $741,000
for the same period in 2001, a marginal decrease of $4,000 or 0.5%. Research and
development personnel costs were stable at $439,000 for the first three quarters
in 2002  compared to $442,000 for the first three  quarters in 2001.  Laboratory
expenses related to research and


                                       17
<PAGE>


development  decreased for the nine months ended  September 30, 2002 to $197,000
from $215,000 for the comparable  period in 2001 as the Company had concentrated
in  finalizing  the  intensive  pre-series  development  of the MagiQTM  battery
technology during 2001.  Consulting  services increased from $1,000 for the nine
months ended September 30, 2001 to $25,000 for the comparable period in 2002, as
the  Company  used  consulting   services  related  to  its  quality   assurance
certification  process  (ISO-Certification)  for  its  MagiQTM  battery  at  the
beginning of the year.  Research and development  office expenses decreased from
$46,000 for the nine month  period ended  September  30, 2001 to $40,000 for the
nine month period ended  September 30, 2002.  Professional  fees associated with
research and  development was $36,000 for the nine months period ended September
30, 2002, compared to $37,000 in 2001.

Marketing  and General and  Administration  Expenses.  The  expenses  related to
marketing  and general and  administration  decreased  to $746,000  for the nine
month period ended September 30, 2002 from $858,000 for the same period in 2001,
a decrease of $112,000 or 13.1%. The higher expenses in 2001 were due in part to
expenses  related  to the  Company's  participation  in the  2001  International
Automotive  Show (IAA) in  Frankfurt,  which  takes  place  every  other year in
September. Investor relations expenses decreased to $143,000 for the nine months
period ended  September  30, 2002,  from $230,000 for the same period in 2001, a
decrease of $87,000.  This decrease in investor  relations expense resulted from
less intensive  activity in investor relations and the restructuring of investor
relations  agreements in 2002.  Personnel expenses increased to $134,000 for the
nine months ended  September 30, 2002,  compared to $123,000 for the nine months
ended September 30, 2001.  Office & travel expenses  decreased from $113,000 for
the nine month period ended September 30, 2001 to $67,000 for the same period in
2002 which was mainly due to a reduction in international traveling.  Consulting
services  increased to $92,000 for the nine months ended September 30, 2002 from
$71,000 for the nine months  ended  September  30, 2001 as the Company  employed
external resources for strategic consulting in 2002. Professional fees decreased
by $21,000 to $165,000 for the period of the three quarters ending September 30,
2002,  from  $186,000 for the same period in 2001.  Expenditures  for  marketing
activities increased from $59,000 for the nine months period ended September 30,
2001 to  $82,000  for the same  period in 2002,  as the  Company  contracted  an
international consulting firm to update its market research data and analysis on
the market for intelligent  battery systems and smart energy  management.  Other
general and  administrative  expenses for the nine months period ended September
30,  2002  versus the  comparable  period in 2001  included  management  fees at
$54,000 ($54,000 - 2001) and other expenses at $6,000 ($16,000 - 2001).

Net Loss. The Company incurred a net loss of $924,000 or $0.05 per share for the
nine months ended  September  30, 2002,  compared to a net loss of $3,231,000 or
$0.28 per share during the same period in 2001. Non-cash  compensation  expenses
was a primary factor for these losses. A secondary factor for the differences in
losses was related to the foreign exchange gain/loss deviation of the comparable
periods: For the nine months period ending September 30, 2002 a foreign exchange
gain of $280,000 was  recorded,  compared to a foreign  exchange gain of $25,000
for the nine months period  ending  September  30, 2001.  Non-cash  compensation
expense  will vary from  quarter-to-quarter  as a result of  fluctuating  market
prices for the Company's equity securities. See "Critical Accounting Policies."

The Company  anticipates that it will continue to incur losses in future periods
until the Company is able to successfully  commercialize its MagiQTM battery and
energy management technologies.  There can be no assurance that the Company will
have  sufficient  capital  to  commercialize  its  MagiQTM  battery  and  energy
management technologies or that such products will be commercially successful.

Liquidity and Capital Resources

Since inception, the Company has financed its operations primarily through sales
of its equity securities.  From inception to September 30, 2002, the Company had
raised approximately $10.0 million (net of issuance costs) from the sale of such
securities,  including  the  issuance  of  2,500,000  common  shares  for deemed
proceeds of $2,500,000 on the business combination with iQ Germany.

As of September 30, 2002, the Company had cash and cash equivalents of $258,000,
compared to $451,000 at December  31, 2001.  The Company had working  capital of
$159,000 at September 30, 2002, compared to $145,000 at December 31, 2001.


                                       18
<PAGE>


In January 2002, the Company  completed a private  placement of 950,000 units of
the  Company  at  $0.65  per unit for  proceeds  of  $617,500,  with  each  unit
consisting of one common share of the Company and one  non-transferable  warrant
exercisable  for a period of twelve months  following  closing and entitling the
holder to purchase one  additional  common  share of the Company for $0.85.  The
subscribers to the private  placement were non-U.S.  persons  outside the United
States and the securities  were issued in reliance upon an exception from United
States registration  requirements available under Regulation S of the Securities
Act of 1933,  as amended.  The Company paid a finder's fee to a non-U.S.  person
outside the United States, in connection with the offering  consisting of 95,000
common shares.

In May 2002, the Company's board of directors determined that it was in the best
interest of the Company to extend the term of certain  warrants  exercisable  to
acquire  common  shares at $1.00  per share  originally  issued in  October  and
November  2001,  from 6 months  to one  year.  The  terms of the  warrants  were
extended to conform with a proposed  private  placement  of units that  included
warrants with a term of one year.

In June 2002, the Company  completed a private  placement of 1,500,000  units of
the  Company  at  $0.50  per unit for  proceeds  of  $750,000,  with  each  unit
consisting of one common share of the Company and one  non-transferable  warrant
exercisable  for a period of twelve months  following  closing and entitling the
holder to purchase one  additional  common  share of the Company for $0.65.  The
subscribers to the private  placement were non-U.S.  persons  outside the United
States in reliance upon an exemption from registration under Regulation S of the
Securities  Act of 1933, as amended.  The Company paid finder's fees to non-U.S.
persons outside the United States, in connection with the offering consisting of
108,000  common  shares.  The shares were issued  pursuant to an exemption  from
registration available under Regulation S of the Securities Act.

In August 2002,  the Company  advanced Gel $75,000 under the terms of the letter
of intent in connection with the Company's proposed acquisition of substantially
all of the assets of Gel. This  obligation  is evidenced by a demand  promissory
note bearing interest at the rate of 6% per annum.

The  Company   anticipates  that  it  will  require   additional   financing  of
approximately  $500,000 to $750,000 to satisfy its working capital  requirements
through December 31, 2002, and an additional $3,000,000 to $4,000,000 to satisfy
its working capital  requirements for the nine month period ending September 30,
2003  depending  on its ability to begin  commercial  production  of its MagiQTM
batteries. See "Plan of Operation." The Company anticipates that it will require
an additional  working  capital during the next twelve months if it acquires the
assets of Gel under the  terms of the LOI.  See "Need for  Additional  Capital,"
below.

The Company plans to finance its capital needs principally from the net proceeds
of its securities  offerings and interest thereon and, to the extent  available,
lines of credit. The Company is in the process of closing a private placement of
units at $0.35  per unit,  each  unit  consisting  of one  common  share and one
warrant  exercisable to acquire one  additional  common share at $0.45 per share
for one year, to raise up to $400,000.  On November 11, 2002, the Company issued
542,853  units  under the  private  placement  to raise  $190,000.  The  Company
anticipates it will close the balance of the private placement during the fourth
quarter of 2002.

The Company  currently  has no  external  sources of capital and there can be no
assurance  that the Company will be able to raise  sufficient  financing to meet
its capital requirements on acceptable terms or in a timely manner, if at all.

The Company currently has no commitments for credit facilities, revolving credit
agreements or lines of credit that could provide additional working capital.

The Company  anticipates that the level of spending will increase  significantly
in  future  periods  as  the  Company  undertakes   activities  related  to  the
commercialization  of the iQ technology.  In addition,  the Company  anticipates
that its general and administrative  expenses will  significantly  increase as a
result  of the  growth  in  its  research,  development,  testing  and  business
development   programs.   The  actual   levels  of  research  and   development,
administrative  and general  corporate  expenditures  are  dependent on the cash
resources available to the Company.

Obligations and Commitments

iQ Germany is obligated to pay to Horst Dieter Braun,  that  company's  founding
President and Peter Braun, the Company's President,  EUR 205,000  (approximately
$200,000)  in  connection  with iQ  Germany's  acquisition  of the  original  iQ
technology and other intellectual property rights in 1995. The amount is payable
only out of (and only to


                                       19
<PAGE>


the extent of) the gross  profits of iQ Germany,  if any. The Company  presently
believes  that it has no  financial  obligation  to either Horst Dieter Braun or
Peter Braun in connection with this agreement.

In the third  quarter of 2002,  the  Company  entered  into a  Financial  Public
Relations Adviser Consulting Agreement with Joerg Schweizer,  a non-U.S.  person
outside  the  United  States.  The  Company  agreed  to pay  Joerg  Schweizer  a
consulting fee in the amount of EUR 5,000  (approximately  $5,000) per month for
such  services.  Of the  consulting  fee,  EUR  2,000 is due  monthly  while the
remaining  EUR 3,000 is payable by issuing  Joerg  Schweizer  common shares at a
deemed  value of $0.52 per  share,  issuable  on a  quarterly  basis.  The first
issuance will take place in October  2002.  The agreement has an initial term of
12 months.

In the  third  quarter  of 2002,  the  Company  entered  into a Media  Relations
Consulting Agreement with Andreas Gloetzl, a non-U.S.  person outside the United
States.  The  agreement  has an initial term of August 1, 2002 through March 15,
2003. The Company  agreed to pay Andreas  Gloetzl a consulting fee in the amount
of $33,800 by issuing  Andreas  Gloetzl common shares at a deemed value of $0.52
per share, issuable as follows:  25,000 shares in October 2002; 20,000 shares in
December 2002; and 20,000 shares in March 2003.

The Company's  capital  requirements  depend on several  factors,  including the
success and progress of its product  development  programs,  the  resources  the
Company  devotes to developing  its  products,  the extent to which its products
achieve  market  acceptance,  and other factors.  The Company  expects to devote
substantial  cash for  research and  development.  The Company will also require
additional  capital if it completes the Gel  acquisition,  for which there is no
assurance.  The Company cannot  adequately  predict the amount and timing of its
future cash requirements. See "Need for Additional Capital," below.

The Company will consider  collaborative  research and development  arrangements
with strategic  partners and additional public or private  financing  (including
the  issuance  of  additional  equity  securities)  to  fund  all or a part of a
particular  program in the future.  There can be no  assurance  that  additional
funding will be available or, if  available,  that it will be available on terms
acceptable to the Company. If adequate funds are not available,  the Company may
have  to  reduce  substantially  or  eliminate  expenditures  for  research  and
development,  testing,  production  and marketing of its proposed  products,  or
obtain funds through  arrangements  with  strategic  partners that require it to
relinquish  rights  to some of its  technologies  or  products.  There can be no
assurance  that the Company  will be able to raise  additional  cash if its cash
resources are exhausted.  The Company's ability to arrange such financing in the
future will depend in part upon the prevailing capital market conditions as well
as its business performance.

Plan of Operation

The Company has been actively undertaking the following initiatives:

Since November 2000, iQ Germany has been awarded the certification in accordance
with the  international  standards  organization  ("ISO")  and Verein  Deutscher
Automobilzulieferer ("VDA"), the Association of German automotive suppliers. ISO
and  VDA  certifications  are  generally  required  for  battery  suppliers  and
suppliers of electronic  goods to the  automotive  industry.  In March 2002, the
certification  was re-awarded and expanded to ISO 9001/2000 and VDA 6.1 and 6.2.
This new standard  certifies the Quality Assurance System of iQ Germany being in
accordance with the high  requirements of the ISO/VDA  standards for a producing
company.   No  governmental  or  regulatory   approvals  are  required  for  the
development of battery technologies.

In January 2001, the founding members of the DC-BUS Alliance signed a memorandum
of  understanding  and agreed to entrust the Company's Chief Executive  Officer,
Peter E. Braun,  with the management and  administration of the DC-BUS Alliance.
Subsequent to that date,  workgroups met on a monthly basis within the Company's
corporate  offices  and  worked  on the  technical  specification  for  multiple
applications of the DC-BUS technology in future cars. Joint  presentations  were
given in  technical  conferences  and  technical  papers have been  submitted to
various audiences.  The consortium agreement has been negotiated and the Company
expects to finalize a contract in this regard in the near future.


                                       20
<PAGE>


In September 2001, the Company introduced its MagiQ(TM) intelligent battery, the
Company's  first  product  designed  for  mass  production,   at  the  Frankfurt
International  Auto Show IAA.  This  resulted  in  numerous  inquiries  from car
manufacturers and TIER 1 suppliers.

In September 2000, the Company  demonstrated a future solution for its SEM smart
energy   management(TM)   application   together  with  DaimlerChrysler  on  the
international  Auto  Show for  Trucks in  Frankfurt.  This  resulted  in a joint
proposal  submitted  to the  European  Union for  funding  of  DaimlerChrysler's
intelligent  Powertrain X-by-wire concept. The project,  called PEIT (Powertrain
Equipped with Intelligent Technology),  was launched during the third quarter of
2001. In this program,  the Company is responsible  for development and delivery
of the complete  electrical energy storage and supply system,  including work on
the system architecture.  Other participants in the project include Knorr Bremse
and Continental AG.

Since the first fiscal quarter of 2000, the Company has presented its technology
at several  international  conferences  and has been requested to submit several
technical  papers  related to its  technologies.  The Company  has entered  into
negotiations with battery  manufacturers,  suppliers to the automotive  industry
and automakers  regarding the use and purchase of the Company's  products and/or
its technology. To date, the Company has not entered into any agreements related
to supplying batteries or licensing its technologies.

The Company completed  development of the MagiQTM battery and planned an initial
production run during the third quarter 2002,  with plans to begin marketing the
battery in the fourth  quarter of 2002.  The Company  entered  into  procurement
contracts  with  suppliers to provide the  components  for the production run in
accordance  with the  Company's  quality  requirements  and at fixed  negotiated
costs. The Company completed an initial production run of its MagiQTM battery in
April,  2002.  The Company  conducted  tests on this initial  production run and
determined  that one of the  external  components  did not  meet  the  Company's
quality standards. All other performance criteria for the MagiQTM battery met or
exceeded the Company's  specifications  in these tests.  The manufacturer of the
component is currently re-engineering its manufacturing process, and the Company
anticipates that the component will meet the Company's quality  standards.  This
process  has caused a six month delay in  manufacturing  the  Company's  initial
commercial  run  of the  MagiQTM  battery  and  the  delivery  of  batteries  to
automobile  manufacturers  for final  testing.  The Company  will be required to
raise additional capital for working capital purposes until sufficient  revenues
can be  generated  from the sales of the  MagiQTM  battery or  licensing  of the
technology.  The Company does not  anticipate it will  generate any  significant
revenues from the sale of MagiQTM  batteries  until at least the second or third
quarter of 2003,  assuming adequate  financing is available to commercialize the
Company's MagiQTM batteries. See "Need for Additional Capital," below.

In September  2002,  the Company  announced that it has entered into a letter of
intent for the  acquisition of  substantially  all of the assets of Gel Electric
Technologies,  Inc. located in California.  Gel is a manufacturer of specialized
automotive  and  storage  batteries  with a  current  emphasis  on  sealed  VRLA
gelled-electrolyte (GEL), sealed VRLA starved-electrolyte (AGM), and sealed lead
acid flooded (WET) batteries.  These batteries generally are more efficient than
batteries that use a conventional  liquid acid  compound.  The Company  believes
that it may be able to use its  existing  iQ  battery  technologies  to make the
batteries  manufactured by Gel even more efficient.  In the future,  the Company
may  also   manufacture  its  MagiQTM   batteries  at  the  Gel  facilities  for
distribution in the United States and Canada. The Company intends to acquire the
assets and business of Gel as a going  concern.  Under the terms of the LOI, the
Company would acquire the assets of Gel for $2,250,000,  payable (i) $250,000 in
cash at closing;  (ii) a promissory note in the principal  amount of $1,750,000,
payable in five equal annual  principal  installments of $350,000,  plus accrued
interest on the remaining  principal  balance of 10% per annum; and a promissory
note in the principal amount of $250,000, without interest, payable on the sixth
anniversary  of the closing.  The  Company's  obligations  would be secured by a
security interest in the assets acquired from Gel. The acquisition is subject to
the  completion of due  diligence,  including an  environmental  study,  and the
negotiation of a definitive  agreement.  In connection with the LOI, the Company
advanced a bridge  loan to Gel in the amount of  $75,000  in August,  2002.  The
parties are continuing  negotiations  and due diligence  related to the proposed
acquisition.  There can be no assurance that the  acquisition  will be completed
or, if completed,  that any synergies  would exist between Gel batteries and the
iQ  technologies.  The  Company  anticipates  that it will be  required to raise
additional  capital  in  order  to  complete  the  acquisition.  See  "Need  for
Additional Capital," below.


                                       21
<PAGE>


As part of the Company's  strategic plan,  over the next 12 months,  the Company
intends to concentrate  its resources on research and  development,  production,
marketing and financing activities.

Research and Development

The Company's  research and development  strategy over the next twelve months is
to:

     o    expand  research  and  development  operations;
     o    expand the MagiQTM product family designs;
     o    start production of batteries that incorporate the iQ technology;
     o    finalize its third party testing program for the MagiQTM product line;
     o    expand joint research  activities with car makers in various x-by-wire
          programs;
     o    continue  the  Company's  state of charge  ("SOC") and state of health
          ("SOH") program development;  and
     o    expand  the   Company's   activities   in  the  field  of  power  line
          communication within the DC-BUS Alliance.

The Company  anticipates that it will spend  approximately  $950,000 on research
and development during 2002.

The  Company's  research  and  development  activities  are expected to increase
substantially  in the event that the Gel acquisition is completed.  There can be
no assurance that such acquisition will be completed.

Production

The Company's production strategy during the next twelve months is to:

     o    complete the limited-production of the MagiQTM battery;
     o    continue  the   assessment   and  the   qualification   of  additional
          manufacturing sites for the production of the MagiQTM battery designs;
          and
     o    enter  into   additional   joint  venture,   partnership   agreements,
          cooperation    agreements   or   similar   agreements   with   battery
          manufacturers.

The Company anticipates that it will spend  approximately  $50,000 on production
related planning activities during 2002.

The Company's  production  activities are expected to increase  substantially in
the event that the Gel acquisition is completed.  There can be no assurance that
such acquisition will be completed.

Marketing

The Company's marketing strategy over the next twelve months is to:

     o    enter into  development  contracts  with  customers of the  automotive
          industry  and  other  industries  to  apply  its  technology  to their
          individual  demand  with  the  goal of  producing  and  supplying  the
          products  that  will be  developed  for these  customers  in their own
          production plants;
     o    expand its marketing activities of the MagiQTM battery;
     o    market the iQ  technology  and the  Company's  software as part of its
          technology for solutions  regarding SOC and SOH status indications for
          batteries to car manufacturers and their Tier 1 suppliers.

The Company anticipates that it will spend  approximately  $100,000 on marketing
and sales  during  2002.  The  Company's  marketing  activities  are expected to
increase substantially during 2003 as it begins marketing the MagiQTM battery.


                                       22
<PAGE>


The Company's marketing activities are expected to increase substantially in the
event that the Gel acquisition is completed. There can be no assurance that such
acquisition will be completed.

Financial

We intend to seek additional  financing for working capital purpose, to fund our
research and development efforts and to commercialize our MagiQTM batteries.  We
may also seek  financing  to acquire  the assets and  business  of Gel or form a
strategic alliance with a battery manufacturer.

We  anticipate  that we will expend  approximately  $100,000 on capital  raising
efforts during 2002.

Administrative and General Operating

The Company estimates that its general  administrative and operating budget will
be approximately $750,000 during 2002. The Company's  administrative and general
operating costs is expected to increase  substantially if the Gel acquisition is
completed. There can be no assurance that the Gel acquisition will be completed.

Need for Additional Capital

The Company  anticipates  that its total operating  budget  (excluding  non-cash
stock  based  compensation   expense/income)  for  2002  will  be  approximately
$1,950,000. The Company anticipates that it will require additional financing of
approximately  $500,000 to $750,000 to satisfy its working capital  requirements
through December 31, 2002, and an additional $3,000,000 to $4,000,000 to satisfy
its working capital  requirements for the nine month period ending September 30,
2003  depending  on its ability to begin  commercial  production  of its MagiQTM
batteries.  In  addition,  the Company  will  require  additional  financing  of
approximately  $1,000,000  during the next  twelve  months if it  completes  the
proposed acquisition of Gel.

The Company  anticipates  that it will need to undertake  additional  financings
during the fourth quarter of 2002. See "Liquidity and Capital  Resources" above.
The Company may require more financing if it experiences  delays, cost overruns,
additional funding needs for joint ventures or other  unanticipated  events. The
Company cannot assure you that it will be able to obtain more financing or that,
if it does, it will be on favorable terms or on a timely basis.

If the Company unable to raise additional  financing on acceptable terms, it may
be required to take some or all of the following actions:

     o    reduce expenditures on research and development;
     o    reduce sales and marketing expenditures;
     o    reduce  general  and  administrative  expenses  through  lay  offs  or
          consolidation of its operations;  o suspend its participation in pilot
          programs  that  are  not  economically   profitable;  o  sell  assets,
          including licenses to its technologies;
     o    suspend its operations until sufficient  financing is available;  or o
          sell or wind up and liquidate its business.

     Any of these action may affect the Company's  ability to offer  competitive
     products  or compete in the  market.  The  Company's  inability  to offer a
     competitive  product or to  effectively  compete will affect its ability to
     continue as a going concern.

Personnel

The Company does not expect any  significant  changes in its personnel  strategy
over the next twelve months.  However, if the Gel acquisition is completed,  the
overall  number of employees of the Company will  increase by  approximately  20
employees due to the  inclusion of the Gel  workforce.  The Company's  personnel
strategy  is to maintain  its  research  and  development  capabilities  and the
Company may hire personnel in marketing and sales once the commercial production
of the MagiQTM battery is commenced.


                                       23
<PAGE>


Other Trends and Uncertainties

Foreign Currency Translation Risk

To date, exposure to foreign currency fluctuations has not had a material effect
on the Company's  operations.  The Company believes its risk of foreign currency
translation  is limited,  as its  operations are based in Germany with resulting
transactions  primarily  denominated in United States dollars.  The Company does
not  currently  engage in hedging  or other  activities  to control  the risk of
foreign  currency  translation,  but  may do so in  the  future,  if  conditions
warrant.

Going Concern

The Company is still in the development stage and could fail before implementing
its  business  strategy.  The Company  may  continue to incur net losses for the
foreseeable  future and the  Company has  prepared  the  accompanying  financial
statements  assuming  that the Company  will  continue as a going  concern.  The
Company has expressed uncertainty as to its ability to remain a going concern.

Item 3. Controls and Procedures

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

Within  90 days  prior  to the date of this  report,  the  Company's  management
carried out an evaluation,  under the supervision and with the  participation of
the Company's  management,  including the Company's Chief Executive  Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's  disclosure  controls  and  procedures  pursuant to Exchange  Act Rule
13a-14.  Based upon the foregoing,  the Company's  Chief  Executive  Officer and
Chief Financial  Officer  concluded that the Company's  disclosure  controls and
procedures are effective in connection with the filing of this Quarterly  Report
on Form 10-QSB for the quarter ended September 30, 2002.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation,  including any significant deficiencies or material weaknesses
of internal controls that would require corrective action.

Part II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

     As of September 30, 2002, there is no material  litigation  pending against
the Company.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     Sales of Unregistered Securities.

In the third  quarter of 2002,  the  Company  entered  into a  Financial  Public
Relations Adviser Consulting Agreement with Joerg Schweizer,  a non-U.S.  person
outside  the  United  States.  The  Company  agreed  to pay  Joerg  Schweizer  a
consulting fee in the amount of EUR 5,000  (approximately  $5,000) per month for
such  services.  Of the  consulting  fee,  EUR  2,000 is due  monthly  while the
remaining  EUR 3,000 is payable by issuing  Joerg  Schweizer  common shares at a
deemed  value of $0.52 per  share,  issuable  on a  quarterly  basis.  The first
issuance  will take place in October  2002.  The  shares are  anticipated  to be
issued in reliance upon an exception from the registration


                                       24
<PAGE>


requirement of the Securities  Act of 1933, as amended (the  "Securities  Act"),
under Regulation S. The agreement has an initial term of 12 months.

In the  third  quarter  of 2002,  the  Company  entered  into a Media  Relations
Consulting Agreement with Andreas Gloetzl, a non-U.S.  person outside the United
States.  The  agreement  has an initial term of August 1, 2002 through March 15,
2003. The Company  agreed to pay Andreas  Gloetzl a consulting fee in the amount
of $33,800 by issuing  Andreas  Gloetzl common shares at a deemed value of $0.52
per share, issuable as follows:  25,000 shares in October 2002; 20,000 shares in
December 2002, and 20,000 shares in March 2003. The shares are anticipated to be
issued in reliance upon an exception  from the  registration  requirement of the
Securities Act.

The  Company is in the process of  completing  a private  placement  of units at
$0.35 per unit,  each  unit  consisting  of one  common  share and one  warrant
exercisable  to acquire one  additional  common share at $0.45 per share for one
year, to raise up to $400,000.  On November 11, 2002, the Company issued 542,853
units under the private  placement for proceeds of $190,000 to non-U.S.  persons
outside the United States in reliance  upon  exceptions  from the  registration
requirements of the Securities Act under Regulation S.

Additional   information   regarding  the  Company's  issuance  of  unregistered
securities  during the past three fiscal  years is  contained  in the  Company's
annual report on Form 10-KSB for the year ended December 31, 2001 under "Item 5.
Market  for Common  Equity  and  Related  Shareholder  Matters - Recent  Sale of
Unregistered  Securities"  filed with the United States  Securities and Exchange
Commission  and  information  regarding the Company's  issuance of  unregistered
securities  during the first and second  quarters  of 2002 is  contained  in the
Company's quarterly reports on Form 10-QSB for the quarters ended March 31, 2002
and June 30, 2002. The  information  contained  under Item 5. "Market for Common
Equity and Related Shareholder Matters - Recent Sale of Unregistered Securities"
of the Company's  annual  report on Form 10-KSB for the year ended  December 31,
2001 is hereby incorporated by reference to this report.

Item 3. DEFAULTS UPON SENIOR SECURITIES

     None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the Shareholders  during the quarter
ended September 30, 2002.

Item 5. OTHER INFORMATION

     On July 23, 2002, the Corporation  amended its Articles of Incorporation to
permit (1) the  establishment  of the  registered  office of the  Corporation by
province  rather  than  by  municipality,  and (2) the  possibility  of  holding
shareholders' meetings outside of Canada including in Germany, the United States
or Barbados.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

The following Exhibits are filed as part of this report:

                                  EXHIBIT INDEX
                                  -------------

       Exhibit No.  Description

       2.1(1)       Certificate  of  Incorporation  dated December 20, 1994, for
                    3099458 Canada Inc.

       2.2(1)       Articles of  Incorporation  dated  December  21,  1994,  for
                    3099458 Canada Inc.

       2.3.(1)      Certificate  of Amendment  dated May 9, 1997,  together with
                    Form 4, Articles of Amendment for iQ Power Technology Inc.

       2.4(1)       Certificate of Amendment  dated March 31, 1998, for iQ Power
                    Technology Inc.

       2.5(1)       By-law Number One General By-Law of iQ Power Technology Inc.
                    dated December 31, 1997, as confirmed on June 30, 1998


                                       25
<PAGE>


       Exhibit No.  Description

       2.6(9)       Certificate  of  Amendment  dated July 23, 2002 for iQ Power
                    Technology Inc.

       2.7(9)       Amendment  to By-law  Number One General  By-Law of iQ Power
                    Technology Inc. dated June 28, 2002

       6.1(1)       Form of Atypical Share Exchange Agreement

       6.2(1)       Share Exchange  Agreement dated August 25, 1998,  between iQ
                    Power  Technology  Inc., iQ Battery Research and Development
                    GmbH  and  the  Shareholders  of  iQ  Battery  Research  and
                    Development GmbH

       6.3(1)       Pooling  Agreement  No. 1 dated August 25, 1998,  between iQ
                    Power Technology Inc.,  Montreal Trust Company of Canada and
                    the Shareholders of iQ Power Technology Inc.

       6.4(1)       Pooling Amendment  Agreement dated August 15, 1998,  between
                    iQ Power Technology  Inc.,  Montreal Trust Company of Canada
                    and the Shareholders of iQ Power Technology Inc.

       6.5(1)       Management  Agreement dated January 1, 1997, between 3099458
                    Canada Inc. and Mayon Management Corp.

       6.6(1)       Consulting Agreement dated August 25, 1998, between iQ Power
                    Technology Inc. and Mayon Management Corp.

       6.7(1)       Employment  Agreement dated August 31, 1998 with Dr. Gunther
                    C. Bauer

       6.8(1)       Employment  Agreement  dated  August 31,  1998 with Peter E.
                    Braun

       6.9(1)       Employment Agreement dated September 1, 1998 with Gerhard K.
                    Trenz

       6.10(1)      Form  of   Confidentiality   Agreement   between   iQ  Power
                    Technology Inc. and certain Officers of the Company

       6.11(1)      Lease  Agreement  by and  between  iQ Battery  Research  and
                    Development  GmbH and  Spima  Spitzenmanufaktur  GmbH  dated
                    December 9, 1997 (Translated to English)

       6.12(1)      Commercial   Lease  Agreement  by  and  between  iQ  Battery
                    Research and  Development  GmbH and Josef  Landthaler,  GmbH
                    dated May 9, 1996, as amended (Translated to English)

       6.13(1)      Form of iQ Germany Confidentiality  Agreement (Translated to
                    English)

       6.14(1)      Form   of   iQ   Germany   Employee    Confidentiality   and
                    Nondisclosure Agreement (Translated to English)

       6.15(1)      Cooperation Agreement by and between iQ Battery Research and
                    Development GmbH and BASF Aktiengesellschaft  (Translated to
                    English)

       6.16(1)      Confidentiality Agreement by and between iQ Battery Research
                    and Development GmbH and Bayerische Motoren Werke dated July
                    29, 1997 (Translated to English)

       6.17(1)      Mutual  Confidentiality  Agreement among iQ Battery Research
                    and Development  GmbH,  Akkumulatorenfabrik  Moll GmbH & Co.
                    KG, and Audi dated May 26, 1998


                                       26
<PAGE>


       Exhibit No.  Description

                    (Translated to English)

       6.18(1)      Confidentiality  Agreement  between iQ Battery  Research and
                    Development GmbH and Mercedes Benz Aktiengessellschaft dated
                    March 21, 1997 (Translated to English)

       6.19(1)      Letter Agreement between iQ Battery Research and Development
                    GmbH and Manufacturer of Batteries Moll Ltd. dated August 3,
                    1998 (Translated to English)

       6.20(1)      Mutual Confidentiality Agreement between iQ Battery Research
                    and  Development  GmbH and  Manufacturer  of Batteries  Moll
                    dated September 8, 1997 (Translated to English)

       6.21(1)      Loan Contract by and between Karin Wittkewitz and iQ Battery
                    Research  and  Development  GmbH  dated  December  28,  1996
                    (Translated to English)

       6.22(1)      Contract Concerning  Industrial Property Rights and Know How
                    by and  between  Dieter  Braun  and  Peter E.  Braun  and iQ
                    Battery  Research and Development  GmbH dated March 15, 1995
                    (Translated to English)

       6.23(1)      Supplementary Contract to the Contract concerning Industrial
                    Property  Rights and Know How by and between H. Dieter Braun
                    and Peter E. Braun and iQ Battery  Research and  Development
                    GmbH dated August 16, 1996 (Translated to English)

       6.24(1)      Extension of Contract regarding  Industrial  Property Rights
                    and Know How by and between Dieter Braun and Peter Braun and
                    iQ Battery Research and Development GmbH dated September 20,
                    1996 (Translated to English)

       6.25(1)      Consulting  Contract by and between iQ Battery  Research and
                    Development  GmbH and Peter  Braun  dated  August  28,  1994
                    (Translated to English)

       6.26(1)      Consulting  Contract by and between iQ Battery  Research and
                    Development  GmbH and Dr.  Gunther  Bauer dated  October 30,
                    1996 (Translated to English)

       6.27(1)      Agreement (Debt Deferral) by and between iQ Battery Research
                    and Development  GmbH and Dieter Braun and Peter Braun dated
                    December 27, 1996 (Translated to English)

       6.28(1)      Agreement  (Debt  Deferral)  by and between iQ Research  and
                    Development  GmbH and Gunther Braun dated  December 27, 1996
                    (Translated to English)

       6.29(1)      Waiver among H. Dieter Braun, Peter E. Braun, Gunther Bauer,
                    Karin  Wittkewitz  and iQ Battery  Research and  Development
                    GmbH dated December 19, 1997 (Translated to English)

       6.30(1)      Agreement by and between iQ Battery Research and Development
                    GmbH and Dieter Braun and Peter Braun dated  October 9, 1998
                    (Translated to English)

       6.31(1)      1998 Stock Option Plan

       6.32(1)      Form of Stock Option Agreement

       6.33(1)      License  Agreement  dated September 1, 1998 between iQ Power
                    Technology, Inc. and Mattalex Management Ltd.


                                       27
<PAGE>


       Exhibit No.  Description

       6.34(1)      Agreement Re Rights and Interests  dated December 9, 1998 by
                    and among the Company, H. Dieter Braun and Peter E. Braun

       6.35(1)      Trademark  Assignment  dated December 9, 1998 by and between
                    the Company and H. Dieter Braun

       6.36(1)      Patent  Assignment dated December 9, 1998 by and between the
                    Company and H. Dieter Braun and Peter E. Braun

       6.37(2)      Pooling  Agreement  No. 2 dated  December 1, 1998 between iQ
                    Power Technology, Inc., Montreal Trust Company of Canada and
                    certain shareholders of iQ Power Technology, Inc.

       6.38(2)     Lease  Agreement  effective  as of February 16, 1999 between
                    Dr. Arne Curt Berger and iQ Battery Research and Development
                    GmbH (Translated to English)

       6.39(2)      Rescission  Agreement  dated  January 13, 1999 between Spima
                    Spitzenmanufaktor   GmbH  and  iQ   Battery   Research   and
                    Development GmbH

       6.40(3)      Cooperation  Agreement  dated October 19, 1999 between Yamar
                    Electronics Ltd. and iQ Battery R&D GmbH

       6.41(3)      Investor  Relations  Consulting  Agreement dated December 8,
                    1999  between  Boyle   International   (Guernsey)   Investor
                    Relations and iQ Power Technology Inc.

       6.42(4)      Corporate  Consulting  Agreement  May 1, 2000,  between  TRT
                    Capital  Projects  Inc.  and iQ Power  Technology  Inc.  and
                    Letter of Amendment dated July 31, 2000

       6.43(4)      Consulting Agreement dated August 12, 2000, between iQ Power
                    Technology and Richard J. Singer

       6.44(4)      Convertible  Debenture  dated  December 27,  2000,  among iQ
                    Power Technology Inc., John Lawson,  and iQ Battery Research
                    and Development GmbH

       6.45(4)      Grid  Promissory  Note dated  December 27, 2000,  between iQ
                    Power Technology Inc. and John Lawson

       6.46(4)      Commitment  Letter dated  December 13, 2000,  among iQ Power
                    Technology  Inc., John Lawson,  and iQ Battery  Research and
                    Development GmbH

       6.47(4)      Guarantee  dated December 27, 2000,  between John Lawson and
                    iQ Battery Research and Development GmbH

       6.48(4)      General Security  Agreement dated December 27, 2000, between
                    iQ Power Technology Inc. and John Lawson

       6.49(4)      Agreement of Subordination in Priority in Association with a
                    Conditional   Waiver  of  Claim  by  and  between  IQ  Power
                    Technology Inc. and iQ Battery Research and Development GmbH
                    dated May 2, 2001

       6.50(5)      Amendment  No. 3 to iQ Power  Technology  1998 Stock  Option
                    Plan

       6.51(5)      iQ Power Technology 2001 Incentive Plan


                                       28
<PAGE>


       Exhibit No.  Description

       6.52(6)      Finder's  Fee  Agreement  by and  between  iQ Power and EH&P
                    Investments AG dated May 5, 2001

       6.53(6)      European  Investor  Relations  Agreement  by and  between iQ
                    Power Technology Inc. and Magdalena  Finance Corp. dated May
                    7, 2001

       6.54(7)      European Investor Relations Agreement - Supplement #1 by and
                    between iQ Power Technology Inc. and Magdalena Finance Corp.
                    dated September 1, 2001.

       6.55(7)      Financial Public Relations Adviser  Consulting  Agreement by
                    and between iQ Power  Technology  Inc. and  Holterman & Team
                    GmbH dated July 1, 2001.

       6.56(7)      Amendment  to Terms of  Non-Revolving  Term Credit  Facility
                    Effective  June 30, 2001 by and between iQ Power  Technology
                    Inc. and John Lawson.

       6.57(8)      European    Investor    Relations    Consulting    Agreement
                    Supplemental  Agreement  # 1 by and  between the Company and
                    Magdalena Finance Corp. dated September 1, 2001. (previously
                    filed as Exhibit 6.60)

       6.58(8)      Contractual  Agreement  by and  between the Company and Jack
                    Wynn & Co., Inc., dated October 23, 2001.  (previously filed
                    as Exhibit 6.61)

       6.59(9)      Finders  Agreement by and between iQ Power  Technology  Inc.
                    and Hereford  Group  Limited.  (previously  filed as Exhibit
                    6.62)

       6.60(9)      Finders Agreement dated June 5, 2002 by and between iQ Power
                    Technology  Inc. and Jorg  Schweizer.  (previously  filed as
                    Exhibit 6.63)

       6.61(10)     Amendment  No. 4 to iQ Power  Technology  1998 Stock  Option
                    Plan

       6.62(10)     Amendment No. 1 to iQ Power Technology 2001 Incentive Plan

       6.63         Media Relations Consulting Agreement by and between iQ Power
                    Technology Inc. and Andreas Gloetzl.

       6.64         Financial Public Relations Adviser  Consulting  Agreement by
                    and between iQ Power Technology Inc. and Jorg Schweizer.

       6.65         Letter of Intent by and between iQ Power Technology Inc. and
                    Gel Electric Technologies, Inc.

       7.1(1)       List of Material Foreign Patents

       99.1         Section 904 Certification of Chief Executive Officer

       99.2         Section 904 Certification of Acting Chief Financial Officer

---------------------
(1)  Previously filed as an exhibit to the registrant's  registration  statement
     on Form SB-1 on December 10, 1998 (File No. 333-68649).
(2)  Previously filed as an exhibit to the registrant's  registration  statement
     on Form SB-1/A (Amendment No. 1) on March 18, 1998 (File No. 333-68649).
(3)  Previously  filed as an exhibit to the  registrant's  annual report on Form
     10-KSB for the year ended December 1, 1999.


                                       29
<PAGE>


(4)  Previously  filed as an exhibit to the  registrant's  annual report on Form
     10-KSB for the year ended December 31, 2000.
(5)  Previously filed as an exhibit to the registrant's  registration  statement
     on Form S-8 filed on July 25, 2001.
(6)  Previously filed as an exhibit to the registrant's quarterly report on Form
     10-QSB for the quarter ended June 30, 2001.
(7)  Previously filed as an exhibit to the registrant's quarterly report on Form
     10-QSB for the quarter ended September 30, 2001.
(8)  Previously  filed as an exhibit to the  registrant's  annual report on Form
     10-KSB for the year ended December 31, 2001.
(9)  Previously filed as an exhibit to the registrant's quarterly report on Form
     10-QSB for the quarter ended June 30, 2002.
(10) Previously filed as an exhibit to the registrant's  registration  statement
     on Form S-8 filed on November 8, 2002.

(b)  Reports on Form 8-K.

     None.


                                       30
<PAGE>


                                   SIGNATURES

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

November 14, 2002.

                                iQ POWER TECHNOLOGY INC.


                         By:    /s/ Peter E. Braun
                            -----------------------------------
                                Peter E. Braun,
                                President and Chief Executive Officer
                                (Principal Executive Officer)




                         By:    /s/ Marco Graf von Matuschka
                            -----------------------------------
                                Marco Graf von Matuschka,
                                Chief Financial Officer


                                       20
<PAGE>


                            SECTION 302 CERTIFICATION

I, Peter E. Braun, certify that:

1. I have reviewed this quarterly report of iQ Power Technology Inc.

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

3.  Based  on  my  knowledge,  the  financial  statement,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which the quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weakness in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls, and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



                            /s/ Peter E. Braun
                            -----------------------------------
                            Peter E. Braun, Chief Executive Officer


                                       31
<PAGE>


                            SECTION 302 CERTIFICATION

I, Marco Graf von Matuschka, certify that:

1. I have reviewed this quarterly report of iQ Power Technology Inc.

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

3.  Based  on  my  knowledge,  the  financial  statement,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which the quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weakness in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls, and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

                            /s/ Marco Graf von Matuschka
                            -----------------------------------
                            Marco Graf von Matuschka,
                            Chief Financial Officer


                                       32