================================================================================

                       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, 2000

                                       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 0-28968

                            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.)


                     Suite 708-A, 1111 West Hastings Street
                       Vancouver, British Columbia V6E 2J3
                                 (604) 669-3132
                          (Address and telephone number
                         of principal executive offices)

                                  Erlenhof Park
                              Inselkammer Strasse 4
                          D-82008 Unterhaching, Germany
(Address of principal place of business or intended principal place of business)

                                 (604) 669-3132
                           (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 September 30, 2000 was 9,746,620.

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


<PAGE>

                               IQ POWER TECHNOLOGY

                            INDEX TO THE FORM 10-QSB
                For the quarterly period ended September 30, 2000

<TABLE>

                                                                                Page
                                                                                ----
<S>                                                                             <C>
Part I - Financial Information ..................................................1

     ITEM 1. FINANCIAL STATEMENTS ...............................................1

        Unaudited Consolidated Balance Sheet ....................................1

        Unaudited Consolidated Statement of Loss and Comprehensive Loss .........2

        Unaudited Consolidated Statement of Shareholders' Equity (Deficit) ......3

        Unaudited Consolidated Statement of Cash Flow ...........................4

        Notes to the Unaudited Consolidated Financial Statements ................5

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
             AND RESULTS OF OPERATIONS .........................................12

Part II - OTHER INFORMATION ....................................................15

     ITEM 1. LEGAL PROCEEDINGS .................................................15

     ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS .........................15

     ITEM 3. DEFAULTS UPON SENIOR SECURITIES ...................................16

     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............16

     ITEM 5. OTHER INFORMATION .................................................16

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................16

SIGNATURES .....................................................................17

</TABLE>



                                       i
<PAGE>

Part I -  FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS



IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Balance Sheet
September 30, 2000
(Expressed in United States dollars; all amounts in thousands)
(Unaudited)
================================================================================


<TABLE>
                                                         September 30,    December 31,
                                                                 2000            1999
                                                        --------------   --------------
<S>                                                           <C>             <C>
ASSETS

CURRENT
   Cash and cash equivalents                                $   636           $ 2,283
   Receivable from shareholders                                  61                62
   Accounts receivable                                           95               180
   Prepaids and deposits                                         49                15
--------------------------------------------------------------------------------------
Total current assets                                            841             2,540
EQUIPMENT, net                                                  359               297
--------------------------------------------------------------------------------------
Total assets                                                $ 1,200           $ 2,837
======================================================================================

LIABILITIES

CURRENT
   Bank indebtedness                                        $     -           $     1
   Accounts payable                                             104               130
   Accrued liabilities                                          141                55
--------------------------------------------------------------------------------------
Total current liabilities                                       245               186

BANK DEBT - non-current                                           -                 2
--------------------------------------------------------------------------------------
Total liabilities                                               245               188
======================================================================================

SHAREHOLDERS' EQUITY (Note 4)

Authorized:
  An unlimited number of common shares of no par value.
Issued and outstanding:
       9,746,620 common shares at September 30, 2000
       9,731,620 common shares at December 31, 1999           5,941             5,904
Additional paid-in capital                                      406               396
Accumulated other comprehensive income (loss)                   (89)               82
Accumulated deficit, during development stage                (5,303)           (3,733)
--------------------------------------------------------------------------------------
Total shareholders' equity (deficit)                            955             2,649
--------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                  $ 1,200           $ 2,837
======================================================================================
</TABLE>

CONTINUING OPERATIONS

           See accompanying notes to consolidated financial statements



                                      1
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Loss and Comprehensive Loss
September 30, 2000
(Expressed in United States dollars; all amounts in thousands)
(Unaudited)
================================================================================


<TABLE>
                                         Cumulative
                                        from date of
                                       inception to         Three months ended              Nine months ended
                                       September 30,          September 30,                   September 30,
                                               2000           2000          1999           2000           1999
                                       --------------      ---------    -----------     ----------     ---------
<S>                                         <C>             <C>           <C>            <C>            <C>
Sales and other revenues                    $   222         $    46       $      -       $     48       $     -
----------------------------------------------------------------------------------------------------------------
EXPENSES
  Research and development expenses:
      Personnel                               1,738             163             93            443           328
      Laboratory                                957              85             71            254           160
      Office                                    438              43             52            158            70
      Consulting services                       563              10             28             31            64
      Professional fees                         724              12             27             59           102
----------------------------------------------------------------------------------------------------------------
                                              4,420             313            271            945           724
----------------------------------------------------------------------------------------------------------------
  General and administrative expenses:
      Personnel                                 316              63             18            132            55
      Financing                                 116             (28)           121            (94)          128
      Office                                    113              30             24             61            33
      Consulting services                       211              72              9            119            20
      Professional fees                         263              44             (4)           120            24
      Management fees                            90              18             19             54            19
      Marketing and sales expenses              107              67              -            109             -
      Investor relations                        179              32             55             99            55
      Research memberships                      100              50             50             50            50
      Travel                                    133              10             47             30            47
      Other                                     150              23             17             53            34
----------------------------------------------------------------------------------------------------------------
                                              1,778             381            356            733           465

  Interest                                      133               -             (1)             -            14
  Stock based compensation                      406               -             16             10           304
----------------------------------------------------------------------------------------------------------------
                                             (6,515)           (648)          (642)        (1,640)       (1,507)

INTEREST INCOME                                 186              13             23             70            23
----------------------------------------------------------------------------------------------------------------

NET LOSS                                     (6,329)           (635)          (619)        (1,570)       (1,484)

Other comprehensive (loss) income:
  Accumulated other comprehensive
    income (loss)                               (89)            (74)            (7)          (171)          (82)
----------------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS                          $(6,418)        $  (709)      $   (626)      $ (1,741)      $(1,566)
================================================================================================================
Basic and diluted loss per share                            $ (0.06)      $  (0.03)      $  (0.18)      $ (0.09)
================================================================================================================
Basic and diluted weighted average
  number of shares outstanding                            9,746,620     24,007,429      9,746,620    17,168,734
================================================================================================================
</TABLE>


           See accompanying notes to consolidated financial statements.



                                       2
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Cash Flows
September 30, 2000
(Expressed in United States dollars; all amounts in thousands)
(Unaudited)
================================================================================


<TABLE>
                                                      Cumulative from      Nine months      Nine months
                                                    date of inception            ended            ended
                                                     to September 30,    September 30,    September 30,
                                                                 2000             2000             1999
                                                   -------------------   ---------------  --------------
<S>                                                    <C>                <C>              <C>
OPERATING ACTIVITIES
   Net loss                                           $  (6,329)          $  (1,570)       $    (1,468)
   Items not affecting cash
      Depreciation and amortization                         178                  63                 51
      Stock based compensation                              378                  10                288
   Changes in non-cash working capital
      Decrease (increase) in accounts receivable            (95)                 85                (12)
      Decrease (increase) in prepaid and deposits           (49)                (34)               (40)
      Increase (decrease) in accounts payable               103                 (26)              (621)
      Increase (decrease) in accrued liabilities            141                  86                (31)
--------------------------------------------------------------------------------------------------------
                                                         (5,673)             (1,386)            (1,833)
--------------------------------------------------------------------------------------------------------
INVESTING ACTIVITY
   Additions to property, plant and equipment              (536)               (124)              (284)
--------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
   Increase in short-term debt                                1                   -               (108)
   Increase in due to shareholder                           (63)                 (1)              (187)
   Advances received from external parties                  296                   -                  -
   Increase in other long-term debt                           -                  (2)                (1)
   Cash acquired on business combination                  4,718                   -              4,718
   Advances from subsidiary                                 581                   -                260
   Issuance of capital stock                                446                  37                166
   Issuance of atypical shares                            1,025                   -                  -
--------------------------------------------------------------------------------------------------------
                                                          7,004                  34              4,848
--------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND
  CASH EQUIVALENTS                                          795              (1,476)             2,730

FOREIGN EXCHANGE MOVEMENT                                  (159)               (171)                (7)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                         -               2,283                 11
--------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                       $     636           $     636        $     2,734
========================================================================================================
</TABLE>



           See accompanying notes to consolidated financial statements



                                       3
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Shareholders' Equity (Deficit)
September 30, 2000
(Expressed in United States dollars; all amounts in thousands)
(Unaudited)
================================================================================


<TABLE>
                                                                           Accumulated                       Total
                                           Common shares    Additional           Other                 Shareholders'
                                       -------------------     Paid-In    Comprehensive   Accumulated         Equity
                                        Number     Amount      Capital     Income (Loss)     Deficit        (Deficit)
                                       --------   --------  -----------   --------------  ------------ --------------
<S>                                     <C>       <C>        <C>           <C>            <C>           <C>
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                                   -            -           -               -         (1,570)         (1,570)
Other comprehensive (loss) -
  foreign currency translation
  adjustments                              -            -           -            (171)             -            (171)
Exercise of options                   15,000           37           -               -              -              37
Stock based compensation                   -            -          10               -              -              10
---------------------------------------------------------------------------------------------------------------------

Balance at September 30, 2000      9,746,620      $ 5,941     $   406       $     (89)     $  (5,303)     $      955
=====================================================================================================================

</TABLE>


           See accompanying notes to consolidated financial statements



                                       4
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2000
(Expressed in United States dollars;
tabular amounts in thousands except per share data)
(Unaudited)
--------------------------------------------------------------------------------


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
     as reverse  acquisition  with iQ Battery being  identified as the acquiror.
     The comparative financial statements are those of iQ Battery.  Collectively
     within these  financial  statements the term Company  applied to operations
     subsequent to the business combination.

     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 a  intelligent  car battery,  in
     which, for the first time, 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 this
     process 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'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 come 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.

     The Company has 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. The Company  intends to
     use  the  proceeds  to  fund  research  and  development  of  iQ  Germany's
     technology,  expansion of the Company's  marketing and sales activities and
     general  working  capital.  It is unlikely  that current funds on hand will
     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 financings
     will be on terms beneficial to the existing shareholders.



                                       5
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2000
(Expressed in United States dollars;
tabular amounts in thousands except per share data)
(Unaudited)
--------------------------------------------------------------------------------


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  Basis of presentation

          These  financial  statements  have been  prepared in  accordance  with
          accounting  principles  generally  accepted  in the United  States for
          interim  financial  reporting and pursuant to the  instructions of the
          United  States  Securities  and  Exchange  Commission  Form 10-QSB and
          Article  10 of  Regulations  S-X.  While  these  financial  statements
          reflect all normal recurring  adjustments which are, in the opinion of
          the management,  necessary for fair presentation of the results of the
          interim  period,  they  do not  include  all of  the  information  and
          footnotes  required by generally  accepted  accounting  principles for
          complete financial statements.  For further information,  refer to the
          financial  statements and footnotes  thereto included in the Company's
          Annual  Report  filed on Form 10-KSB for the year ended  December  31,
          1999.

     (b)  Use of estimates

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

     (c)  Foreign currency translation

          The Company's current activities result in transactions denominated in
          German  Deutsche  Marks  and  United  States  and  Canadian   dollars.
          Management  considered the following in the process of determining the
          Company's functional currency.

          (i)  All equity  financing  to this date have been  denominated  in US
               funds.

          (ii) In excess of 50% of the Company's operating expenditures are paid
               or denominated in US funds.

          (iii)In excess of 50% of the total assets  throughout are  denominated
               in US  funds.  Further,  the  Company  maintains  its  cash in US
               dollars,  only converting to Canadian  dollars or German Deutsche
               Marks  to  the  extent   necessary  to  pay  Canadian  or  German
               denominated liabilities.

          Based on these factors,  the Company has determined that the US dollar
          is the appropriate  functional  currency for measurement and reporting
          purposes.



                                       6
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2000
(Expressed in United States dollars;
tabular amounts in thousands except per share data)
(Unaudited)
--------------------------------------------------------------------------------


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (c)  Foreign currency translation (continued)

          Transaction  amounts  denominated in foreign currencies are translated
          into US dollars at exchange rates prevailing at the transaction dates.
          Carrying  values of non-US dollar assets and  liabilities are adjusted
          at each balance sheet date to reflect the exchange rate  prevailing at
          that date.  Gains and losses arising from adjustment of foreign assets
          and  liabilities  are included in earnings.  Assets and liabilities of
          subsidiaries  not reporting in US dollars are translated into their US
          dollar  equivalents  at the rate of  exchange in effect at the balance
          sheet  date.  Revenues  and  expenses  are  translated  at the average
          exchange rate for the reporting period.  Gains and losses arising from
          translation  of  financial  statements  are deferred and recorded as a
          separate component of comprehensive income (loss).

     (d)  Cash and cash equivalents

          Cash and cash equivalents  consist of cash on hand,  deposits in banks
          and highly liquid money market  instruments with an original  maturity
          of 90 days or less.

     (e)  Equipment

          Equipment  is recorded  at cost.  Depreciation  is recorded  using the
          straight-line  method  based  upon the  useful  lives  of the  assets,
          generally estimated at 3-5 years. When assets are sold or retired, the
          cost and  accumulated  depreciation  are removed from the accounts and
          any gain or loss is included in income.

     (f)  Long-term liabilities to original shareholders

          Liabilities due to shareholders,  including interest, only in case the
          Company has generated  sufficient net assets or  liquidation  proceeds
          are shown under non-current liabilities.

     (g)  Research and development

          Research  and  development  costs are  expensed as  incurred  unless a
          project meets the specified criteria for  capitalization.  Transfer of
          intangible  assets in the amount of DM400,000  (US $ 194,680)  (patent
          and registered design) by founding shareholders of the Company and the
          related  liability  are not  reflected in the  accompanying  financial
          statements.



                                       7
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2000
(Expressed in United States dollars;
tabular amounts in thousands except per share data)
(Unaudited)
--------------------------------------------------------------------------------


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (h)  Impairment of long-lived assets

          The carrying value of long-lived  assets,  principally  equipment,  is
          reviewed  for   potential   impairment   when  events  or  changes  in
          circumstances indicate that the carrying amount of such assets may not
          be recoverable. The determination of recoverability is made based upon
          the  estimated  undiscounted  future  net cash  flows  of the  related
          assets.

     (i)  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 equals or exceeds the fair value of the underlying stock
          on the date of grant, no compensation expense is recognized.

     (j)  Financial instruments and risk concentration

          The Company  estimates  that the carrying  values of its cash and cash
          equivalents, current receivables and, payables, approximate fair value
          at  September  30, 2000 and  December  31, 1999 due to the  short-term
          maturity of the  balances.  Financial  instruments  which  potentially
          subject the Company to concentration of credit risk are primarily cash
          and cash equivalents.  It is the Company's  practice to place its cash
          and cash  equivalents  in time deposits at commercial  banks with high
          credit ratings. In foreign locations, local financial institutions are
          generally  utilized for local currency  needs.  The Company limits the
          amount of exposure to any one  institution  and does not believe it is
          exposed to any significant credit risk.

     (k)  Recent pronouncements

          In  June  1998,  the  Financial   Accounting  Standards  Board  issued
          Statement No. 133 (SFAS 133),  Accounting for  Derivative  Instruments
          and  Hedging   Activities,   which  standardizes  the  accounting  for
          derivative instruments.

          SFAS 133,  as amended,  is  effective  for all fiscal  quarters of all
          fiscal  years  beginning  after  June  15,  2000.  The  impact  on the
          Company's financial statements has not been determined but the Company
          currently  does not use  derivatives to manage its exposure to foreign
          exchange and interest rate risk. The Company will adopt SFAS 133 as of
          January 1, 2001.



                                       8
<PAGE>


iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2000
(Expressed in United States dollars;
tabular amounts in thousands except per share data)
(Unaudited)
--------------------------------------------------------------------------------


4.   SHARE CAPITAL

     (a)  Service warrants

          The US Investor  Relations  Service  Agreement dated June 28, 1999 was
          terminated in November 12, 1999 and the 200,000 warrants  provided for
          under the IR Agreement were  cancelled.  In December 1999, the Company
          issued 40,000 one year Service  Warrants,  each warrant  entitling the
          holder to purchase one common share exercisable as follows:

          (i)  20,000  warrants  vesting  on  execution  of  Investor  Relations
               Agreement, exercisable at a price of $ 5.00 per share;

          (ii) 20,000 warrants vesting June 1, 2000, exercisable at a price of $
               7.50 per share.

     (b)  Stock options

          The  Company  has  established  a Stock  Option  Plan  for  employees,
          officers, directors,  consultants, and advisors. Options granted under
          the  Stock  Option  Plan  may be  either  incentive  stock  option  or
          non-qualified stock options. The Company has reserved 1,918,000 common
          shares for issuance under the Stock Option Plan.  Options  granted for
          issuance under the Stock Option Plan  generally are not  transferable,
          and the  exercise  price of incentive  stock  options must be at least
          equal to 100% of the fair  market  value of the  common  shares on the
          date of the grant.

          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.

          The Company  grants stock options both under the Stock Option Plan and
          by way of individual grants outside of the Stock Option Plan.




                                       9
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2000
(Expressed in United States dollars;
tabular amounts in thousands except per share data)
(Unaudited)
--------------------------------------------------------------------------------


4.   SHARE CAPITAL (Continued)

     (b)  Stock options (continued)

          The  following  options  have been granted and remain  outstanding  at
          September 30, 2000 under the Stock Option Plan:

            Number of                 Exercise
             options                    price                 Expiry date
         --------------              -----------            ------------------
            1,035,000                 $  1.50               December 1, 2008
              138.000                 $  1.50               June 28, 2009
              160.000                 $  1.50               July 7, 2009
              115.000                 $  1.50               October 15, 2009
              367.000                 $  1.50               June 12, 2010
               43.000                 $  1.50               July 28, 2010
         --------------
            1,858,000
         ==============

          The  following  options  have been granted and remain  outstanding  at
          September 30, 2000 outside of the Stock Option Plan:

            Number of                 Exercise
             options                    price                 Expiry date
         --------------              -----------            ------------------

             60.000                   $  1.50               June 28, 2001
             40.000                   $  1.50               June 28, 2001
         --------------
            100.000
         ==============

          In addition,  15,000 shares were issued in the quarter ended March 31,
          2000, on the exercise of stock options  granted under the Stock Option
          Plan.

          In the quarter ended September 30, 2000, 80,000 options were cancelled
          by the board of directors granted under the stock option plan.



                                       10
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2000
(Expressed in United States dollars;
tabular amounts in thousands except per share data)
(Unaudited)
--------------------------------------------------------------------------------


5.   RELATED PARTY TRANSACTIONS

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

     (a)  Management  fees for the nine months ended  September 30, 2000 of $Nil
          (nine months ended September 30, 1999 - $Nil) paid to a company with a
          common director.

     The Company has entered into the following contractual arrangements:

     (a)  a consulting  agreement  dated August 25, 1998 with a company having a
          common  director.  Under the terms of the  agreement  the  Company  is
          obligated to pay the  consultant  $6,000 per month for a term of three
          years commencing August 25, 1998;

     (b)  employment  agreement  with two directors of the Company to occupy the
          position of President and Chief Executive Officer and  Vice-President,
          Research and  Development  and Technical  Advisor.  Under the terms of
          these  agreements,  the Company is  obligated  to pay these  employees
          $9,000 and $8,000  per month,  respectively,  for a term of five years
          commencing August 31, 1998;

     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  and
     directors  of iQ  Battery.  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
     DM  400,000  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.  All of the
     Company's physical assets are located in Germany.



                                       11
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

     Certain  statements  and  information  contained  in this  Form  constitute
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking  statements involve known
and unknown  risks,  uncertainties  and other  factors that may cause the actual
results,  performance  or  achievement of 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 and history of losses, the Company's relative concentration of
customers,  the risks  related to the  Company's  ability to  commercialize  its
technology,  risks  associated  with changes in market  demand for the Company's
technology,  risks  involving  the  management  of  growth  and  integration  of
acquisitions,  competition, product development risks and risks of technological
change,  dependence on third-party  marketing  relationships and suppliers,  the
Company's  ability to protect  its  intellectual  property  rights and the other
risks and  uncertainties  detailed  in the  Company's  Securities  and  Exchange
Commission filings.

     Unless provided otherwise, all amounts are in United States dollars.

Overview

     The Company was  organized in 1991 to develop and  commercialize  batteries
and electric power technology for the automotive industry.  Since that date, the
Company has been engaged primarily in research and product development  efforts.
Its primary  product is a "smart"  automotive  starter  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,  and does not anticipate  having  material  revenues from operations
until fourth  quarter of 2001,  if at all. 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 deficit  accumulated  during the development  stage will
increase significantly before it generates material revenues.  Prior to June 18,
1999,  the  financial  statements  of the  Company  and iQ  Battery  Research  &
Development  GmbH ("iQ  Germany") were presented as separate and distinct as the
former shareholders of iQ Germany had a put option to enable them to reverse the
August 25,  1998  transaction  in which the Company  acquired  iQ Germany.  That
option  terminated  on June 18,  1999,  when the  Company  raised  in  excess of
$3,000,000 through equity financing. See "Liquidity and Capital Resources."

     After  June  17,  1999,   all  financial   information  is  reported  on  a
consolidated   basis.  Any  financial   information  of  the  Company  used  for
comparative  purposes  prior to June 18, 1999,  is financial  information  of iQ
Germany only.

     On March 30, 2000, the Company's  shareholders  approved a reverse-split of
the Company's issued and outstanding common shares on a two and one-half (2 1/2)
share for one (1) share basis.  On April 10, 2000, the Company filed Articles of
Amendment to effect the reverse  split,  and each 2 1/2 common shares issued and
outstanding on April 10, 2000 were automatically  converted into 1 common share.
The information contained in the Company's financial statements,  which are part
of this report, and this report give effect to the reverse split.


The  Company's  Results of Operations  for the Three Months Ended  September 30,
2000 compared to the Three Months Ended September 30, 1999

     No revenues from operations were recorded in either the three months period
ended  September  2000 or the three months  period  ended  September  1999.  The
Company does not anticipate it will record any revenues from  operations  during
the fourth  quarter  ending  December 31, 2000.  The Company  earned  $13,000 in
interest income during the three months period ended September 30, 2000 compared
to $23,000 for the same period in 1999.


                                       12
<PAGE>

     As of  September  30,  2000  the  Company  had an  accumulated  deficit  of
$5,303,000.  The  Company  incurred a net loss of  $635,000  for the three month
period  ended  September  30, 2000  compared  to a net loss of $619,000  for the
comparable period in 1999.

     For the three month period ended  September 30, 2000, the Company  incurred
research and  development  expenses of $313,000  compared  with $271,000 for the
comparable  period of the prior year, an increase of  approximately  15.5%.  The
increase during the three month period ended September 30, 2000, compared to the
same period in 1999 results from the following:  personnel expenses increased to
$163,000 during the three month period in 2000 from $93,000 in 1999, as a result
of an  increase  in the  number  of  research  and  development  personnel,  and
laboratory  expenses  increased to $85,000 during the three month period in 2000
from $71,000 in 1999.  Increases in personnel  expenses as well as in laboratory
expenses reflect the cost of supporting a higher level of activity,  principally
related to building  prototypes and product testing.  Office expenses  decreased
from  $52,000  during the three month period in 1999 to $43,000 in 2000 due to a
lower level of travel activity and due to foreign currency  effects.  Consulting
services and  professional  fees related to research and  development  decreased
from $55,000  during the three month  period in 1999 to $22,000 in 2000,  as the
Company relied on its own personnel for research and development.

     The Company  incurred general and  administrative  expenses of $381,000 for
the three month period ended  September  30, 2000 compared with $356,000 for the
comparable   period  of  the  prior  year,  an  increase  of  approximately  7%.
Administrative  and general corporate  expenses increased during the three month
period  ended  September  30,  2000  compared to the same period in 1999 for the
following: personnel expenses increased to $63,000 during the three month period
in 2000 from  $18,000  in 1999,  as a result  of an  increase  in the  number of
administrative personnel and redundant accrued expenses related to the Company's
former  Chief  Financial  Officer  incurred  during the three month period ended
September 30, 2000; office expenses  increased to $30,000 during the three month
period in 2000 from  $24,000  in 1999,  as a result of an  increase  in  general
administrative and business activities; consulting services increased to $72,000
during the three  months  period in 2000 from $9,000 in 1999,  resulting  mainly
from recruiting expenses related to the search for new finance staff, IT-related
expenses  in  context  with the  customizing  of the  Company's  management  and
financial  reporting  software  and  increased  management  consulting  expenses
related to establishing a human resources  department for the Company during the
three month period ended September 30, 2000. During the three month period ended
September 30, 2000, the Company incurred marketing and sales expenses of $67,000
compared to $nil in the comparable  period of the prior year, due to an increase
in the number of sales  personnel and intensified  sales and marketing  activity
related to implementing the Company's  roll-out strategy for its first batteries
in relevant markets scheduled for 2001.  Travel expenses  decreased from $47,000
during the three month period in 1999 to $10,000 in 2000 and investor  relations
expenses decreased from $55,000 during the three month period in 1999 to $32,000
in 2000.

     The  Company's  expenditures  are  expected  to  materially  increase as it
pursues  research,  development,  testing  and  commercialization  programs,  it
intensifies its sales and marketing  activity related to implementing a roll-out
strategy for its first  batteries in 2001. The Company  intends to begin selling
batteries  in the fourth  quarter of 2001 in the after  market,  as  replacement
batteries.  The  Company  anticipates  the  batteries  will  be  distributed  by
retailers and wholesalers. Selling batteries to the after market reflects only a
part of the  Company's  distribution  and revenue  strategy.  The Company  still
anticipates  that the  primary  source  of its  revenues  will be  derived  from
licensing its battery technology to manufacturers.

     In addition to the extension of sales and marketing  activity,  the Company
expands finance and administrative staff and financial and management system.


The Company's Results of Operations for the Nine Months Ended September 30, 2000
compared to the Nine Months Ended September 30, 1999

     No revenues from  operations  were recorded in either the nine month period
ended September 30, 2000 or the nine months period ended September 30, 1999. The
Company does not anticipate it will record any revenues from  operations  during
the fourth  quarter  ending  December 31, 2000.  The Company  earned  $70,000 in
interest income during the nine month period ended September 30, 2000,  compared
to $23,000 for the same period in 1999.

     The Company  incurred a net loss of  $1,570,000  for the nine month  period
ended September 30, 2000 compared to a net loss of $1,484,000 for the comparable
period in 1999.



                                       13
<PAGE>

     For the nine month period ended  September 30, 2000,  the Company  incurred
research and  development  expenses of $945,000  compared  with $724,000 for the
comparable  period of the prior year,  an increase of  approximately  5.8%.  The
increase in research and development  expenses reflects the cost of supporting a
higher  level  of  activity,  principally  research  and  development,  building
prototypes and product  testing.  Research and  development  expenses  increased
during the nine month period  ended  September  30,  2000,  compared to the same
period in 1999 for the  following:  personnel  expenses  increased  to  $443,000
during the nine month  period in 2000 from  $328,000 in 1999,  as a result of an
increase  in the  number  of  research  and  development  personnel;  laboratory
expenses  increased  to  $254,000  during  the nine  month  period  in 2000 from
$160,000 in 1999; and office  expenses  attributable to research and development
increased to $158,000 during the nine month period in 2000 from $70,000 in 1999,
as a result if increased research and development activity.  Consulting services
and  professional  fees  related to  research  and  development  decreased  from
$166,000 during the nine month period in 1999 to $90,000 in 2000, as the Company
relied on its own personnel for research and development.

     The Company  incurred general and  administrative  expenses of $733,000 for
the nine month period ended  September  30, 2000  compared with $465,000 for the
comparable  period of the prior  year,  an  increase  of  approximately  57.63%.
Administrative  and general corporate  expenses  increased during the nine month
period  ended  September  30,  2000  compared to the same period in 1999 for the
following: personnel expenses increased to $132,000 during the nine month period
in 2000 from  $55,000  in 1999,  as a result  of an  increase  in the  number of
administrative personnel and redundant accrued expenses related to the Company's
former  Chief  Financial  Officer  incurred  during the nine month  period ended
September 30, 2000;  office expenses  increased to $61,000 during the nine month
period in 2000 from  $33,000  in 1999,  as a result of an  increase  in  general
administrative  and  business  activities;   consulting  services  increased  to
$119,000  during the nine months period in 2000 from $20,000 in 1999,  resulting
principally  from  recruiting  expenses  related to the  search for new  finance
staff,  IT-related  expenses in context with the  customizing  of the  Company's
management and financial reporting software and increased management  consulting
expenses  related to establishing a human  resources  department for the Company
during the nine month period  ended  September  30, 2000.  During the nine month
period  ended  September  30,  2000,  the Company  incurred  management  fees of
$54,000,  marketing and sales expenses of $109,000,  investor relations expenses
of $99,000, travel expenses of $30,000 and other expenses of $53,000,  primarily
as a result of sales and  marketing  activities  and  additional  administrative
costs related to being a public  company.  Professional  fees related to general
and administrative activities increased to $120,000 during the nine month period
ended September 30, 2000 from $24,000 during the same period in 1999.

     The  Company's  expenditures  are  expected  to  materially  increase as it
pursues  research,  development,  testing  and  commercialization  programs,  it
intensifies its sales and marketing  activity related to implementing a roll-out
strategy for its first  batteries in 2001. The Company  intends to begin selling
batteries in the fourth  quarter of 2001,  in the after market,  as  replacement
batteries.  The  Company  anticipates  its  batteries  will  be  distributed  by
retailers and wholesalers. Selling batteries to the after market reflects only a
part of the  Company's  distribution  and revenue  strategy.  The Company  still
anticipates that its primary source of revenues in the long-term will be derived
from licensing its battery technology to battery manufacturers.

     In addition to the extension of sales and marketing  activity,  the Company
expands finance and administrative staff and financial and management system.


Liquidity and Capital Resources

     Since inception,  the Company has financed its operations primarily through
sales of its equity  securities.  As of September 30, 2000, the Company had cash
and cash  equivalents  of  $636,000,  and  working  capital  of  $596,000.  From
inception to  September  30, 2000,  the Company had raised  approximately  $7.35
million  (net of issuance  costs)  from the sale of  securities,  excluding  the
issuance of 4,000,000  common  shares for deemed  proceeds of  $2,500,000 on the
business  combination with iQ Germany.  On June 18, 1999, the Company  completed
its initial public  offering in the United States  pursuant to which it received
net proceeds of $4,690,000. As a part of the issuance of 2,200,000 common shares
the agent to the offering was granted 220,000 Agent Warrants entitling the agent
to purchase  220,000  common shares for $2.50 per share in the first year of the
warrant and for $3.75 per share in the second year of  warrant.  Agent  Warrants
were  exercised  to  purchase  139,850  shares for  proceeds  of $349,000 to the
Company during the year ended December 31, 1999.

     iQ  Germany  is  obligated  to pay to Horst  Dieter  Braun,  the  Company's
founding  President,  and  Peter  Braun,  the  Company's  President,   DM400,000
($194,680) in connection with iQ Germany's  acquisition of the iQ technology and



                                       14
<PAGE>

other  intellectual  property rights. The amount is payable only out of and only
to the extent of the gross profits of iQ Germany.

     The Company  plans to finance its capital  needs  principally  from the net
proceeds of its past  securities  offerings  and  interest  thereon,  additional
equity  financings and, to the extent  available,  lines of credit.  The Company
currently has no commitments  related to any equity financings or for any credit
facilities  such as revolving  credit  agreements  or lines of credit that could
provide  additional  working  capital.  The Company  believes  that its existing
capital  resources will be sufficient to fund its  operations  through 2000. 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, marketing and promoting its products, the extent to which
its products achieve market acceptance, the revenues generated from the sales of
its  products,  if any,  and  other  factors.  The  Company  expects  to  devote
substantial  cash for research and  development  activities and to implement the
roll-out strategy related to marketing its first battery scheduled for 2001. The
Company  cannot  adequately  predict  the amount  and timing of its future  cash
requirements.  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.

     The  Company   anticipates   that  the  level  of  spending  will  increase
significantly  in the future periods as it undertakes  research and  development
activities  and  implements  a  marketing  and  sales  strategy  related  to the
commercialization  of the iQ technology.  In addition,  the Company  anticipates
that its general and administrative expenses will also significantly increase as
a result of the  growth  in our  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.


Foreign Currency Translation Risk

     To date,  exposure to foreign currency  fluctuations has not had a material
effect on our  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.


Part II -  OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS

     From time to time,  the  Company  may be a party to  litigation  and claims
incident to the ordinary course of business. While the results of litigation and
claims cannot be predicted with  certainty,  the Company  believe that the final
outcome of such matters will not have a material adverse effect on its business,
financial condition and operating results.

     ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     a)   Sales of Unregistered Securities

          Not applicable.



                                       15
<PAGE>

     b)   Use of Proceeds from Sales of Registered Securities

     On June 18, 1999, the Company  completed an initial public  offering of its
common  shares.  The selling  agent in the offering was IPO Capital  Corp.  (the
"Agent").  The common  shares sold in the  offering  were  registered  under the
Securities  Act of 1933, as amended,  on a  Registration  Statement on Form SB-1
(the "Registration  Statement") (Reg. No. 333-68649) that was declared effective
by the SEC on May 10, 1999.  The offering  commenced on May 10, 1999 after which
time, all 2,200,000 common shares  registered  under the Registration  Statement
were sold at a price to the  public of $2.50 per  common  share.  The  aggregate
offering amount registered was $5,500,000.  In connection with the offering, the
Company paid an aggregate of $105,000 in  commissions  and fees to the Agent and
also issued to the Agent warrants to purchase  220,000 common shares.  The Agent
may exercise the warrants for US$2.50 per common share during the first year and
for US$3.75 per common share during the second year after issuance.

     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  security  holders of the
Company during the three month period ended September 30, 2000.


     ITEM 5. OTHER INFORMATION

           None.


     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          None.

     (b)  Reports on Form 8-K

          None.




                                       16
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                       IQ POWER TECHNOLOGY INC

Date:  November 14, 2000               By: /s/ Peter E. Braun
                                           -------------------------------------
                                          Name:  Peter E. Braun
                                          Title: President and Principal
                                                 Financial and Accounting
                                                 Officer













                                       17