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

                       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 June 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 No ----- --------

     The  number  of  outstanding  common  shares,  without  par  value,  of the
registrant at June 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 June 30, 2000

<TABLE>

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

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

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

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

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

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

              Notes to the 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 ..................16

         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 ...........................17


SIGNATURES

</TABLE>


<PAGE>


Part I -  FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS


IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Balance Sheet
(Expressed in United States Dollars)
(Unaudited)
================================================================================

<TABLE>
                                                                  June 30,        December 31,
                                                                      2000                1999
                                                                 ----------       ------------
<S>                                                                <C>                 <C>
ASSETS
CURRENT
  Cash                                                             $ 1,363             $ 2,283
  Receivable from shareholders                                          56                  62
  Accounts receivable                                                  102                 180
  Prepaids and deposits                                                 42                  15
----------------------------------------------------------------------------------------------
Total current assets                                                 1,563               2,540

EQUIPMENT, net                                                         348                 297
----------------------------------------------------------------------------------------------
Total assets                                                       $ 1,911             $ 2,837
==============================================================================================

LIABILITIES
CURRENT
  Bank indebtedness                                                    $ -                 $ 1
  Accounts payable                                                     157                 130
  Accrued liabilities                                                   91                  55
----------------------------------------------------------------------------------------------
Total current liabilities                                              248                 186

BANK DEBT - non-current                                                  -                   2
----------------------------------------------------------------------------------------------
Total liabilities                                                      248                 188
----------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY

Capital stock
Authorized:
  An unlimited number of common shares of no par value
Issued and outstanding:
  9,746,620 common shares at June 30, 2000
  9,731,620 common shares at December 31, 1999                       5,941               5,904
Additional paid-in capital                                             406                 396
Accumulated other comprehensive (loss) income                          (15)                 82
Accumulated deficit, during development stage                       (4,669)             (3,733)
----------------------------------------------------------------------------------------------
Total shareholders' equity                                           1,663               2,649
----------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                         $ 1,911             $ 2,837
==============================================================================================

</TABLE>

CONTINUING OPERATIONS (Note 2)


       See Accompanying Notes to the Consolidated Financial Statements



                                       1
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Loss and Comprehensive Loss
(Expressed in United States Dollars;
all amounts in thousands except per share data)
(Unaudited)


<TABLE>
                                                 Cumulative
                                               from date of     Three months ended          Six months ended
                                               inception to           June 30,                   June 30,
                                                   June 30,    ---------------------       ----------------------
                                                       2000      2000         1999         2000          1999
                                               -------------   --------      -------      --------      -------

<S>                                                 <C>          <C>          <C>          <C>          <C>
SALES AND OTHER REVENUE                             $ 176          $ -           $ -      $     -        $    -
----------------------------------------------------------------------------------------------------------------

EXPENSES

  Research and development expenses
      Personnel                                     1,575          162           111          279           243
      Laboratory                                      872           87            50          169            90
      Office                                          395           46            12          115            17
      Consulting services                             553            6            21           21            35
      Professional fees                               712           36            58           47            76
----------------------------------------------------------------------------------------------------------------
                                                    4,107          337           252          631           461
----------------------------------------------------------------------------------------------------------------

  General and administrative expenses
      Personnel                                       253           33            23           68            39
      Financing                                       144           (7)            7          (58)            8
      Office                                           83           16             4           24             9
      Consulting services                             139           29             6           46            12
      Professional fees                               219           43            35           76            39
      Management fees                                  72           18             -           36             -
      Marketing and sales expenses                     40           39             -           40             -
      Investor relations                              147           47             -           68             -
      Research memberships                             50            -             -            -             -
      Travel                                          123            4             -           20             -
      Other                                           127           21             -           31             -
----------------------------------------------------------------------------------------------------------------
                                                    1,397          243            75          351           107
----------------------------------------------------------------------------------------------------------------

  Interest                                            133            -             9            -            15
  Stock based compensation                            406            5           288           10           288
----------------------------------------------------------------------------------------------------------------
                                                   (5,867)        (585)         (624)        (992)         (871)
----------------------------------------------------------------------------------------------------------------

INTEREST INCOME                                       173           24             5           56             5
----------------------------------------------------------------------------------------------------------------
NET LOSS                                           (5,694)        (561)         (619)        (936)         (866)

Other comprehensive (loss) income:
  Accumulated other comprehensive
    income (loss)                                     (15)         (51)            3          (97)          (75)
----------------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS                                $(5,709)      $ (612)       $ (616)    $ (1,033)       $ (941)
----------------------------------------------------------------------------------------------------------------

Basic and diluted loss per share                               $ (0.06)      $ (0.10)     $ (0.11)      $ (0.16)
----------------------------------------------------------------------------------------------------------------

Weighted average number of
  shares outstanding                                         9,746,620     5,865,295   9,741,620      5,492,647
----------------------------------------------------------------------------------------------------------------
</TABLE>


          See Accompanying Notes to the Consolidated Financial Statements



                                       2
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Shareholders' Equity (Deficit)
(Expressed in United States Dollars;
all amounts in thousands except per share data)
(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                                           -           -          -              -         (936)        (936)
Other comprehensive (loss) -
  foreign currency translation adjustments         -           -          -            (97)           -          (97)
Exercise of options                           15,000          37          -              -            -           37
Stock based compensation                           -           -         10              -            -           10
---------------------------------------------------------------------------------------------------------------------

Balance at June 30, 2000                   9,746,620       5,941        406            (15)      (4,669)       1,663
</TABLE>


Note 1

During the period to June 30, 2000 the Company  completed a share  consolidation
whereby all of the Company's issued and outstanding  shares were consolidated on
a 2.5 shares to 1 basis.  This  consoldation has been  retroactively  applied in
these financial statements.

      See Accompanying Notes to the Consolidated Financial Statements



                                       3
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Cash Flow
(Expressed in United States Dollars;
all amounts in thousands except per share data)
(Unaudited)


<TABLE>
----------------------------------------------------------------------------------------------------------------------
                                                                Cumulative from        Six months          Six months
                                                              date of inception             ended               ended
                                                                    to June 30,          June 30,            June 30,
                                                                           2000              2000                1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                <C>               <C>
OPERATING ACTIVITIES
  Net loss                                                            $ (5,694)          $ (936)           $    (866)
  Items not affecting cash
    Depreciation and amortization                                          165               50                   25
    Stock based compensation                                               406               10                  288
  Changes in non-cash working capital
    (Increase) decrease in accounts receivable                            (102)              84                    9
    (Increase) decrease in prepaid and deposits                            (42)             (27)                   -
    Increase (decrease) in accounts payable                                157               27                 (377)
    (Decrease) increase in accrued liabilities                              91               36                   14
                                                                        (5,019)            (756)                (907)
----------------------------------------------------------------------------------------------------------------------


INVESTING ACTIVITY
  Additions to property, plant and equipment                              (513)            (101)                (120)
----------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
  Decrease in long-term debt                                                (2)              (3)                (105)
  Decrease in due to shareholder                                           (56)               6                  (79)
  Advances received from external parties                                  296                -                    -
  Cash acquired on business combination                                  4,718                -                4,718
  Advances from subsidiary                                                 581                -                  260
  Issue of capital stock                                                   446               37                    -
  Issuance of atypical shares                                            1,025                -                    -
                                                                         7,008               40                4,794
----------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS                                                       1,476             (817)               3,767

FOREIGN EXCHANGE MOVEMENT                                                 (113)            (103)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                                        -            2,283                   11

CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                                        $ 1,363           $1,363             $  3,778
----------------------------------------------------------------------------------------------------------------------
</TABLE>


           See Note 6 for non-cash investing and financing activity


        See Accompanying Notes to the Consolidated Financial Statements



                                       4
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 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
     (see Note 5). 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 developing a chargeable  battery which
     allows an improved current output at low outside temperatures.  The process
     engineering  for this  chargeable  battery  and 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 Floha,  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 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
     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,  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 six months ended June 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-Q and Article
          10 of Regulations  S-X. While these financial  statements  reflect all
          normal recurring  adjustments which are, in the opinion of 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-SB for the year ended December 31, 1999.

     (b)  Use of estimates

          The  preparation of financial  statements in conformity with generally
          accepted accounting principles generally accepted in the United States
          requires  management to make estimates and assumptions that affect the
          reported  amounts  of  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
          both US and Canadian dollars.  Management  considered the following in
          the process to determine 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  to the  extent
               necessary to pay Canadian denominated liabilities.

          Based on these  factors  the Company  has  determined  that the United
          States dollars 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 six months ended June 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  (patent and  registered
          design)  by  founding  shareholders  of the  Company  and the  related
          liability are not reflected in the accompanying financial statements.

     (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.



                                       7
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2000
(Expressed in United States Dollars;
tabular amounts in thousands except per share data)
(Unaudited)
================================================================================


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (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 March 31, 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 six months ended June 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 has
          been 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 lease
          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.

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

             Number of                 Exercise
              options                   price                  Expiry date
              -------                   -----                  -----------
            1,035,000                  $ 1.50                 December 1, 2008
               80,000                  $ 2.50                 December 1, 2008
               58,000                  $ 1.50                 June 28, 2009
               80,000                  $ 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
            ---------
            1,895,000



                                       9
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 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 June
          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 12, 2002
             --------
             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.

5.   RELATED PARTY TRANSACTIONS

     Related  party  transactions  not  disclosed  elsewhere  in  the  financial
     statements comprised: (a) Management fees for the six months ended June 30,
     2000 of $Nil (six months ended June 30, 1999 - $Nil) paid to a company with
     a common director.  The Company has entered into the following  contractual
     arrangements:

     (i)  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;

     (ii) 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;

     (iii)an employment  agreement  with the  Vice-President,  Finance and Chief
          Financial  Officer.  Under the terms of the agreement,  the Company is
          obligated  to pay this  employee  $7,000 per month for a term of three
          years  commencing  September 1, 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.



                                       10
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2000
(Expressed in United States Dollars;
tabular amounts in thousands except per share data)
(Unaudited)
================================================================================


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 Report  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 late 2000, 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 a
part of this report, and this report give effect to the reverse split.



                                       12
<PAGE>

The  Company's  Results of  Operations  for the Three Months Ended June 30, 2000
Compared to the Three Months Ended June 30, 1999.

     No revenues  were  recorded in either the three month period ended June 30,
2000 or the three  month  period  ended  June 30,  1999.  The  Company  does not
anticipate it will record any revenues from operations  during the third quarter
ending  September 30, 2000. The Company earned $24,000 in interest income during
the three  month  period  ended June 30,  2000,  compared to $5,000 for the same
period in 1999.

     As of June 30, 2000, the Company had an accumulated  deficit of $4,669,000.
The Company  incurred a net loss of $561,000  for the three month  period  ended
June 30, 2000,  compared to a net loss of $619,000 for the comparable  period in
1999. The difference in the non-cash stock-based compensation expense during the
three month period ended June 30, 1999 of $288,000 compared to $5,000 during the
same  period in 2000,  accounted  in part for the  higher net loss for the three
month period ended June 30, 1999.

     For the three  month  period  ended June 30,  2000,  the  Company  incurred
research and  development  expenses of $337,000  compared  with $252,000 for the
comparable  period of the prior year.  The increase in research and  development
expenses reflects the cost of supporting a higher level of activity, principally
research, product development, building prototypes and product testing. Research
and development  expenses increased during the three month period ended June 30,
2000, compared to the same period in 1999 for the following:  personnel expenses
increased  to $162,000  during the three month  period in 2000 from  $111,000 in
1999,  as a result of an  increase  in the number of  research  and  development
personnel;  laboratory  expenses  increased  to $87,000  during the three  month
period in 2000 from $50,000 in 1999;  and office  expenses  increased to $46,000
during  the three  month  period in 2000 from  $12,000  in 1999,  as a result of
increased   research  and   development   activity.   Consulting   services  and
professional  fees related to research and  development  decreased  from $79,000
during the three month period in 1999 to $42,000 in 2000, as the Company  relied
on its own personnel for research and development.

     The Company  incurred general and  administrative  expenses of $243,000 for
the three  month  period  ended June 30,  2000  compared  with  $75,000  for the
comparable  period  in  1999.  Administrative  and  general  corporate  expenses
increased  during the three month period  ended June 30,  2000,  compared to the
same period in 1999 for the following:  personnel  expenses increased to $33,000
during the three month  period in 2000 from  $23,000 in 1999,  as a result of an
increase in the number of administrative personnel; office expenses increased to
$16,000  during the three month period in 2000 from $4,000 in 1999,  as a result
of an increase in general  administrative  and business  activities;  consulting
services  increased to $29,000 during the three month period in 2000 from $6,000
in 1999. During the three month period ended June 30, 2000, the Company incurred
management  fees of $18,000,  marketing and sales expenses of $39,000,  investor
relations  expenses of $47,000,  travel expenses of $4,000 and other expenses of
$21,000,  primarily as a result of sales and marketing activities and additional
administrative cost related to being a public company. Professional fees related
to general and administrative  activities  increased to $43,000 during the three
month period ended June 30, 2000 from $35,000 during the same period in 1999.

     The  Company's  expenditures  are  expected  to  materially  increase as it
pursues  research,  development,  testing  and  commercialization  programs  and
expands finance and administrative staff and financial and management system.

The  Company's  Results of  Operations  for the Six Months  Ended June 30,  2000
Compared to the Six Months Ended June 30, 1999.

     No revenues  were  recorded in either the six month  period  ended June 30,
2000 or the six  month  period  ended  June  30,  1999.  The  Company  does  not
anticipate it will record any revenues from operations  during the third quarter
ending  September 30, 2000. The Company earned $56,000 in interest income during
the six month period ended June 30, 2000, compared to $5,000 for the same period
in 1999.

     The Company  incurred a net loss of $936,000 for the six month period ended
June 30, 2000,  compared to a net loss of $866,000 for the comparable  period in
1999. The difference in the non-cash stock-based compensation expense during the
six month period ended June 30, 1999 of $288,000  compared to $10,000 during the
same period in 2000, accounted in part for the higher net loss for the six month
period ended June 30, 1999.



                                       13
<PAGE>

     For the six month period ended June 30, 2000, the Company incurred research
and development  expenses of $631,000  compared with $461,000 for the comparable
period of the prior year.  The  increase in research  and  development  expenses
reflects  the  cost of  supporting  a  higher  level  of  activity,  principally
research, product development, building prototypes and product testing. Research
and development  expenses  increased  during the six month period ended June 30,
2000, compared to the same period in 1999 for the following:  personnel expenses
increased to $279,000 during the six month period in 2000 from $243,000 in 1999,
as a result of an increase in the number of research and development  personnel;
laboratory  expenses  increased to $169,000  during the six month period in 2000
from $90,000 in 1999; and office  expenses  increased to $115,000 during the six
month period in 2000 from $17,000 in 1999, as a result of increased research and
development  activity.  Consulting  services  and  professional  fees related to
research and development  decreased from $111,000 during the six month period in
1999 to $68,000 in 2000, as the Company relied on its own personnel for research
and development.

     The Company  incurred general and  administrative  expenses of $351,000 for
the six  month  period  ended  June 30,  2000  compared  with  $107,000  for the
comparable  period  in  1999.  Administrative  and  general  corporate  expenses
increased during the six month period ended June 30, 2000,  compared to the same
period in 1999 for the following: personnel expenses increased to $68,000 during
the six month period in 2000 from $39,000 in 1999, as a result of an increase in
the number of  administrative  personnel;  office expenses  increased to $24,000
during  the six  month  period in 2000  from  $9,000 in 1999,  as a result of an
increase in general administrative and business activities;  consulting services
increased  to $46,000  during the six month period in 2000 from $12,000 in 1999.
During the six month period ended June 30, 2000, the Company incurred management
fees of $36,000,  marketing and sales  expenses of $40,000,  investor  relations
expenses of $68,000,  travel  expenses of $20,000 and other expenses of $31,000,
primarily  as  a  result  of  sales  and  marketing  activities  and  additional
administrative cost related to being a public company. Professional fees related
to general and  administrative  activities  increased to $76,000  during the six
month period ended June 30, 2000 from $39,000 during the same period in 1999.

     The  Company's  expenditures  are  expected  to  materially  increase as it
pursues  research,  development,  testing  and  commercialization  programs  and
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 June 30, 2000,  the Company had cash and
cash equivalents of $1,363,000. From inception to June 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 the 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,  that  company's
founding  President  and Peter Braun,  the  Company's  President,  DM 400,000 in
connection  with  iQ  Germany's  acquisition  of the  iQ  technology  and  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  and, to the
extent available,  lines of credit. The Company currently has no commitments 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  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 cannot  adequately
predict the amount and timing of our 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



                                       14
<PAGE>

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 future  periods  as it  undertakes  research  and  development
activities 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.

Recent Accounting Pronouncements

Accounting for Derivative Instruments and Hedging Activities.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities."  The Statement  establishes  accounting  and reporting
standards  requiring that every derivative  instrument  (including some types of
derivative  instruments  embedded in other contracts) be recorded in the balance
sheet as either an asset or liability  measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized  currently in
earnings unless specific hedge accounting  criteria are met. Special  accounting
for qualifying  hedges allows a derivative's  gains and losses to offset related
results on the hedged item in the income statement,  and requires that a company
must formally document,  designate, and assess the effectiveness of transactions
that receive hedge accounting.  SFAS 133 is effective for fiscal years beginning
after June 15,  1999 and must be applied to  instruments  issued,  acquired,  or
substantively  modified after December 31, 1997. The Company does not expect the
adoption  of the  accounting  pronouncement  to have a  material  effect  on our
financial position or results of operations.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     None.

     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  believes that the final
outcome of such matters will not have a material adverse effect on its business,
financial condition and operating results.



                                       15
<PAGE>

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     a)   Sales of Unregistered Securities

     During the three month  period  ended March 31,  2000,  the Company  issued
15,000 common  shares  pursuant to the exercise of Stock Options for proceeds of
$37,500.  The common shares were issued to non-U.S.  persons  outside the United
States in reliance upon an exemption from registration  pursuant to Regulation S
promulgated under the Securities Act.

     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 $2.50 per common share during the first year and
for $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 June 30, 2000.

ITEM 5.  OTHER INFORMATION

     Effective  July 17, 2000,  Gerhard K. Trenz was terminated as the Company's
Vice-President - Finance and Chief Financial Officer.

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:  August 11, 2000                 By: /s/ Peter E. Braun
                                           -------------------------------------
                                          Name:  Peter E. Braun
                                          Title: President and Principal
                                                 Financial and Accounting
                                                 Officer
















                                       17