================================================================================
                       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, 1999

                                       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
                    (Address of principal executive offices)

                                 (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  [X]

         The number of  outstanding  common  shares,  without par value,  of the
registrant at September 30, 1999 was 24,145,625.

     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, 1999


<TABLE>
                                                                                            Page
                                                                                            ----
<S>  <C>                                                                                    <C>
Part I -  FINANCIAL INFORMATION

    ITEM 1.    FINANCIAL STATEMENTS

    iQ Power Technology Inc.

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

       Consolidated Statement of Loss and Deficit ............................................2

       Consolidated Statement of Cash Flow ...................................................3

       Notes to the Consolidated Financial Statements ........................................4


    ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS ..........................................11

Part II - OTHER INFORMATION

    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

</TABLE>




                                      -i-
<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)
--------------------------------------------------------------------------------


<TABLE>
                                                                                    September 30         December 31
                                                                                            1999                1998
                                                                               ------------------  ------------------
                                                                                     (Unaudited)
<S>                                                                                 <C>                 <C>
ASSETS

CURRENT
  Cash                                                                              $  2,734,359        $     11,073
  Receivable from shareholders                                                           120,738              43,237
  Accounts receivable                                                                    126,746             104,930
  Prepaids and deposits                                                                   59,305               1,055
                                                                               ------------------  ------------------
Total current assets                                                                   3,041,148             160,295
EQUIPMENT, net                                                                           292,486              59,583
                                                                               ==================  ==================
Total assets                                                                        $  3,333,634        $    219,878
                                                                               ==================  ==================
LIABILITIES

CURRENT
  Bank indebtedness                                                                 $      1,833        $    108,621
  Accounts payable                                                                       149,942             472,449
  Accrued liabilities                                                                    166,097             150,804
  Loans from iQ Power                                                                          -             778,276
  Current portion of bank debt                                                                 -               1,055
  Due to shareholders                                                                          -              68,547
                                                                               ------------------  ------------------
Total current liabilities                                                                317,872           1,579,752
BANK DEBT - non-current                                                                    2,037               3,164
NON-CURRENT DUE TO  SHAREHOLDERS                                                               -              50,092
                                                                               ------------------  ------------------
Total liabilities                                                                        319,909           1,633,008
                                                                               ------------------  ------------------
SHAREHOLDERS' EQUITY

Capital stock                                                                          5,713,872              52,728
Additional paid-in capital                                                               332,220                   -
Cumulative foreign exchange adjustment                                                   (81,844)                  -
Accumulated deficit, during development stage                                         (2,950,523)         (1,465,858)
                                                                               ------------------  ------------------
Total shareholders' equity                                                             3,013,725          (1,413,130)
                                                                               ==================  ==================
Total liabilities and shareholders' equity                                          $  3,333,634        $    219,878
                                                                               ==================  ==================
</TABLE>

CONTINUING OPERATIONS (Note 2)




                                      -1-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Loss and Deficit
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
<TABLE>
                                                 -----------------------------------------------------------------------
                                                         Three months ended                    Nine months ended
                                                            September 30                         September 30
                                                 -------------------------------------- --------------------------------
                                                       1999             1998                  1999              1998
                                                    (Unaudited)     (Unaudited)            (Unaudited)      (Unaudited)
<S>                                               <C>               <C>                  <C>                <C>
EXPENSES
  Research and development
    expenses:
      Personnel                                 $     93,148      $    76,559            $   328,234        $    173,481
      Laboratory                                      71,103           46,562                159,996             120,407
      Office                                          52,407           12,278                 69,839              46,895
      Consulting services                             28,408           47,779                 63,562             127,902
      Professional fees                               26,475           80,409                102,011             167,915
                                                --------------    -------------          -------------      -------------
                                                     271,541          263,587                723,642             636,600
  General and administrative
    expenses:
      Personnel                                       18,064            5,613                 55,084               5,614
      Financing                                      120,650              629                128,151               1,689
      Office                                          23,524            2,097                 33,059               6,220
      Consulting services                              8,929                -                 19,667              39,750
      Professional fees                               (4,374)          14,381                 23,881              35,350
      Management fees                                 19,120                -                 19,120                   -
      Investor relations                              55,000                -                 55,000                   -
      Research memberships                            50,000                -                 50,000                   -
      Travel                                          46,526                -                 46,526                   -
      Other                                           17,274                -                 34,365                   -
                                                --------------    -------------          -------------      -------------
                                                     354,713           22,720                464,853              88,623
  Interest                                              (867)          11,880                 14,495              35,719
  Stock based compensation                            16,500                -                304,443                   -
  Professional fees                                        -                -                      -                   -
                                                --------------    -------------          -------------      -------------
                                                     641,887          298,187              1,507,433             760,942

INTEREST INCOME                                      (23,411)          (4,769)               (22,768)             (4,910)

NET LOSS                                            (618,476)        (293,418)            (1,484,665)           (756,032)

Accumulated deficit
  during development
  stage, beginning of period                      (2,332,047)      (1,047,935)            (1,465,858)           (824,961)
Adjustment to state temporary
  Atypical equity at redemption
  amount                                                   -                -                      -             239,640
                                                --------------    -------------          -------------      -------------
ACCUMULATED DEFICIT
  DURING DEVELOPMENT
  STAGE, END OF PERIOD                          $ (2,950,523)     $(1,341,353)           $(2,950,523)       $ (1,341,353)

Basic and diluted loss per share                $      (0.03)     $     (0.02)           $     (0.09)       $      (0.06)
                                                --------------    -------------          -------------      -------------
Weighted average number of
  shares outstanding                              24,007,429       12,800,000             17,168,734          12,800,000
                                                ==============    =============          =============      =============
</TABLE>


                                      -2-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statement of Cash Flow
(Expressed in United States Dollars)
--------------------------------------------------------------------------------

<TABLE>
                                                                                   Nine months         Nine months
                                                                                      ended               ended
                                                                                   September 30        September 30
                                                                                       1999                1998
                                                                                 ---------------      --------------
                                                                                   (Unaudited)         (Unaudited)
<S>                                                                              <C>                    <C>
OPERATING ACTIVITIES
  Net loss                                                                       $ (1,468,165)          $ (756,032)
  Items not affecting cash
    Depreciation and amortization                                                      51,470               15,577
    Stock based compensation                                                          287,943                    -
  Changes in non-cash working capital
    Increase in accounts receivable                                                   (12,027)              (9,586)
    Increase in prepaid and deposits                                                  (40,015)                   -
    Decrease in accounts payable                                                     (621,224)                   -
    (Decrease) increase in accrued liabilities                                        (31,222)             229,456
                                                                                 ---------------      --------------
                                                                                   (1,833,240)            (520,585)
                                                                                 ---------------      --------------
INVESTING ACTIVITY
  Additions to property, plant and equipment                                         (284,472)             (35,946)
                                                                                 ---------------      --------------
FINANCING ACTIVITIES
  (Decrease) increase in short-term debt                                             (107,842)              86,270
  (Decrease) in due to shareholder                                                   (187,176)             (19,770)
  Advances received from external parties                                                   -              337,293
  Decrease in other long-term debt                                                     (1,126)              (1,198)
  Cash acquired on business combination                                             4,717,998                    -
  Advances from subsidiary                                                            260,099                    -
  Issuance of shares                                                                  166,200                    -
  Issuance of atypical shares                                                               -              239,640
                                                                                 ---------------      --------------
                                                                                    4,848,153              642,235
                                                                                 ---------------      --------------
INCREASE IN CASH AND
  CASH EQUIVALENTS                                                                  2,730,441               85,704

FOREIGN EXCHANGE MOVEMENT                                                              (7,255)                   -

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                                                  11,073               17,177
                                                                                 ===============      ==============
CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                                                  $  2,734,259           $  102,881
                                                                                 ===============      ==============

</TABLE>





                                      -3-
<PAGE>




IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 1999
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


1.   NATURE OF OPERATIONS

     iQ Power  Technology  Inc.  (iQ  Power) was  incorporated  under the Canada
     Business  Corporations Act on September 20, 1994.  Effective June 17, 1999,
     iQ  Power  completed  a  business  combination  with  iQ  Battery  Research
     Development GmbH (iQ Battery).  The business combination has been accounted
     for as a reverse  acquisition,  with iQ  Battery  being  identified  as the
     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.


2.   CONTINUING OPERATIONS

     These financial statements have been prepared on a going concern basis. 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
     Company has raised approximately  $4,875,000,  net of commissions and costs
     of issue, through the issuance of 5,500,000 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 Battery,  and 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.






                                      -4-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 1999
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


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, 1998.

     (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. The Company's  completed financing as disclosed in
                    Note 11 is also denominated in US funds.

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

          (iii)     90% of the  total  assets  throughout  1997  and  1998  were
                    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.

          The  majority of  transactions  of the combined  enterprise  have been
          denominated in US dollars and German  Deutsche  Marks.  Based on these
          factors the Company has  determined  that the United  States dollar is
          the  appropriate  functional  currency for  measurement  and reporting
          purposes.





                                      -5-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 1999
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     (c)  Foreign currency translation (Continued)

          Assets and  liabilities  denominated  in Deutsche  Marks and  Canadian
          dollars  are  translated  at the rate of  exchange  in  effect  at the
          balance  sheet  date.   Transaction   gains  and  losses  relating  to
          conversion of period end balances  denominated in Canadian dollars and
          revenue and expenses denominated in Canadian dollars are included with
          operating results.

     (d)  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.

     (e)  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.

     (f)  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.

     (g)  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 is effective for all fiscal quarters
          of all fiscal years  beginning  after June 15, 2000. The impact on the
          Company's financial statements is not expected to be material.





                                      -6-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 1999
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


4.   PRO FORMA RESULTS OF OPERATIONS

     The  following  unaudited  pro forma  information  presents  the results of
     operations  of the Company as if the iQ Power  acquisition  had occurred at
     January 1, 1999.

                                                               Nine months ended
                                                                 September 30
                                                                    1999
                                                               -----------------

     Revenue                                                    $            -
     ---------------------------------------------------------------------------
     Net loss for the period                                    $   (1,849,281)
     ---------------------------------------------------------------------------
     Loss per share                                             $        (0.10)
     ---------------------------------------------------------------------------
     Weighted average number of shares outstanding                  18,479,424
     ---------------------------------------------------------------------------


5.   BUSINESS COMBINATION

     On June 17, 1999, iQ Power and iQ Battery  completed an agreement  pursuant
     to which iQ Power issued  12,800,000  common shares in exchange for all the
     issued common and atypical shares of iQ Battery.

     During the year ended December 31, 1998, iQ Power issued shares pursuant to
     a share exchange  agreement  dated August 25, 1998 with iQ Battery  whereby
     the shareholders of iQ Battery  transferred  their iQ Battery shares to the
     iQ Power for, in the aggregate,  10,000,000 common shares. The shareholders
     of iQ  Battery  had the option to cancel the share  exchange  agreement  if
     after the four month  anniversary  of the  initial  filing by iQ Power of a
     registration  statement on Form SB-1 with the United States  Securities and
     Exchange  Commission (a) iQ Power had failed to complete an equity offering
     with gross proceeds of at least  $3,000,000 and (b) the  shareholders of iQ
     Battery had repaid to iQ Power the full amount of all funds  advanced to iQ
     Battery.  The option terminated when iQ Power completed an equity financing
     with gross proceeds of more than $3,000,000.

     iQ Power also  entered into share  exchange  agreements  in September  1998
     under which 2,800,000  common shares were issued to the holders of Atypical
     Shares of iQ Battery  Atypical  Shares means  certain  shares of iQ Battery
     which are not part of the  ordinary  capital of iQ Battery  and were issued
     pursuant to  agreements  between iQ Battery and the holders of those shares
     under German tax  incentives.  The iQ Power common  shares and the Atypical
     Shares were held in escrow until completion of the offering.

     The business  combination  has been accounted for as a reverse  acquisition
     whereby the  purchase  method of  accounting  has been used with iQ Battery
     being identified as the accounting  parent.  These  consolidated  financial
     statements include the operations for iQ Power, the accounting  subsidiary,
     from the date of acquisition.  The fair value of the net assets of iQ Power
     at the date of acquisition is as follows:




                                      -7-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 1999
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


5.   BUSINESS COMBINATION (Continued)

<TABLE>
<S>                                    <C>                                   <C>
     Current assets, including cash of $4,717,998                            $ 4,754,985
     Advances to iQ Battery                                                    1,112,965
     -------------------------------------------------------------------------------------
                                                                               5,867,950
     Less: Current liabilities                                                  (345,230)
     -------------------------------------------------------------------------------------
     Purchase price                                                          $ 5,522,720
     -------------------------------------------------------------------------------------

     Purchase price comprised of:
       Issuance of common shares                                             $ 5,494,944
       Assumption of obligation relating to share purchase warrants               27,776
     -------------------------------------------------------------------------------------
                                                                             $ 5,522,720
     -------------------------------------------------------------------------------------
</TABLE>


6.   SHARE CAPITAL

     Authorized

          An unlimited number of common shares

     Issued and outstanding
<TABLE>
                                                                                  Number of
                                                                              Common shares             Amount
                                                                             --------------       ------------
     <S>                                                                      <C>                <C>
     Balance, January 1, 1998 (iQ Power)                                        1,969,740          $  492,435
     Private placement, issued for cash                                         3,709,685             927,421
     ---------------------------------------------------------------------------------------------------------
     Balance, December 31, 1998                                                 5,679,425           1,419,856
     Shares issued for cash                                                     5,500,000           5,500,000
     Issue costs                                                                        -            (652,576)
     ---------------------------------------------------------------------------------------------------------
     Balance, June 17, 1999                                                    11,179,425           6,267,280
     Adjustment for reverse acquisition on June 17, 1999                                -          (6,214,552)
     ---------------------------------------------------------------------------------------------------------
                                                                               11,179,425              52,728
     Issued to effect the reverse acquisition                                  12,800,000           5,494,944
     ----------------------------------------------------------------------------------------------------------
     Balance, June 30, 1999                                                    23,979,425           5,547,672
     Warrants exercised                                                           166,200             166,200
     ----------------------------------------------------------------------------------------------------------
     Balance, September 30, 1999                                               24,145,625          $5,713,872
     ----------------------------------------------------------------------------------------------------------
</TABLE>


     (a)  Agent Warrants

          As a part of the issuance of 5,500,000  common shares the agent to the
          offering was granted  550,000  Agent  Warrants  entitling the agent to
          purchase  550,000  common shares for $1 per share in the first year of
          the warrant and for $1.50 per share in the second year of the warrant.
          During the period to September  30, 1999, 166,200  Agent Warrants were
          exercised for proceeds of $166,200.





                                      -8-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 1999
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


6.   SHARE CAPITAL (Continued)

     (b)  Service warrants

          The Company  has  created  500,000  two year  Service  Warrants,  each
          warrant  entitling the holder to purchase one common share exercisable
          as follows:

          i)   125,000   warrants  vesting  on  the  execution  of  an  Investor
               Relations Agreement, exercisable at a price of $1.75 per share;

          ii)  125,000 warrants vesting October 1, 1999,  exercisable at a price
               of $2.50 per share;

          iii) 125,000 warrants vesting January 1, 2000,  exercisable at a price
               of $3.50 per share; and

          iv)  125,000 warrants vesting April 1, 2000, exercisable at a price of
               $5.00 per share.

          The Company  will issue the Service  Warrants on the  execution  of an
          Investor Relations Agreement.

     (c)  Stock options

          The Company has granted the following stock options:

          Of the options  outstanding  on  September  30, 1999,  1,826,666  were
          vested.

          Number of                    Exercise
          options                       price                 Expiry date
        ------------                  -----------          ----------------
          2,825,000                   $   1.00             December 1, 2008
            345,000                   $   1.00             June 28, 2009
            150,000                   $   1.00             June 28, 2001
            400,000                   $   1.50             July 7, 2009


     (d)  Loss per share

          The weighted average number of shares used to calculate loss per share
          data is based on treating the shares issued in the reverse acquisition
          as if they had been  outstanding from the period to September 30, 1999
          and September 30, 1998.






                                      -9-
<PAGE>

IQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the nine months ended September 30, 1999
(Expressed in United States Dollars)
--------------------------------------------------------------------------------


7.   RELATED PARTY TRANSACTIONS

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

     Management  fees for the nine months ended  September  30, 1999 of $54,000,
     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
          $8,500 and $8,000  per month,  respectively,  for a term of five years
          commencing August 31, 1998;

     (c)  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.







                                      -10-
<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. 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.

     All  financial  information  contained  in this report are in U.S.  dollars
unless provided  otherwise.  Collectively within this report, the term "Company"
refers to the consolidated operations of the Registrant and its subsidiary.

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 process engineering for the Company's smart battery and know-how
is based on a patent acquired from the founding  shareholders of iQ Battery.

     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 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  entering  a period in which it will
increase spending on product research and development,  marketing,  staffing and
other general and  administrative  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  Battery") were presented as separate
and distinct  because the former  shareholders of iQ Battery had a put option to
enable them to reverse the August 25, 1998  transaction.  That option terminated
on June 18,  1999,  when the Company  raised in excess of $ 3,000,000  by 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
Battery only.


The  Company's  Results of Operations  for the Three Months Ended  September 30,
1999 Compared to the Three Months Ended September 30, 1998

     No revenues were recorded in either the three month period ended  September
30, 1999 or the three month period ended September 30, 1998.

     The  Company  incurred a net loss of $618,476  for the three  month  period
ended September 30, 1999,  compared to a net loss of $293,418 for the comparable
period  of the  prior  year  primarily  as a result  of  increased  general  and
administrative  expenses,  including  increased  management  fees and employment
expenses related to the hiring of additional employees during 1999 and increased
investor relations expenses. Professional fees over the period in 1999 decreased
by  approximately  77%.



                                      -11-
<PAGE>

     For the three month period ended  September 30, 1999, the Company  incurred
research and  development  expenses of $271,541  compared  with $263,587 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.

     The Company  incurred general and  administrative  expenses of $354,713 for
the three month period ended  September  30, 1999  compared with $22,720 for the
comparable  period of the prior year. For the three month period ended September
30, 1999 compared to September  30, 1998,  general and  administrative  expenses
increased  due  primarily  to  increased  administrative  costs  related  to the
combined  business  operations  of the  Registrant  and iQ  Battery.  During the
comparative  three month  periods ended  September 30, 1999 and 1998,  personnel
costs  were  $18,064 in 1999  compared  to $5,613 in 1998;  expenses  related to
investor  relations  activities  were $175,650 in 1999 compared to $629 in 1998;
consulting  and  management  fees were $28,029 in 1999  compared to nil in 1998;
office  expenses  were $8,929 in 1999 compared to nil in 1998;  travel  expenses
were $46,526 in 1999 compared to nil in 1998; and research  membership fees were
$50,000 in 1999 compared to nil in 1998.


The Company's Results of Operations for the Nine Months Ended September 30, 1999
Compared to the Nine Months Ended September 30, 1998

     No revenues were  recorded in either the nine month period ended  September
30, 1999 or the nine month period ended September 30, 1998.

     As of  September  30,  1999,  the  Company  had an  accumulated  deficit of
$2,950,523.  The Company  incurred a net loss of  $1,484,665  for the nine month
period  ended  September  30,  1999,  compared to a net loss of $756,032 for the
comparable period of the prior year primarily as result of the cost of increased
research and development,  expenses  attributable to its recent public offering,
increased  management  fees and  employment  expenses  related  to the hiring of
additional  employees  during 1999 and increased  investor  relations  expenses.
Professional  fees for the  Company  were  down 38% from the same  period in the
prior year.

     For the nine month period ended  September 30, 1999,  the Company  incurred
research and  development  expenses of $723,642  compared  with $636,600 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.

     The Company  incurred general and  administrative  expenses of $464,853 for
the nine month period ended  September  30, 1999  compared  with $88,623 for the
comparable  period of the prior year. For the nine month period ended  September
30, 1999 compared to September  30, 1998,  general and  administrative  expenses
increased  due  primarily to increased  costs  related to the combined  business
operations of the Registrant and iQ Battery.  During the comparative  nine month
periods ended September 30, 1999 and 1998,  personnel costs were $55,084 in 1999
compared to $5,614 in 1998;  expenses related to investor  relations  activities
were $183,151 in 1999 compared to $1,689 in 1998; consulting and management fees
were $38,787 in 1999 compared to $39,750 in 1998;  office  expenses were $33,059
in 1999  compared  to $6,220  in 1998;  travel  expenses  were  $46,526  in 1999
compared  to nil in 1998;  and  research  membership  fees were  $50,000 in 1999
compared to nil in 1998.

     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

     As of September  30,  1999,  the Company had cash and cash  equivalents  of
$2,734,359.  Since inception,  the Company has financed its operations primarily
through sales of its equity  securities.  From  inception to September 30, 1999,
the Company had raised approximately $6,276,250 (net of issuance costs) from the
sale of such securities, including net proceeds of $4,690,000 from the Company's
initial  public  offering  completed  on June 18, 1999 in the




                                      -12-
<PAGE>

United States and excluding the issuance of 10,000,000  common shares for deemed
proceeds of $2,500,000 from the business combination with iQ Battery.

     iQ Battery is obligated to pay to Horst Dieter Braun,  the  Company's  Vice
President, Research and Development and Peter Braun, our President, DM400,000 in
connection  with  iQ  Battery'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 Battery.

     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
1999. 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 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 we  undertake  research  and  development
activities related to the  commercialization of the iQ technology.  In addition,
we  anticipate   that  our  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 us.

Year 2000 Issue

     The Year 2000 issue  arises  with the change in century  and the  potential
inability  of  information  systems  to  correctly  "rollover"  dates to the new
century.  To save on computer storage space, many systems were programmed with a
two-digit  century (i.e.  December 31, 1999 would appears as 12/31/99)  assuming
that all years would be part of the 20th  century.  On January 1, 2000,  systems
with this  programming  will default to 01/01/1900  instead of  01/01/2000,  and
calculations  using or  reporting  the date will not be correct  and errors will
arise. To prevent this from occurring, information systems need to be updated to
ensure they recognize the Year 2000.




                                      -13-
<PAGE>

     The Company has conducted a review of its computer  systems to identify the
systems that could be  incompatible  with dates beyond December 31, 1999, and is
developing an implementation  plan to resolve issues that may arise. The Company
places  minimal  reliance  on data  sensitive  software  and  believes  that the
expected cost and availability of resources, to recover information not properly
processed after December 31, 1999,  would not result in a material effect on its
results of operations.

     The  Company  began  its Year  2000  strategy  by  compiling  a list of all
computerized  equipment  and  making  a  determination  of how,  if at all,  the
software  will  be  affected  by  Year  2000.  Although  the  effect  is so  far
unquantified, all of the Company's software is recent, and therefore the Company
anticipates  that it will have sufficient time to test any new systems that need
to be  installed.  All of the Company's  financial and business  records will be
backed up to ensure that no loss of information can occur.  The Company does not
anticipate incurring significant costs in this regard.

     The Company has  contacted  each of its  strategic  partners,  consultants,
contractors and significant  suppliers and has obtained  assurances from some of
them that their relevant  operating software and systems are Year 2000 compliant
or will be by December 31, 1999. The Company plans to continue to make inquiries
of those  suppliers  and  service  providers  who have not yet  provided it with
information regarding their Year 2000 compliance status. The Company anticipates
that it will complete its third-party  Year 2000  compliance  review by November
1999.  The Company is monitoring  the status of all of its  significant  service
providers' and suppliers' Year 2000  compliance  efforts to minimize the risk of
any  material  adverse  effect  on  its  operations  resulting  from  compliance
failures. The Company has also, in some cases, identified alternative sources of
supply or service should its present  suppliers or service  providers  encounter
Year 2000 compliance problems.


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,  because  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
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.




                                      -14-
<PAGE>

PART II - OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS

     As of the date hereof,  there is no material litigation pending against the
Company. On January 3, 1994, a civil lawsuit was filed by Hans Engelhorn against
Peter E. Braun and Horst Dieter Braun in the District  Court of Berlin (Case No.
3 O 40/94).  Mr.  Engelhorn seeks to compel  transfer of  intellectual  property
rights  related  to  the iQ  technology  or,  alternatively,  money  damages  of
approximately  DM500,000  ($310,000).  The intellectual property rights at issue
are now  held by iQ  Battery.  Mr.  Engelhorn  alleges  that  the  Brauns  had a
contractual  obligation to transfer the  intellectual  property to a partnership
which has since been  dissolved.  Although  the  lawsuit is still  pending,  the
Company has been advised by the Brauns that the  prosecution of this lawsuit has
not been  pursued.  The Company  believes  that the lawsuit is without merit and
will not materially affect its rights in the intellectual property at issue.

     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

     During the three month period ended  September 30, 1999, the Company issued
166,200 common shares pursuant to the exercise of Agent Warrants for proceeds of
$166,200.  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 5,500,000 common shares  registered  under the Registration  Statement
were sold at a price to the  public of $1.00 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  550,000 common shares.  The Agent
may  exercise  the warrants for $1.00 per common share during the first year and
for $1.50 per common share during the second year after issuance.

     In  addition,  the  following  table sets forth an estimate of all expenses
incurred in connection  with the offering,  other than Agent's fees. All amounts
shown are estimated except for the registration fees of the SEC.

     SEC Registration Fee                        $        1,390
     NASD Filing Fee                             $        1,000
     Accounting Fees and Expenses                $       50,000
     Legal Fees and Expenses                     $       75,000
     Blue Sky Qualification Fees and Expenses    $       15,000
     Transfer and Custody Agent Fees             $       10,000
     Printing Expenses                           $        4,000
     Miscellaneous                               $      103,610
                                                        -------
     Total                                       $      260,000




                                      -15-
<PAGE>

     After  deducting the estimated  expenses set forth above,  the net offering
proceeds to the Company were  $5,240,000.  Since May 10,  1999,  the Company has
used a portion of the net offering  proceeds for the purposes  described  below.
The Company believes that the amounts set forth represent a reasonable  estimate
of the amounts actually applied.

     Transfer to iQ  Battery                     $    3,500,000
     Payment of payables                         $      312,527
     Current expenses   (working capital)        $      224,470


     ITEM 3. DEFAULTS UPON SENIOR SECURITIES

          None.

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

          None.

     ITEM 5. OTHER INFORMATION

          None.

     ITEM 6. EXHIBITS AND 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 15, 1999              By:  /s/ Peter E. Braun
                                           -------------------------------------
                                           Name:    Peter E. Braun
                                           Title:   President


Date:  November 15, 1999              By:  /s/ Gerhard K. Trenz
                                           -------------------------------------
                                           Name:    Gerhard K. Trenz
                                           Title:   Vice President Finance and
                                           Chief Financial Officer (Principal
                                           Financial and Accounting Officer)