# UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549

_________________

# FORM 10-QSB

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

| | For the
quarterly period ended  March 31, 2003
| | ----------------------------------------------

# OR

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

| | For
the transition period from ___________________ to ______________________.
| | -----------------------------------------------------------------------------

Commission file number
000-26165

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

|CANADA
(Jurisdiction of Incorporation | NOT APPLICABLE
(I.R.S. Employer Identification No.)
|------------------------------------- | ---------------------------------------------------

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

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

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Check
whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.   Yes [X]   
  No [  ]

The
number of outstanding common shares, without par value, of the registrant at May 6, 2003
was 22,072,188.

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

---

iQ POWER TECHNOLOGY INC.
FORM 10-QSB
TABLE OF CONTENTS

|                                     |  |                                                                                       |  | Page No.
|------------------------------------ |  | ------------------------------------------------------------------------------------- |  | --------
|PART IINTERIM FINANCIAL INFORMATION |  |                                                                                      
|Item 1.                              |  | Unaudited Consolidated Balance Sheets                                                 |  | 1       
|                                     |  | Unaudited Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)    |  | 2       
|                                     |  | Unaudited Consolidated Statements of Shareholders' Equity (Deficit)                   |  | 3       
|                                     |  | Unaudited Consolidated Statements of Cash Flows                                       |  | 4       
|                                     |  | Notes to Unaudited Consolidated Financial Statements                                  |  | 5       
|Item 2.                              |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 12      
|Item 3.                              |  | Controls and Procedures                                                               |  | 21      
|PART IIOTHER INFORMATION            |  |                                                                                      
|Item 1.                              |  | Legal Proceedings                                                                     |  | 22      
|Item 2.                              |  | Changes in Securities and Use of Proceeds                                             |  | 22      
|Item 3.                              |  | Defaults Upon Senior Securities                                                       |  | 23      
|Item 4.                              |  | Submission of Matters to a Vote of Security Holders                                   |  | 23      
|Item 5.                              |  | Other Information                                                                     |  | 23      
|Item 6.                              |  | Exhibits and Reports On Form 8-K                                                      |  | 23      
|Signatures                           |  | 27                                                                                   
|Certifications                       |  | 28                                                                                   

---

# Item 1. Financial
Statements

iQ POWER TECHNOLOGY INC.
(a development stage company) Unaudited Consolidated Balance Sheets
(Expressed in United States Dollars; all amounts in thousands, except per share data)

---

|                                                    
|----------------------------------------------------
|
|                                                    
|ASSETS                                              
|                                                    
|Current Assets                                      
|Cash and cash equivalents                           
|Receivable from related parties                     
|Other receivables                                   
|Prepaids and deposits                               
|Other current assets                                
|                                                    
|Total current assets                                
|Non-current Assets                                  
|Equipment, net                                      
|                                                    
|Total non-current assets                            
|                                                    
|TOTAL ASSETS                                        
|                                                    
|LIABILITIES AND SHAREHOLDERS' EQUITY                
|                                                    
|LIABILITIES                                         
|Current liabilities                                 
|Bank overdraft                                      
|Accounts payable                                    
|Accrued payroll and employees benefits              
|Accrued liabilities                                 
|                                                    
|Total current liabilities                           
|                                                    
|TOTAL LIABILITIES                                   
|                                                    
|SHAREHOLDERS' EQUITY                                
|                                                    
|Authorized:                                         
|An unlimited number of common shares of no par value
|Issued and outstanding:                             
|20,348,227 common shares at December 31, 2002       
|21,432,372 common shares at March 31, 2003          
|Capital surplus/Additional paid-in                  
|Accumulated other comprehensive (loss) income       
|Accumulated deficit, during development stage       
|(after loss allocation to silent partners)          
|                                                    
|TOTAL SHAREHOLDERS' EQUITY                          
|                                                    
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY          
|                                                    

See accompanying notes to
consolidated financial statements.

1

---

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

---

|                                               
|-----------------------------------------------
|
|                                               
|SALES AND OTHER REVENUE                        
|                                               
|EXPENSES                                       
|Research and development expenses              
|Personnel (incl. stock based compensation)     
|Laboratory                                     
|Office & Travel                                
|Consulting services                            
|Professional fees                              
|                                               
|Total Research & Development expenses          
|Marketing and general & administrative expenses
|Personnel (incl. stock based compensation)     
|Financing                                      
|Office & Travel                                
|Consulting services                            
|Professional fees                              
|Management fees                                
|Marketing activities                           
|Investor relations                             
|Research memberships                           
|Provision for investment                       
|Other                                          
|                                               
|Total Marketing and G&A expenses               
|                                               
|TOTAL OPERATING EXPENSES                       
|Interest expense                               
|                                               
|TOTAL EXPENSES                                 
|Interest and other income                      
|(Gain)/loss on foreign exchange                
|INCOME/(LOSS) BEFORE INCOME TAX                
|Income tax                                     
|NET INCOME/(LOSS)                              
|                                               
|Other comprehensive income (loss)              
|COMPREHENSIVE INCOME/(LOSS)                    
|                                               
|Basic and diluted loss per share, on net loss  
|Basic and diluted weighted average             
|number of shares outstanding                   
|                                               
|                                               

See accompanying notes to
consolidated financial statements.

2

---

iQ POWER TECHNOLOGY INC.
(a development stage company) Unaudited Consolidated Statements of Shareholders' Equity (Deficit)
(Expressed in United States Dollars; all amounts in thousands, except per share data)

---

|                                      | Shares | Amount     | Accumulated
Additional
Paid-In
Capital | Accumulated
Other"
Comprehensive
Income (Loss) | Accumulated
Deficit | Total
Shareholders'
Equity
(Deficit)
|------------------------------------- | ------ | ---------- | -------------------------------------- | ---------------------------------------------- | ------------------- | ------------------------------------
|                                     
|Balance at December 31, 1991          |        | 40         |                                        | $        60                                    |                     | $      --                           
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1992          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1993          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1994          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1995          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1996          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1997          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|Other comprehensive (loss) -          |        |            |                                        |                                                |                     |                                     
|foreign currency translation          |       
|adjustments                           |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1998          |        | 40         |                                        | 60                                             |                     | --                                  
|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                                          |                     |                                     
|Stock based compensation              |        |            |                                        |                                                |                     | 396                                 
|Exercise of warrants                  |        | 139,850    |                                        | 349                                            |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1999          |        | 9,731,620  |                                        | 5,904                                          |                     | 396                                 
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Exercise of options                   |        | 15,000     |                                        | 37                                             |                     | --                                  
|Stock based compensation              |        | --         |                                        | --                                             |                     | 10                                  
|                                     
|Balance at December 31, 2000          |        | 9,746,620  |                                        | 5,941                                          |                     | 406                                 
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Issue of shares                       |        | 5,203,004  |                                        | 2,132                                          |                     | --                                  
|Stock based compensation              |        |            |                                        |                                                |                     | 1,444                               
|Exercise of options                   |        | 1,002,500  |                                        | 501                                            |                     | --                                  
|                                     
|Balance at December 31, 2001          |        | 15,952,124 |                                        | $   8,574                                      |                     | $ 1,850                             
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Issue of shares                       |        | 4,376,103  |                                        | 1,992                                          |                     | --                                  
|Stock based compensation              |        |            |                                        |                                                |                     | (279)                               
|Exercise of options                   |        | 20,000     |                                        | 10                                             |                     | --                                  
|                                     
|Balance at December 31, 2002          |        | 20,348,7   |                                        | $ 10,576                                       |                     | $ 1,571                             
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Issue of shares                       |        | 1,084,145  |                                        | 363                                            |                     | --                                  
|Stock based compensation              |        |            |                                        |                                                |                     | --                                  
|Exercise of options                   |        | --         |                                        | --                                             |                     | --                                  
|                                     
|Balance at March 31, 2003             |        | 21,432,372 |                                        | $ 10,939                                       |                     | $ 1,571                             
|                                     

See accompanying notes to
consolidated financial statements.

3

---

iQ POWER TECHNOLOGY INC.
(a development stage company) Unaudited Consolidated Statements of Cash Flows
(Expressed in United States Dollars; all amounts in thousands, except per share data)

---

|                                            
|--------------------------------------------
|
|                                            
|OPERATING ACTIVITIES                        
|Net loss                                    
|Items not affecting cash                    
|Depreciation and amortization               
|Stock based compensation                    
|Changes in non-cash working capital         
|(Increase) decrease in other receivable     
|(Increase) decrease in prepaids and deposits
|Increase (decrease) in accounts payable     
|Increase (decrease) in accrued liabilities  
|(Increase) decrease in other assets         
|                                            
|                                            
|INVESTING ACTIVITY                          
|Additions to property, plant and equipment  
|                                            
|FINANCING ACTIVITIES                        
|Increase of bank overdraft                  
|Increase (decrease) in due to shareholder   
|Advances received from external parties     
|Cash acquired on business combination       
|Advances from subsidiary                    
|Issue of capital stock                      
|Issuance of atypical shares                 
|                                            
|                                            
|(DECREASE) INCREASE IN CASH AND             
|CASH EQUIVALENTS                            
|                                            
|EFFECT OF FOREIGN EXCHANGE MOVEMENT         
|                                            
|CASH AND CASH EQUIVALENTS,                  
|BEGINNING OF PERIOD                         
|                                            
|CASH AND CASH EQUIVALENTS,                  
|END OF PERIOD                               
|                                            

See accompanying notes to
consolidated financial statements.

|Supplemental schedule of non-cash and financing activities (in thousands USD):
|------------------------------------------------------------------------------
|                                                                              
|Shares issued                                                                 
|to agents for finder's fees                                                   
|for external stock based compensation                                         

4

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2002 
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

|1. | NATURE
OF OPERATIONS
|-- | --------------------

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

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

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

|2. | CONTINUING
OPERATIONS
|-- | ---------------------

| | These
financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course of
business. The Company has incurred cumulative losses since inception and as of December
31, 2002, the Company has a negative working capital position. The Companys ability
to continue as a going concern is dependent upon the ability of the Company to attain
future profitable operations and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations when they
become due. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this uncertainty.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
1999, the Company raised approximately $4,875,000, net of commissions and costs of issue,
through the issuance of 2,200,000 shares of common stock pursuant to a Registration
Statement on Form SB-1. In May 2001, the Company completed a private placement of
3,000,000 common shares at $0.25 per share for proceeds of $750,000. In September 2001, a
private placement of 333,333 common shares at $0.75 per share for proceeds of $250,000
was also completed. In the fourth quarter of 2001, the Company raised additional funds
through the private placement of 1,019,344 units of the Company at US$0.70 per unit for
proceeds of $713,541, with each unit consisting of one common share of the Company and
one non-transferable warrant exercisable for a period of six months following closing and
entitling the holder to purchase one additional common share of the Company for US$1.00
(see note 5(e) for more details on the warrants).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
January 2002, the Company raised an additional $617,500 in equity capital through the
private placement of 950,000 units of the Company at US$0.65 per unit, each such unit
consisting of one common share of the Company and one non-transferable warrant
exercisable for a period of twelve months following closing and entitling the holder to
purchase one additional common share of the Company for US$0.85. In June 2002, the
Company raised an additional $750,000 in equity capital through the private placement of
1,500,000 units of the Company at US$0.50 per unit, each such unit consisting of one
common share of the Company and one non-transferable warrant exercisable for a period of
twelve months following closing and entitling the holder to purchase one additional
common share of the Company for US$0.65. In November and December 2002, the Company
raised an additional $550,500 in equity capital through the private placement of
1,572,853 units of the Company at US$0.35 per unit, each such unit consisting of one
common share of the Company and one non-transferable warrant
exercisable for a period of twelve months following closing and entitling the holder to
purchase one additional common share of the Company for US$0.45.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2002 
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

|2. | CONTINUING
OPERATIONS (Continued)
|-- | ---------------------------------

| | In
February 2003, the Company raised an additional $52,500 in equity capital through the
private placement of 150,000 units of the Company at US$0.35 per unit, each such unit
consisting of one common share of the Company and one non-transferable warrant
exercisable for a period of twelve months following closing and entitling the holder to
purchase one additional common share of the Company for US$0.45.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February and March 2003, the Company raised an additional $235,500 in capital through the
private placement of 735,937 units ot the Company at US$0.32 per unit, each such unit
consisting of one common share of the Company and one non-transferable warrant
exercisable for a period of twelve months following closing and entitling the holder to
purchase one additional common share of the Company for US$0.42.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
subscribers to all private placements were non-U.S. persons outside the United States of
America.
| | -----------------------------------------------------------------------------------------------------

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

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

| | As
of March 31, 2003, the Companys current financial condition requires the infusion
of additional capital in order to continue its current operations. If the Company is
unable to obtain the additional financing, the Company will be unable to meet all of its
financial obligations. There is no assurance that the Company will be able to secure
additional financing or that such financing will be on terms beneficial to the existing
shareholders.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | BASIS
OF PRESENTATION
|-- | ---------------------

| | The
unaudited financial statements included herein have been prepared pursuant to the rules
aud regulations of the Securities and Exchange Commission for reporting on Form 10-Q.
Certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted pursuant to such rules and regulations. The
statements should be read in conjunction with the accounting policies and notes to
consolidated financial statements included in the Companys 2002 Annual Report on
Form 10-K.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

6

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2002 
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

|4. | SHARE
CAPITAL
|-- | -------------

| | Authorized
| | ----------

| | An
unlimited number of common shares
| | ------------------------------------

| | Issued
and outstanding
| | ----------------------

|                                                          | Number ofCommon shares | Amount ($000)
|--------------------------------------------------------- | ---------------------- | -------------
|Balance, January 1, 1998 (iQ Power)                       |                        | 787,896      
|Private placement, issued cash                            |                        | 1,483,874    
|                                                         
|Balance, December 31, 1998                                |                        | 2,271,770    
|Shares issued for cash                                    |                        | 2,200,000    
|Issue costs                                               |                        | --           
|                                                         
|Balance, June 17, 1999                                    |                        | 4,471,770    
|Adjustment for                                            |                       
|reverse acquisition on June 17, 1999                      |                        | --           
|                                                         
|                                                          |                        | 4,471,770    
|                                                         
|Issued to effect the reverse acquisition                  |                        | 5,120,000    
|Warrants exercised during the year                        |                        | 139,850      
|                                                         
|Balance, December 31, 1999                                |                        | 9,731,620    
|Options exercised during the year                         |                        | 15,000       
|                                                         
|Balance, December 31, 2000                                |                        | 9,746,620    
|Private placements, issued for cash (incl. Finder's Fees) |                        | 4,597,944    
|Shares issued for conversion of debt                      |                        | 400,000      
|Shares issued for external stock based compensation       |                        | 205,060      
|Options exercised during the year                         |                        | 1,002,500    
|                                                         
|Balance, December 31, 2001                                |                        | 15,952,124   
|Private placements, issued for cash (incl. Finder's Fees) |                        | 4,225,853    
|Shares issued for external stock based compensation       |                        | 150,250      
|Options exercised during the year                         |                        | 20,000       
|                                                         
|Balance, December 31, 2002                                |                        | 20,348,227   
|Private placements, issued for cash (incl. Finder's Fees) |                        | 993,079      
|Shares issued for stock based compensation                |                        | 91,066       
|                                                         
|Balance, March 31, 2003                                   |                        | 21,432,372   

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

| | (a) | Stock
options
| | --- | -------------

| | The
 Company  has  established  a Stock  Option  Plan  for  employees,           officers,
 directors,  consultants,  and  advisors.  The  Company  has           reserved
 4,714,000  common shares for issuance under the Stock Option           Plan.  Thereof
 30,000  options were granted in the first quarter 2002           with an exercise price
of $1.00. In the second quarter of 2002, 20,000           shares were issued on the
exercise of stock options  granted under the           stock option plan.  During the
first  quarter of 2003,  no shares have           been issued on the exercise of stock
 options  granted under the stock           option plan.  Options granted for issuance
under the Stock Option Plan           generally  are not  transferable,  and the
 exercise  price  of  stock           options must be at least equal to 100% of the fair
market value of the           common shares on the date of the grant.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2002 
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

|4. | SHARE
CAPITAL (Continued)
|-- | -------------------------

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

| | SFAS
No. 123,  issued in October  1995,  requires  the use of the fair           value based
method of accounting for stock options. Under this method,           compensation  cost
is  measured at the grant date as the fair value of           the options granted and is
recognized over the exercise period. During           the years ended December 31, 2002
and 2001, the Company issued options           to individuals  other than  employees and
directors,  which under SFAS           No. 123 are recognised as share-based
 compensation  rateably over the           vesting period. SFAS No. 123, however,  allows
the Company to continue           to measure the  compensation  cost of employee  and
 director  related           stock options in  accordance  with APB 25. The Company has
adopted the           disclosure-only provision of SFAS No. 123 and SFAS No. 148,
Accounting           for  Stock-Based   Compensation  -  Transition  and  Disclosure  -
 an           Amendment of FASB Statement No. 123.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 12, 2000, the Board of Directors  decreased the exercise price           for the
Stock Option Plan; from $2.50 to $1.50 for all options granted           under and
 outside of the plan.  On  January  16,  2001,  the Board of           Directors
 decreased  again the  exercise  price for the Stock  Option           Plans from $1.50
to $0.50 for all options granted under and outside of           the plan.  On January 18,
2002,  the Board of Directors  decreased the           exercise price of the 1,415,000
options granted under the Plan on June           28, 2001,  from $1.37 to $1.00.  Due to
the  changes,  all the options           which were  granted  under the plan  prior to
the  change in  exercise           price will be accounted for using variable plan
 accounting  under APB           25. Variable  accounting  requires that the intrinsic
value, being the           excess of the current market price at the end of each
reporting period           in excess of the exercise price of the repriced  options,  be
expensed           as non-cash stock based compensation  expense,  until such time as the
          repriced options are exercised, expire or are otherwise forfeited. Any
          increase in the intrinsic value of the repriced  options will decrease
          reported earnings, and any subsequent decreases in value will increase
          reported earnings. For those options which were granted outside of the
          plan prior to the change in exercise  price,  the  Company  recognizes
          additional  compensation  cost for the excess of the fair value of the
          modified  options issued over the value of the original  option at the
          date of the modification.  According to APB 25 the Company recorded no
          stock based compensation in the first quarter of 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table  illustrates the effect on net earnings (loss) and           net
 earnings  (loss) per share if the  Company  had  applied the fair           value
recognition  provisions of SFAS No. 123 to stock-based  employee           compensation.
All amounts below are in $000's except per share data.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | Three months ended
March 31,
2003 | Three months ended
March 31,
2002
|------------------------------------- | --------------------------------- | ---------------------------------
|                                     
|Net loss                              |                                   |                                  
|As reported                           |                                   | $    (491                        
|Deduct: Total stock-based employee    |                                  
|compensation expense determined       |                                  
|under fair value based method for all |                                  
|awards net of related tax effects     |                                   | $        --                      
|                                     
|Pro forma net loss                    |                                   | $    (491                        
|Loss per share (basic and diluted)    |                                  
|As reported                           |                                   | $  (0.02                         
|SFAS No. 123 pro forma                |                                   | $        --                      
|                                     
|Pro forma net loss                    |                                   | $  (0.02                         

8

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2002 
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

|4. | SHARE
CAPITAL (Continued)
|-- | -------------------------

| | The
weighted average fair value, calculated using the Black-Scholes option pricing model value
of options granted under the stock option plan during the three months ended March 31,
2002 was $0.32 per share. The fair value of these options was estimated at the date of
grant using a weighted average volatility factor of 85%, a dividend yield of 0%, a
weighted average expected life of the stock options of 3 years, and a risk free interest
rate of 3.43%. For the three months ended March 31, 2003, no stock options were granted to
employees.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Incentive
Share Plan
| | --- | --------------------

| | In
July 2001, the Company instituted an Incentive Plan reserving shares for issue to
officers, directors, and employees of the Company and its subsidiary as an incentive. The
number of shares set aside for issue under the incentive share plan is 2,500,000 common
shares. No incentive shares have been granted under this plan as of March 31, 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
incentive plan will be accounted for as a fixed stock compensation plan in accordance with
Accounting Principles Board (APB) Opinion No. 25.
| | ------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Loss
per share
| | --- | --------------

| | Losses
per share calculations give effect to the reverse takeover described in Note 1.
| | --------------------------------------------------------------------------------------

| | (d) | iQ
share capital
| | --- | ----------------

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

| | (e) | Issuance
of shares due to private placements
| | --- | --------------------------------------------

| | In
November 2002, the Company announced another private placement of up to 1,715,000 units of
the Company at $0.35 per unit for proceeds of $600,000, with each unit consisting of one
common share of the Company and one non-transferable warrant exercisable for a period of
twelve months following closing and entitling the holder to purchase one additional common
share of the Company for US$0.45. Thereof 1,572,853 units for proceeds of $550,500 were
issued in November and December 2002. Additional 150,000 units for proceeds of $52,500
were issued in February 2003. The subscribers to the private placement were non-U.S.
persons outside the United States in reliance upon an exemption from registration under
Regulation S of the Securities Act of 1933, as amended. The Company incurred finders
fees to non-U.S. persons outside the United States, in connection with the offering
consisting of 107,142 common shares. The cost of the finders fee was netted against
the proceeds obtained from the financing. The finders fees were paid out in February
2003. The shares were issued pursuant to an exemption from registration available under
Regulation S of the Securities Act.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2002 
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

|4. | SHARE
CAPITAL (Continued)
|-- | -------------------------

| | The
combined fair value of the attached warrants as of the date of the private placement was
approximately $235,000. The fair value was calculated using the Black-Scholes
option-pricing model. These warrants were offered in the private placement in order to
increase investor interest, align the interest of prospective investors with shareholders,
and potentially allow them to invest in the Company at a future date.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February and March 2003, the Company issued 735,937 units of the Company at $0.32 per unit
for proceeds of $235,500, with each unit consisting of one common share of the Company and
one non-transferable warrant exercisable for a period of twelve months following closing
and entitling the holder to purchase one additional common share of the Company for
US$0.42. The subscribers to the private placement were non-U.S. persons outside the United
States in reliance upon an exemption from registration under Regulation S of the
Securities Act of 1933, as amended.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
combined fair value of the attached warrants as of the date of the private placement was
approximately $72,000. The fair value was calculated using the Black-Scholes
option-pricing model. These warrants were offered in the private placement in order to
increase investor interest, align the interest of prospective investors with shareholders,
and potentially allow them to invest in the Company at a future date.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) | Issuance of shares due to consulting agreements
| | --- | -----------------------------------------------

| | In
August 2002, the Company entered into a Financial Public Relations Adviser Consulting
Agreement with Joerg Schweizer, a non-U.S. person outside the United States. The Company
agreed to pay Joerg Schweizer a consulting fee in the amount of EUR 5,000 (approximately
$5,300) per month for such services. Of the consulting fee, EUR 2,000 is due monthly while
the remaining EUR 3,000 is payable by issuing Joerg Schweizer common shares, issuable on a
quarterly basis. The agreement has an initial term of 12 months. As of March 31, 2003, the
Company had issued Joerg Schweizer 56,300 common shares under the agreement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
August 2002, the Company entered into a Media Relations Consulting Agreement with Andreas
Gloetzl, a non-U.S. person outside the United States. The agreement has an initial term of
August 1, 2002 through March 15, 2003. The Company agreed to pay Andreas Gloetzl a
consulting fee in the amount of $33,800 by issuing Andreas Gloetzl common shares, issuable
as follows: The first issuance of 25,000 shares in October 2002, additional 20,000 shares
in December 2002, the last installment of 20,000 shares in March 2003. As of March 31,
2003, the Company had issued Andreas Gloetzl all 65,000 common shares under the agreement.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002, the Company entered into a Officer Engagement Agreement with Marco Graf von
Matuschka, our Chief Financial Officer. The Company agreed to pay Marco Graf von Matuschka
a consulting fee in the amount of $3,000 per month for such services. Of the consulting
fee, one half is payable by issuing 3,333 common shares. The agreement had an initial term
ending March 31, 2003, and renewable on a quarterly basis thereafter. As of March 31,
2003, the Company had issued Marco Graf von Matuschka 11,666 common shares under the
agreement.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

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

| | (a) | Management fees for the three months ended March 31, 2003 of $18.000 (2002
                $18,000) were paid to a company with a common director.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has entered into the following contractual arrangements:
| | --------------------------------------------------------------------

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

| | (c) | 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,
               one of which is a director of the Company. The intangibles purchased relate to a
               German patent, an international patent application as well as the registered
               design iQ. The Company and the shareholders agreed that the
               shareholders would receive DM 400,000 (approximately $220,000) 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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | As of March 31, 2003, the Company has receivables of $77,000 in connection with
               loan agreements with three shareholders, two of which are directors of the
               Company. These loans date from prior years.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2002 
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

|6. | SEGMENT
DISCLOSURES
|-- | -------------------

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

|7. | RECENT
TRANSACTIONS
|-- | -------------------

| | In
September 2002, the Company announced that it has entered into a letter of intent for the
acquisition of the business and assets of Gel Electric Technologies, Inc. (Gel)
headquartered in Los Angeles, California, USA. In the course of this agreement iQ Power
made a prepayment of $150,000 to Gel in the year ended 2002. Gel is obligated to reimburse
the prepayment by notice of iQ Power. In January 2003, the Company made an additional
prepayment of $75,000 to Gel. The Company has decided to reserve $150,000 of the
prepayments a provision for investment due to the weak financial position of Gel and the
likelyhood that it may be unable to reimburse the prepayment on demand. The reserve was
accounted for in the yaer ended 2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | SUBSEQUENT
EVENT
|-- | ----------------

| | Subsequent
events not made elsewhere in the financial statements include:
| | -------------------------------------------------------------------------

| | Subsequent
to the quarter ended March 31, 2003, the Company raised an additional $197,200 in equity
capital through the private placement of 616,250 units of the Company at US$0.32 per unit,
each such unit consisting of one common share of the Company and one non-transferable
warrant exercisable for a period of twelve months following closing and entitling the
holder to purchase one additional common share of the Company for US$0.42. The subscribers
to the private placement and the finder were non-U.S. persons outside the United States
and the offering was conducted pursuant to Regulation S as promulgated by the United
States Securities and Exchange Commission.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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

Certain statements in this Quarterly
Report on Form 10-QSB constitute forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual results,
performance or achievements of iQ Power Technology Inc. and its subsidiary, iQ Battery
Research and Development GmbH (hereinafter iQ Germany or iQ
Battery), (hereinafter collectively, referred to as iQ Power and
the Company), or developments in the Companys industry, to differ
materially from the anticipated results, performance or achievements expressed or implied
by such forward-looking statements. Such factors include, but are not limited to: the
Companys limited operating history; risks related to delays in developing, marketing
and commercializing the Companys batteries; lengthy development and sales cycles
related to the commercialization of battery technologies; the Companys dependence
upon a relative concentration of customers in the automotive and battery manufacturing
industries; competition in the battery industry and competing battery technologies; risk
related to the development of the Companys battery technologies and acceptance by
the automotive and battery manufacturing industries; risks of technological change that
may be inconsistent with the Companys technologies or the may render its
technologies obsolete; dependence on selected vertical markets within the automotive and
battery manufacturing industries; general economic risks that may affect the demand for
automotive batteries; the Companys reliance on third-party marketing relationships
and suppliers; the Companys ability to protect its intellectual property rights;
risks related to the Companys proposed acquisitions and the other risks and
uncertainties described under Business  Risk Factors in Part I of the
Companys Annual Report on Form 10-KSB filed with the United States Securities and
Exchange Commission on April 16, 2003.

# Overview

The Company was organized in 1991 to
develop and commercialize batteries and electric power technology for the automotive
industry and other industries. Since that date, it 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. The Company initially planned to begin manufacturing its
MagiQTM battery during the second half of 2002, with plans to begin marketing
the battery in the fourth quarter of 2002. The Company completed an initial production run
of its MagiQTM battery in April, 2002. The Company conducted tests on this
initial production run and determined that one of the external components did not meet the
Companys quality standards. All other performance criteria for the
MagiQTM battery met or exceeded the Companys specifications in these
tests. The manufacturer of the component was required to re-engineer its manufacturing
process to meet the Companys quality standards. This process has caused a
substantial month delay in manufacturing the Companys initial commercial run of the
MagiQTM battery and the delivery of batteries to automobile manufacturers for
final testing. The Company will be required to raise additional capital for working
capital purposes until sufficient revenues can be generated from the sales of the
MagiQTM battery or licensing of the technology. The Company does not anticipate
it will generate any revenues from the sale of MagiQTM batteries until at least
the second half of 2003, assuming adequate financing is available to commercialize the
Companys MagiQTM batteries. See Need for Additional Capital,
below.

The Company currently has no service
or licensing agreements in place and the Company does not anticipate that it will receive
any material revenues from the sale of batteries or from service or license arrangements
during 2003. 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.

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

12

---

efficient. The Company had
anticipated that it would acquire the assets and business of Gel as a going concern. In
connection with the LOI, the Company advanced a bridge loan to Gel in the amount of
$150,000 in 2002 and an additional $75,000 in the first quarter of 2003. The terms of the
LOI contemplated that the Company would acquire the assets of Gel for $2,250,000, payable
(i) $250,000 in cash at closing; (ii) a promissory note in the principal amount of
$1,750,000, payable in five equal annual principal installments of $350,000, plus accrued
interest on the remaining principal balance of 10% per annum; and a promissory note in
the principal amount of $250,000, without interest, payable on the sixth anniversary of
the closing. The Companys obligations would be secured by a security interest in
the assets acquired from Gel. The acquisition was subject to the completion of due
diligence, including an environmental study, and the negotiation of a definitive
agreement. The LOI expired prior to negotiation of a definitive agreement with Gel. The
parties are continuing negotiations and due diligence related to the proposed acquisition
although they are restructuring the formal acquisition agreement and acquisition costs to
address certain concerns of the parties. There can be no assurance that the acquisition
will be completed or, if completed, that any synergies would exist between Gels
batteries and the iQ technologies. The Company anticipates that it will be required to
raise additional capital to complete the acquisition. See Need for Additional
Capital, below.

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.

The Companys accounting for
stock options is significant because the effect the compensation expense has on the
Companys results. As the Company begins mass production of its product in the future
and begins to earn revenue on sales of the product, the compensation expense associated
with the Companys stock options will have a significant effect on its ability to
incur positive net results.

# Critical Accounting
Policies

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

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

In accordance with the provisions of
the Financial Accounting Standards Boards (FASB) Statement of Accounting
Standard (SFAS) No. 123, Accounting for Stock-Based Compensation, the Company
has elected to follow the Accounting Principles Boards Opinion No. 25, Accounting
for Stock Issued to Employees and the related interpretations (APB 25) in
accounting for its employee stock based compensation plans. Due to changes in the exercise
price for certain Stock Options granted under the Stock Option Plan, those options will be
accounted for using variable plan accounting under APB 25.

Under APB 25, if the exercise price
of employee stock options issued under a fixed plan equals or exceeds the fair value of
the underlying stock on the date of grant, no compensation expense is recognized (see Note
4(a)). Stock options granted to non-employees result in the recognition of expenses upon
the fair value of such stock options as prescribed under SFAS No. 123. Due to changes in
the exercise price for certain Stock Option granted under the Stock Option Plan, those
options will be accounted for using variable plan accounting under APB 25. Variable
accounting requires that the intrinsic value, being the excess of the current market price
at the end of each reporting

13

---

period in excess of the exercise
price of the repriced options, be expensed as non-cash stock based compensation expense,
until such time as the repriced options are exercised, expire or are otherwise forfeited.
Any increase in the intrinsic value of the repriced options will decrease reported
earnings, and any subsequent decreases in value will increase reported earnings. For
those options which were granted outside of the plan prior to the change in exercise
price, the Company recognizes additional compensation cost for the excess of the fair
value of the modified options issued over the value of the original option at the date of
the modification.

The Companys accounting for
stock options is significant because the effect the compensation expense has on the
Companys results. As the Company begins to produce their product in the future and
begins to earn revenue on sales of the product, the compensation expense associated with
the Companys stock options will have a significant effect on its ability to incur
positive net results.

# Related Party
Transactions

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

The Company's Results of Operations
for the Three Months Ended March 31, 2003 Compared to the Three Months Ended March 31,
2002

Revenues.    
          No revenues were recorded in either the three month period ended March 31, 2003
          or the three month period ended March 31, 2002. The Company only recently
          delivered a limited number of our MagiQTM batteries for a pilot
          program that is the first step in the Companys plan to commercialize
          MagiQTM batteries. The Company does not anticipate that it will
          generate any significant revenues from the sale of MagiQTM batteries
          until it successfully introduces MagiQTM batteries to a broad
          commercial market or one or more manufacturers install MagiQTM
          batteries as original manufacturer equipment in their vehicles, assuming the
          Company can raise sufficient financing to commercialize its MagiQTM
          batteries.

Total Operating Expenses. The
Company had total operating expenses of $578,000 for the three month period ended March
31, 2003, compared to $469,000 for the same period in 2002. Total operating expenses for
the three month period ended March 31, 2003 included research and development expenses of
$272,000 ($230,000  2002) and marketing and general and administrative expenses of
$306,000 ($239,000  2002). Total operating expenses increased by $109,000 or 23% for
the three month period ended March 31, 2003, compared to the same period in 2002. The
primary factors contributing to increased operating expenses were a reversal of non-cash
stock-based compensation expenses in the three month period ended March 31, 2002, the
strengthening of the Euro versus the US dollar, and an increase in professional fees in
general and administration.

Research and Development
Expenses. Research and development expenses in total were $272,000 for the three
months ended March 31, 2003 compared to $230,000 for the same period in 2002, an increase
of $42,000 or 18%. Research and development personnel costs increased by $72,000 from
$108,000 for the first quarter in 2002 to $180,000 for the first quarter in 2003. The
reversal of stock-based compensation expenses in the three month period ended March 31,
2002 accounted for $32,000 of the total increase in personnel related expenses (no
expenses related to stock-based compensation were incurred in 2003); an additional
increase of $30,000 was due to the exchange rate difference of the Euro versus the US
dollar in the two compared periods. Laboratory expenses related to research and
development were approximately the same at $70,000 for the three months ended March 31,
2003 and for the comparable period in 2002. Research and development office & travel
expenses decreased from $15,000 for the three month period ending March 31, 2002 to $6,000
for the same period in 2003. Consulting services decreased from $19,000 for the first
quarter in 2002 to $8,000 for the first three months in 2003, as the Company incurred
expenses for consulting services related to its quality assurance certification process in
the first quarter of 2002. The Companys professional fees associated with research
and development decreased to $8,000 in the first quarter of 2003, compared to $18,000 in
2002.

14

---

We anticipate that research and
development expenses will be slightly higher in 2003 as we continue development of our
BEM-Battery Energy Manager® and SEM-Smart Energy Manager® technologies. See
Plan of Operation.

Marketing and General and
Administration Expenses. The expenses related to marketing and general and
administration increased to $306,000 for the three month period ended March 31, 2003 from
$239,000 for the same period in 2002, an increase of $67,000 or 28%. Personnel related
expenses increased $15,000 to $48,000 for the three month period ended March 31, 2003 from
$33,000 for the same period in 2002. The reversal of stock-based compensation expenses in
the three month period ended March 31, 2002 accounted for $11,000 of the total increase in
personnel related expenses (no expenses related to stock-based compensation were incurred
in 2003). Professional fees increased significantly to $92,000 for the first quarter in
2003, compared to $18,000 for the first quarter in 2002 due to the Companys
intensified negotiations related to the acquisition of Gel and due to auditing fees and
legal expenses related to our Securities and Exchange Commission filings. Investor
relations expenses decreased to $31,000 for the three months ended March 31, 2003, from
$84,000 for the same period in 2002, a decrease of $53,000. This decrease in investor
relations expense resulted from the restructuring of investor relations agreements in
2002. Consulting fees increased $17,000 to $50,000 for the three months ended March 31,
2003, from $33,000 for the three months ended March 31, 2002, as the Company increased its
use of consultants to assist it with business development and capital raising efforts.
Other expenses related to marketing and general and administration for the quarter ended
March 31, 2003 included: increased office & travel expenses at $32,000 ($29,000 
first quarter 2002); increased marketing activities at $25,000 ($21,000  first
quarter 2002); management fees at $18,000 ($18,000  first quarter 2002); and all
other expenses at $10,000 ($3,000  first quarter 2002).

The Company anticipates that the
level of expenditures related to its marketing and general and administration expenses
will increase during 2003 as it plans to increase marketing efforts to introduce and
commercialize the MagiQTM battery. The Company also expects to increase its
efforts to enter into service and licensing arrangements to commercialize its
MagiQTM battery and its related energy management technologies.

Net Loss. The Company incurred
a net loss of $490,000 or $0.02 per share for the first quarter of 2003, compared to a net
loss of $512,000 or $0.03 per share during the same period in 2002. The Company incurred a
gain on foreign exchange of $90,000 for the three months period ended March 31, 2003,
compared to a loss on foreign exchange of $42,000 for the same period in 2003.

The Company anticipates that it will
continue to incur losses in future periods until the Company is able to successfully
commercialize its MagiQTM battery and energy management technologies. There can
be no assurance that the Company will have sufficient capital to commercialize its
MagiQTM battery and energy management technologies or that such products will
be commercially successful. The MagiQTM battery is being manufactured by a
third-party manufacturer for limited sales in Europe, which is anticipated to begin in
late 2003, assuming adequate financing is available. There can be no assurance that the
Companys efforts to commercialize the MagiQTM battery will be successful
or that we will not experience delays in introducing our battery to the market.

# Liquidity and Capital
Resources

Since inception, the Company has
financed its operations primarily through sales of its equity securities. From inception
to March 31, 2003, the Company had raised approximately $12,000,000 (net of issuance
costs) from the sale of such securities. As of March 31, 2003, the Company had cash and
cash equivalents of $174,000, compared to $331,000, at December 31, 2002. The Company had
a working capital deficit of $359,000 at March 31, 2003, compared to a working capital
deficit of $148,000 at December 31,2002. In light of the Companys working capital
position and prospects at December 31, 2002, the Companys auditors expressed
substantial doubt about the ability of the Company to continue as a going concern. The
Companys financial statements are prepared using United States generally accepted
accounting principles applicable to a going concern, and do not reflect adjustments to the
carrying value of assets and liabilities, the reported expenses and balance sheet
classifications that would be necessary if the appropriateness of the going concern
assumption were not appropriate. Such adjustments could be material.

15

---

In January 2003, the Company advanced
Gel $75,000 under the terms of the letter of intent in connection with the Companys
proposed acquisition of substantially all of the assets of Gel. This obligation is
evidenced by a demand promissory note bearing interest at the rate of 6% per annum.

In November 2002, the Company
announced another private placement of up to 1,715,000 units of the Company at $0.35 per
unit for proceeds of $600,000, with each unit consisting of one common share of the
Company and one non-transferable warrant exercisable for a period of twelve months
following closing and entitling the holder to purchase one additional common share of the
Company for $0.45. The Company issued 1,572,853 units for proceeds of $550,500 in November
and December 2002. The Company issued an additional 150,000 units for proceeds of $52,500
in February 2003. The subscribers to the private placement were non-U.S. persons outside
the United States in reliance upon an exemption from registration under Regulation S of
the Securities Act of 1933, as amended. The Company paid a finders fees to non-U.S.
persons outside the United States, in connection with the offering consisting of 107,142
common shares. The finders fees were paid in February 2003. The shares were issued
pursuant to an exemption from registration available under Regulation S of the Securities
Act.

In February and March 2003, the
Company issued 735,937 units of the Company at $0.32 per unit for proceeds of $235,500,
each unit consisting of one common share of the Company and one non-transferable warrant
exercisable for a period of twelve months following closing to purchase one additional
common share of the Company for $0.42. The subscribers to the private placement were
non-U.S. persons outside the United States in reliance upon an exemption from registration
under Regulation S of the Securities Act of 1933, as amended.

Subsequent to the quarter ended March
31, 2003, the Company raised an additional $197,200 in equity capital through the private
placement of 616,250 units of the Company at $0.32 per unit, each such unit consisting of
one common share of the Company and one non-transferable warrant exercisable for a period
of twelve months following closing and entitling the holder to purchase one additional
common share of the Company for $0.42. The subscribers to the private placement and the
finder were non-U.S. persons outside the United States and the offering was conducted
pursuant to Regulation S as promulgated by the United States Securities and Exchange
Commission.

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

The Company anticipates that it will
require an additional $2,300,000 to $2,600,000 in financing to meet its on-going short
term and long term obligations during 2003 and to fund its plan of operation. See
Plan of Operation. The Company plans to finance its capital needs principally
from the net proceeds of its securities offerings and interest thereon and, to the extent
available, lines of credit. In addition, the Company expects to generate revenues from the
sales of its products.

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

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

The Company anticipates that the
level of spending will increase significantly in future periods as the Company undertakes
marketing and sales 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 commercialization, research,
development, testing and business development programs. The Company expects its
expenditures on research and development to continue on the current level. The actual
levels of research and development, administrative and general, and marketing corporate
expenditures are dependent on the cash resources available to the Company.

Currently, the Company is
investigating investment opportunities such as an investment in Gel, a North American
based battery manufacturer and possible plans to build a production facility in Germany.
The Company currently

16

---

does not have sufficient cash or
working capital to pursue on either of these opportunities. The Company currently has
commitments in the form of letters of intent for government subsidies and credit
financing for the building of a manufacturing plant in Germany. Both opportunities are
dependent on the availability of equity or debt financing to the Company on acceptable
terms. The successful completion of the financing cannot be guaranteed.

# Obligations and
Commitments

iQ Germany is obligated to pay to
Horst Dieter Braun, that companys founding President and Peter Braun, our President,
DM 400,000 in connection with iQ Germanys acquisition of the iQ technology and other
intellectual property rights. This obligation is equivalent to approximately EUR205,000
($220,000). The amount is payable only out of (and only to the extent of) the gross
profits of iQ Germany, if any. The Company presently believes that it has no financial
obligation to either Horst Dieter Braun or Peter Braun in connection with this agreement.

In August 2002, the Company entered
into a Financial Public Relations Adviser Consulting Agreement with Joerg Schweizer, a
non-U.S. person outside the United States. The Company agreed to pay Joerg Schweizer a
consulting fee in the amount of EUR 5,000 (approximately $5,300) per month for such
services. Of the consulting fee, EUR 2,000 is due monthly while the remaining EUR 3,000 is
payable by issuing Joerg Schweizer common shares, issuable on a quarterly basis. The
shares are anticipated to be issued in reliance upon an exception from the registration
requirement of the Securities Act under Regulation S. The agreement has an initial term of
12 months. As of March 31, 2003, the Company had issued Joerg Schweizer 56,300 common
shares under the agreement.

In August 2002, the Company entered
into a Media Relations Consulting Agreement with Andreas Gloetzl, a non-U.S. person
outside the United States. The agreement has an initial term of August 1, 2002 through
March 15, 2003. The Company agreed to pay Andreas Gloetzl a consulting fee in the amount
of $33,800 by issuing Andreas Gloetzl common shares, issuable as follows: The first
issuance of 25,000 shares in October 2002, additional 20,000 shares in December 2002, the
last installment of 20,000 shares in March 2003. The shares are anticipated to be issued
in reliance upon an exception from the registration requirement of the Securities Act. As
of March 31, 2003, the Company had issued Andreas Gloetzl all 65,000 common shares under
the agreement.

In November 2002, the Company entered
into a Officer Engagement Agreement with Marco Graf von Matuschka, our Chief Financial
Officer. The Company agreed to pay Marco Graf von Matuschka a consulting fee in the amount
of $3,000 per month for such services. Of the consulting fee, one half is payable by
issuing 3,333 common shares. The agreement had an initial term ending March 31, 2003, and
renewable on a quarterly basis thereafter. As of March 31, 2003, the Company had issued
Marco Graf von Matuschka 11,666 common shares under the agreement.

The Companys capital
requirements depend on several factors, including the success and progress of its product
development programs, the resources it devotes to developing its products, the extent to
which its products achieve market acceptance, and other factors. The Company in the past
has, and in the future expects to, devote substantial cash and other resources to research
and development efforts. The Company will also require additional capital if it completes
the Gel acquisition or undertakes to build or acquire a battery manufacturing facility,
for which there is no assurance. The Company cannot adequately predict the amount and
timing of its future cash requirements.

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

# Plan of Operation

The Company has been actively
undertaking the following initiatives:

17

---

The Company completed development of
the MagiQ battery and started initial pilot production. The Company refined contracts with
all suppliers necessary to provide the components for the ramp-up of the production
according to quality requirements and at fixed negotiated costs. The Company completed
test run programs to establish effective quality control programs, but experienced delays
caused by set backs in one specific component.

The Company is currently examining
mass production options to expand its production capacities in the future. The Company
also completed a risk management analysis and are negotiating with battery manufacturers
to expand its production.

The Company entered into a
non-binding letter of intent for the acquisition of the business and assets of Gel, a
battery manufacturer headquartered in Los Angeles, California. The LOI expired prior to
completion of the formal agreement with Gel. The parties are continuing negotiations and
due diligence related to the proposed acquisition although they are restructuring the
formal acquisition agreement and acquisition costs to address certain concerns of the
parties.

In addition, the Company has entered
into a letter of intent with the City of Hof, Germany, to pursue the opportunity to built
a pilot production plant as part of an automotive cluster that the Bavarian State plans to
locate there. In that context, the Company had filed an application for government funds
in April, 2002, and has been negotiating financings with numerous banks and investment
firms, resulting in the issuance of a letter of intent by two major German banks for the
loan financing portion of the investment. The Company will need to raise additional
capital in addition to the bank financing to pursue this opportunity.

In September 2000, The Company showed
our SEM Smart Energy Management application together with DaimlerChrysler at the
International Auto Show for Trucks in Frankfurt. This resulted in a joint proposal
submitted to the European Union for funding of DaimlerChryslers intelligent
Powertrain X-by-wire concept. The project, called project PEIT (Powertrain Equipped with
Intelligent Technology), was launched during the third quarter of 2001. The Company is
responsible for development and delivery of the complete electrical energy storage and
supply system, including work on the system architecture for the project. Other
participants in the project PEIT include: Knorr Bremse, Diehl Avionic Systeme and
Continental AG. In September 2002, one vehicle was integrated into a fixed test stand,
with full functionality to emulate drives, and another vehicle intended for street tests
is currently being built. iQ has delivered its smart batteries equipped with the iQ
modules and an additional electronic for data recording and storage. iQ is in the process
of completing the design of the Energy managing unit for the project.

In Spring 2002, The Companys
Management was nominated by Ernst & Young, Germany for the award Entrepreneur of
the Year 2002 and in September received the award of Finalist.

Since the first fiscal quarter of
2000, the Company has been invited to present its technology on several international
conferences and to submit several technical papers. The Company continues to negotiate
with battery manufacturers, suppliers to the automotive industry and automakers regarding
the use and purchase of its products and/or its technology.

As part of the Companys
strategic plan, over the next 12 months, we intend to undertake the following activities:

# Research and Development

| |  | intensify
the Companys research and development operations on the SEM and BEM product family
designs;
| | - | ------------------------------------------------------------------------------------------------------

| |  | complete
and continuously improve the MagiQTM product family designs;
| | - | ---------------------------------------------------------------------

| |  | finalize
a third party testing and validation program;
| | - | ------------------------------------------------------

| |  | continue
joint research activities with car makers in various x-by-wire programs;
| | - | ---------------------------------------------------------------------------------

| |  | continue
state of charge (SOC) and state of health (SOH) software and implementation development;
and
| | - | -----------------------------------------------------------------------------------------------------

| |  | expedite
activities in the field of power line communication with the DC-BUS technology.
| | - | ----------------------------------------------------------------------------------------

18

---

The Company anticipates that it will
spend approximately $850,000 on research and development for the fiscal year ending
December 31, 2003.

# Production

| |  | commence
the mass-production of our MagiQTM battery;
| | - | ----------------------------------------------------

| |  | continue
the assessment and the qualification of additional manufacturing sites for the production
of the MagiQTM battery designs;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| |  | enter
into joint ventures, partnership agreements, cooperation agreements or similar agreements
with battery manufacturers;
| | - | ---------------------------------------------------------------------------------------------------------------------------

| |  | assess
options to operate own manufacturing sites;
| | - | --------------------------------------------------

| |  | enforce
quality management and assurance programs of suppliers and internal workflows;
| | - | ---------------------------------------------------------------------------------------

| |  | continuously
improve production processes, optimize cost structure, and increase product quality; and
| | - | -----------------------------------------------------------------------------------------------------

| |  | implement
adequate software tools for production planning and scheduling (PPS) and enterprise
resource planning (ERP)
| | - | ---------------------------------------------------------------------------------------------------------------------

The Company anticipates that it will
spend approximately $600,000 on production related costs and planning activities for the
fiscal year ending December 31, 2003.

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

# Marketing

| |  | expand
marketing activities of our MagiQTM battery system;
| | - | ----------------------------------------------------------

| |  | market
the MagiQTMbattery system to Original Equipment Manufacturers (OEM) customers
and After Market (AM) distributors;
| | - | ------------------------------------------------------------------------------------------------------------------------

| |  | market
the iQ technology and the Companys software as SOC and SOH status indications
solutions for batteries to car  manufacturers
and their Tier 1 suppliers;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | enter
into customization programs with customers of the automotive industry and other
industries to apply the Companys technology for energy storage (MagiQTM)
to their individual demand; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | enter
into development contracts with customers of the automotive industry and other industries
to apply the Companys technology for energy management solutions (BEM, SEM) to
their individual demand with the goal of producing and supplying the products to those
customers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company anticipates that it will
spend approximately $300,000 on marketing and sales for the fiscal year ending
December 31, 2003.

# Financial

| |  | seek
additional financing to expand the Companys operations and to acquire an interest
in or form a strategic alliance with a battery manufacturer, so that time-to-market of
our first generation of products can be reduced; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | generate
turnover from the sales of the Company's products.
| | - | -----------------------------------------------------------

The Company anticipates that it will
expend approximately $150,000 on capital raising efforts during 2003.

# Administrative and
General Operating

| |  | intensify
business development activities towards corporations and alliances;
| | - | -----------------------------------------------------------------------------

| |  | implement
additional corporate governance structures in order to respond to increased internal and
external needs;
| | - | ------------------------------------------------------------------------------------------------------------------

19

---

| |  | continuously
improve public awareness through investor and public relations activities in accordance
with the Companys development; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| |  | adjust
structure of the company organization and work flows along company growth and expansion.
| | - | -----------------------------------------------------------------------------------------------

The Company estimates that its
general administrative and operating budget will be approximately $900,000 during our
fiscal year ending December 31, 2003.

# Need for Additional
Capital

The Company anticipates that its
total operating budget for fiscal year ending December 31, 2003 will be approximately
$2,800,000. The Company anticipates that it will require additional financing of
approximately $2,300,000 to $2,600,000 to satisfy its working capital requirements through
December 31, 2003.

In the event that the Company
acquires its own production facilities, its total budget for the fiscal year ended 2003 is
expected to increase significantly.

The Company is in the process of
completing a private placement to non-U.S. persons outside the United States to raise
$700,000. In the first quarter of 2003, the Company received approximately $430,000 in
connection with this private placement. There can be no assurance that the Company will be
able to close the balance of the private placement. In addition, the Company will need to
raise additional capital in the near future to continue as a going concern. See
Liquidity and Capital Resources above. The Company may experience delays, cost
overruns, additional funding needs for joint ventures or other unanticipated events that
will increase the Companys need to raise additional financing. The Company cannot
assure you that it will be able to obtain more financing or that, if it does, it will be
on favorable terms or on a timely basis.

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

| |  | reduce
expenditures on research and development;
| | - | ------------------------------------------------

| |  | reduce
sales and marketing expenditures;\
| | - | -----------------------------------------

| |  | reduce
general and administrative expenses through lay offs or consolidation of its operations;
| | - | -----------------------------------------------------------------------------------------------

| |  | suspend
its participation in pilot programs that are not economically profitable;
| | - | ---------------------------------------------------------------------------------

| |  | sell
assets, including licenses to its technologies;
| | - | ----------------------------------------------------

| |  | suspend
its operations until sufficient financing is available; or
| | - | ------------------------------------------------------------------

| |  | sell
or wind up and liquidate its business.
| | - | -------------------------------------------

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

# Personnel

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

20

---

# Other Trends and
Uncertainties

# Foreign Currency Translation
Risk

US dollars forwarded to our German
subsidiary are translated into Euros for German accounting purposes as soon as the funds
are used for their operations. In the consolidation process these loans are translated
back into US dollars resulting in foreign exchange gains or losses at the Companys
German subsidiary. In the first quarter of 2003, due to the strengthening of the Euro
versus the US dollar, the Company incurred foreign exchange gains of $90,000. The Company
believes its risk of foreign currency translation is limited to these inter-company
transactions. The Company does not currently engage in hedging or other activities to
control the risk of foreign currency translation, but may do so in the future, if
conditions warrant.

# Going Concern

The Company is still in the
development stage and could fail before implementing its business strategy. The Company
may continue to incur net losses for the foreseeable future and the Company has prepared
the accompanying financial statements assuming that it will continue as a going concern.
The Companys auditors have expressed uncertainty as to the Companys ability to
remain a going concern. In connection with our 2002 Annual Report on Form 10-K, the
Companys auditors have expressed substantial doubt as to the Companys ability
to continue as a going concern. See Item 7. Financial Statements  Note
2. of the Companys Annual Report on Form 10-KSB filed with the United States
Securities and Exchange Commission on April 16, 2003.

ITEM
3.  Controls and Procedures

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

Within 90 days prior to the date of
this report, the Companys management carried out an evaluation, under the
supervision and with the participation of the Companys management, including the
Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of the Companys disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the Companys Chief
Executive Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures are effective in connection with the filing of this Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2003.

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

21

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# Part II  OTHER
INFORMATION

ITEM
1.  LEGAL PROCEEDINGS

As
of March 31, 2003, there is no material litigation pending against the Company.

ITEM
2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

Sales
of Unregistered Securities.

As of March 31, 2003, the Company had
issued Joerg Schweizer, a non-U.S. person outside the United States, 56,300 common shares
under the terms of a Financial Public Relations Adviser Consulting Agreement. The shares
were issued in reliance upon an exception from the registration requirement of the
Securities Act under Regulation S.

As of March 31, 2003, the Company had
issued Andreas Gloetzl, a non-U.S. person outside the United States, 65,000 common shares
under the terms of a Media Relations Consulting Agreement. The shares were issued by the
Company as follows: 25,000 shares in October 2002, 20,000 shares in January 2003, and
20,000 shares in March 2003. The shares were issued in reliance upon an exception from the
registration requirement of the Securities Act available under Regulation S.

As of March 31, 2003, the Company had
issued Marco Graf von Matuschka, a non-U.S. person outside the United States, 11,666
common shares under the terms of an Officer Engagement Agreement. The shares were issued
in reliance upon an exception from the registration requirement of the Securities Act
available under Regulation S.

In November 2002, the Company
announced another private placement of up to 1,715,000 units of the Company at $0.35 per
unit for proceeds of $600,000, with each unit consisting of one common share of the
Company and one non-transferable warrant exercisable for a period of twelve months
following closing and entitling the holder to purchase one additional common share of the
Company for $0.45. The Company issued 1,572,853 units for proceeds of $550,500 in November
and December 2002. The Company issued an additional 150,000 units for proceeds of $52,500
in February 2003. The subscribers to the private placement were non-U.S. persons outside
the United States in reliance upon an exemption from registration under Regulation S of
the Securities Act of 1933, as amended. The Company paid a finders fees to non-U.S.
persons outside the United States, in connection with the offering consisting of 107,142
common shares. The finders fees were paid in February 2003. The shares were issued
pursuant to an exemption from registration available under Regulation S of the Securities
Act.

In February and March 2003, the
Company issued 735,937 units of the Company at $0.32 per unit for proceeds of $235,500,
each unit consisting of one common share of the Company and one non-transferable warrant
exercisable for a period of twelve months following closing to purchase one additional
common share of the Company for $0.42. The subscribers to the private placement were
non-U.S. persons outside the United States in reliance upon an exemption from registration
under Regulation S of the Securities Act of 1933, as amended.

Subsequent to the quarter ended March
31, 2003, the Company raised an additional $197,200 in equity capital through the private
placement of 616,250 units of the Company at US$0.32 per unit, each such unit consisting
of one common share of the Company and one non-transferable warrant exercisable for a
period of twelve months following closing and entitling the holder to purchase one
additional common share of the Company for US$0.42. The subscribers to the private
placement and the finder were non-U.S. persons outside the United States and the offering
was conducted pursuant to Regulation S as promulgated by the United States Securities and
Exchange Commission.

Additional information regarding the
Companys issuance of unregistered securities during the past three fiscal years is
contained in the Companys annual reports on Form 10-KSB for the years ended December
31, 2002 and 2001 under Item 5. Market for Common Equity and Related Shareholder
Matters  Recent Sale of Unregistered Securities filed with the United States
Securities and Exchange Commission. The information contained under Item 5. Market
for Common Equity and Related Shareholder Matters  Recent Sale of Unregistered
Securities of the

22

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Companys annual report on Form
10-KSB for the year ended December 31, 2001 is hereby incorporated by reference to this
report.

ITEM
3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

No
matters were submitted to a vote of the Shareholders during the quarter ended March 31,
2003.

ITEM
5.  OTHER INFORMATION

On
March 10, 2003, John Larson resigned as a member of our audit committee, and on April 21
2003, John Lawson resigned as a director of the Company.

ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K

The following Exhibits are filed as
part of this report:

EXHIBIT INDEX

|Exhibit No. |  | Description
|----------- |  | -----------

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

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

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

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

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

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

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

|10.1(1) |  | Management
Agreement dated January 1, 1997, between 3099458 Canada Inc. and           Mayon
Management Corp. (previously filed as Exhibit 6.5)
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

23

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|Exhibit 
     No. |  | Description
|----------------- |  | -----------

|10.2 (1) |  | Consulting
Agreement dated August 25, 1998, between iQ Power Technology Inc.           and Mayon
Management Corp. (previously filed as Exhibit 6.6)
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|10.3(1) |  | Employment
Agreement dated August 31, 1998 with Dr. Günther C. Bauer           (previously
filed as Exhibit 6.7)
|------- |  | ----------------------------------------------------------------------------------------------------------------

|10.4(1) |  | Employment
Agreement dated August 31, 1998 with Peter E. Braun (previously           filed as
Exhibit 6.8)
|------- |  | ----------------------------------------------------------------------------------------------------------

|10.5(1) |  | Form
of Confidentiality Agreement between iQ Power Technology Inc. and certain
          Officers of the Company (previously filed as Exhibit 6.10)
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|10.6(1) |  | Form
of iQ Germany Confidentiality Agreement (Translated to English)(previously
          filed as Exhibit 6.13)
|------- |  | ----------------------------------------------------------------------------------------------------------------

|10.7(1) |  | Form
of iQ Germany Employee Confidentiality and Nondisclosure Agreement           (Translated
to English)(previously filed as Exhibit 6.14)
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|10.8(1) |  | Cooperation
Agreement by and between iQ Battery Research and Development GmbH           and BASF
Aktiengesellschaft (Translated to English)(previously filed as Exhibit           6.15)
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9(1) |  | Confidentiality
Agreement by and between iQ Battery Research and Development           GmbH and
Bayerische Motoren Werke dated July 29, 1997 (Translated to           English)(previously
filed as Exhibit 6.16)
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

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|Exhibit 
     No. |  | Description
|----------------- |  | -----------

|10.10(1) |  | Mutual
Confidentiality Agreement among iQ Battery Research and Development GmbH,
               Akkumulatorenfabrik Moll GmbH & Co. KG, and Audi dated May 26, 1998
               (Translated to English)(previously filed as Exhibit 6.17)
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11(1) |  | Confidentiality
Agreement between iQ Battery Research and Development GmbH and                Mercedes
Benz Aktiengessellschaft dated March 21, 1997 (Translated to
               English)(previously filed as Exhibit 6.18)
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12(1) |  | Contract
Concerning Industrial Property Rights and Know How by and between                Dieter
Braun and Peter E. Braun and iQ Battery Research and Development GmbH
               dated March 15, 1995 (Translated to English)(previously filed as Exhibit
6.22)
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13(1) |  | Supplementary
Contract to the Contract concerning Industrial Property Rights and                Know
How by and between H. Dieter Braun and Peter E. Braun and iQ Battery
               Research and Development GmbH dated August 16, 1996 (Translated to
               English)(previously filed as Exhibit 6.23)
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14(1) |  | Extension
of Contract regarding Industrial Property Rights and Know How by and
               between Dieter Braun and Peter Braun and iQ Battery Research and
Development                GmbH dated September 20, 1996 (Translated to
English)(previously filed as                Exhibit 6.24)
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15(1) |  | Agreement
(Debt Deferral) by and between iQ Battery Research and Development                GmbH
and Dieter Braun and Peter Braun dated December 27, 1996 (Translated to
               English)(previously filed as Exhibit 6.27)
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16(1) |  | Agreement
(Debt Deferral) by and between iQ Research and Development GmbH and                Günther
Bauer dated December 27, 1996 (Translated to English)(previously                filed as
Exhibit 6.28)
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17(1) |  | Waiver
among H. Dieter Braun, Peter E. Braun, Günther Bauer, Karin
               Wittkewitz and iQ Battery Research and Development GmbH dated December 19,
1997                (Translated to English)(previously filed as Exhibit 6.29)
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18(1) |  | Agreement
by and between iQ Battery Research and Development GmbH and Dieter                Braun
and Peter Braun dated October 9, 1998 (Translated to English)(previously
               filed as Exhibit 6.30)
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19(1) |  | 1998
Stock Option Plan (previously filed as Exhibit 6.31)
|-------- |  | ---------------------------------------------------------

|10.20(1) |  | Form
of Stock Option Agreement (previously filed as Exhibit 6.32)
|-------- |  | -----------------------------------------------------------------

|10.21(1) |  | Agreement
Re Rights and Interests dated December 9, 1998 by and among the                Company,
H. Dieter Braun and Peter E. Braun (previously filed as Exhibit 6.34)
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22(1) |  | Trademark
Assignment dated December 9, 1998 by and between the Company and H.                Dieter
Braun (previously filed as Exhibit 6.35)
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|10.23(1) |  | Patent
Assignment dated December 9, 1998 by and between the Company and H.                Dieter
Braun and Peter E. Braun (previously filed as Exhibit 6.36)
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24(3) |  | Cooperation
Agreement dated October 19, 1999 between Yamar Electronics Ltd. and                iQ
Battery R&D GmbH(previously filed as Exhibit 6.40)
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

25

---

|Exhibit 
     No. |  | Description
|----------------- |  | -----------

|10.25(4) |  | Agreement
of Subordination in Priority in Association with a Conditional Waiver                of
Claim by and between IQ Power Technology Inc. and iQ Battery Research and
               Development GmbH dated May 2, 2001 (previously filed as Exhibit 6.49)
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26(5) |  | Amendment
No. 3 to iQ Power Technology 1998 Stock Option Plan (previously filed                as
Exhibit 6.50)
|-------- |  | ---------------------------------------------------------------------------------------------------------------

|10.27(5) |  | iQ
Power Technology 2001 Incentive Plan (previously filed as Exhibit 6.51)
|-------- |  | --------------------------------------------------------------------------

|10.28(8) |  | European
Investor Relations Consulting Agreement Supplemental Agreement # 1 by                and
between the Company and Magdalena Finance Corp. dated September 1, 2001.
               (previously filed as Exhibit 6.57)
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29(10) |  | Amendment
No. 4 to iQ Power Technology 1998 Stock Option Plan (previously filed                as
Exhibit 6.61)
|--------- |  | ---------------------------------------------------------------------------------------------------------------

|10.30(10) |  | Amendment
No. 1 to iQ Power Technology 2001 Incentive Plan (previously filed as
               Exhibit 6.62)
|--------- |  | ------------------------------------------------------------------------------------------------------------

|10.31(11) |  | Media
Relations Consulting Agreement by and between iQ Power Technology Inc. and
               Andreas Gloetzl (previously filed as Exhibit 6.63)
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|10.32(11) |  | Financial
Public Relations Adviser Consulting Agreement by and between iQ Power
               Technology Inc. and Jörg Schweizer (previously filed as Exhibit 6.64)
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.33(11) |  | Letter
of Intent by and between iQ Power Technology Inc. and Gel Electric
               Technologies, Inc. (previously filed as Exhibit 6.65)
|--------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

|10.34 |  | Consulting
Agreement by and between iQ Power Technology Inc. and Marco Graf v. Matuschka
|----- |  | ----------------------------------------------------------------------------------------

|99.1 |  | Section
904 Certification of Chief Executive Officer
|---- |  | ----------------------------------------------------

|99.2 |  | Section
904 Certification of Chief Financial Officer
|---- |  | ----------------------------------------------------

_________________

|(1) |  | Previously filed as an exhibit to the registrants registration statement
               on Form SB-1 on December 10, 1998 (File No. 333-68649).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Previously filed as an exhibit to the registrants registration statement
               on Form SB-1/A (Amendment No. 1) on March 18, 1998 (File No. 333-68649).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Previously filed as an exhibit to the registrants annual report on Form
               10-KSB for the year ended December 1, 1999.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Previously filed as an exhibit to the registrants annual report on Form
               10-KSB for the year ended December 31, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Previously filed as an exhibit to the registrants registration statement
               on Form S-8 filed on July 25, 2001.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

|(6) |  | Previously filed as an exhibit to the registrants quarterly report on Form
               10-QSB for the quarter ended June 30, 2001.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Previously filed as an exhibit to the registrants quarterly report on Form
               10-QSB for the quarter ended September 30, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Previously filed as an exhibit to the registrants annual report on Form
               10-KSB for the year ended December 31, 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Previously filed as an exhibit to the registrants quarterly report on Form
               10-QSB for the quarter ended June 30, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------

|(10) |  | Previously filed as an exhibit to the registrants registration statement
               on Form S-8 filed on November 8, 2002.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------

|(11) |  | Previously filed as an exhibit to the registrants quarterly report on Form
               10-QSB for the quarter ended September 30, 2002.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|(12) |  | Previously filed as an exhibit to the registrants annual report on Form
               10-KSB for the year ended December 31, 2002.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------

|(b) | Reports
on Form 8-K.
|--- | --------------------

| | None
| | ----

26

---

# SIGNATURES

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

May 15, 2003.

| | IQ POWER TECHNOLOGY INC.


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

| | IQ POWER TECHNOLOGY INC.


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

27

---

# SECTION 302
CERTIFICATION

I, Peter E. Braun, certify that:

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

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

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

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

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

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

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

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

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

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

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

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

May 15, 2003

28

---

# SECTION 302
CERTIFICATION

I, Marco Graf von Matuschka, certify
that:

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

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

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

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

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

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

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

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

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

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

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

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

May 15, 2003

29

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