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 June 30, 2002

                                       OR

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

     For the transition period from _______________ to _________________.

                        Commission file number 000-26165


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


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

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


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

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

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

     The  number  of  outstanding  common  shares,  without  par  value,  of the
registrant at August 13, 2002 was 18,733,474.

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


<PAGE>

                               IQ POWER TECHNOLOGY
                            INDEX TO THE FORM 10-QSB
                  For the quarterly period ended June 30, 2002


                                                                            Page
                                                                            ----

PART I -  FINANCIAL INFORMATION ..............................................1

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

          Unaudited Consolidated Balance Sheets...............................1

          Unaudited Consolidated Statement of Income/(Loss) and
             Comprehensive Income/(Loss)......................................2

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

          Unaudited Consolidated Statements of Cash Flow......................4


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


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

PART II - OTHER INFORMATION ..................................................19

  ITEM 1. LEGAL PROCEEDINGS ..................................................19

  ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ..........................19

  ITEM 3. DEFAULTS UPON SENIOR SECURITIES ....................................20

  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ................20

  ITEM 5. OTHER INFORMATION ..................................................22

  ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ...................................22

SIGNATURES ...................................................................26



                                       i

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


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


<TABLE>
                                                                      June 30,       December 31,
                                                                          2002               2001
---------------------------------------------------------------------------------------------------
<S>                                                                    <C>                <C>
   ASSETS

     Current Assets
       Cash and cash equivalents                                           710                451
       Receivable from original shareholders                                75                 78
       Other receivables                                                   152                129
       Prepaids and deposits                                               177                160
       Other current assets                                                128                 83
---------------------------------------------------------------------------------------------------
     Total current assets                                                1,242                901

     Non-current Assets
       Equipment, net                                                      473                459
---------------------------------------------------------------------------------------------------
     Total non-current assets                                              473                459

   TOTAL ASSETS                                                          1,715              1,360
---------------------------------------------------------------------------------------------------
   LIABILITIES AND SHAREHOLDERS' EQUITY

     LIABILITIES
       Current liabilities
         Accounts payable                                                  397                430
         Accrued payroll and employees benefits                             40                101
         Advances                                                            4                  -
         Accrued liabilities                                               231                225
                                                                                              263
---------------------------------------------------------------------------------------------------
       Total current liabilities                                           672                756
---------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES                                                     672                756

     SHAREHOLDERS' EQUITY

       Authorized:
         An unlimited number of common shares of no par value
       Issued and outstanding:
          15,952,124 common shares at December 31, 2001
          18,733,474 common shares at June 30, 2002                     10,041              8,574
       Capital surplus/Additional paid-in                                1,741              1,850
       Accumulated other comprehensive (loss) income                      (259)                26
       Accumulated deficit, during development stage
         (after loss allocation to silent partners)                    (10,480)            (9,846)

---------------------------------------------------------------------------------------------------
     TOTAL SHAREHOLDERS' EQUITY                                          1,043                604

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                            1,715              1,360
---------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.



                                       1
<PAGE>


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



<TABLE>

                                                      Cumulative from        Three months                 Six months
                                                     date of inception      ended June 30,               ended June 30,
                                                        to June 30,
                                                           2002           2002          2001           2002          2001
--------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>           <C>            <C>           <C>
SALES AND OTHER REVENUE                                     182              -             -              -             -
--------------------------------------------------------------------------------------------------------------------------
EXPENSES
   Research and development expenses
     Personnel                                            2,785            154           150            294           327
     Laboratory                                           1,364             58            56            126           135
     Office                                                 570             14            21             29            32
     Consulting services                                    625              5             -             24             1
     Professional fees                                      856             16            12             34            26
--------------------------------------------------------------------------------------------------------------------------
   Total Research & Development expenses                  6,200            247           239            507           521

   Marketing and general & administrative expenses
     Personnel                                              689             43            41             87            82
     Financing                                              278              1             1              2             2
     Office                                                 247             20            18             35            36
     Consulting services                                    474             15            25             48            55
     Professional fees                                      690            106            53            124           122
     Management fees                                        216             18            18             36            36
     Marketing activities                                   277             39             1             59            11
     Investor relations                                     744             41            76            125           117
     Research memberships                                   100              -             -              -             -
     Travel                                                 282              1             1             15             9
     Other                                                  185              2             4              4             6
--------------------------------------------------------------------------------------------------------------------------
   Total Marketing and G&A expenses                       4,182            286           238            535           476

   Stock based compensation                               1,713            (66)        2,329           (109)        2,329
--------------------------------------------------------------------------------------------------------------------------
   TOTAL OPERATING EXPENSES                              12,095            467         2,806            933         3,326

   Interest expense                                         173              1            24              1            24
--------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES                                           12,268            468         2,830            934         3,350
   Interest and other income                               (143)            (1)           (1)            (1)           (1)
   (Gain)/loss on foreign exchange                         (439)          (341)           49           (299)           91

INCOME/(LOSS) BEFORE INCOME TAX                         (11,504)          (126)       (2,878)          (634)       (3,440)

   Income tax                                                 -              -             -              -             -

NET INCOME/(LOSS)                                       (11,504)          (126)       (2,878)          (634)       (3,440)
--------------------------------------------------------------------------------------------------------------------------
   Other comprehensive income (loss)                       (259)          (323)           53           (285)           90

COMPREHENSIVE INCOME/(LOSS)                             (11,763)          (449)       (2,825)          (919)       (3,350)
--------------------------------------------------------------------------------------------------------------------------
 Basic and diluted loss per share, on net loss            (1.52)         (0.01)        (0.26)         (0.04)        (0.33)

Basic and diluted weighted average
   number of shares outstanding                       7,560,055     17,567,850    10,863,832     17,229,628    10,308,312
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       2
<PAGE>

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

<TABLE>


                                                              Accumulated     Accumulated                       Total
                                      Common shares            Additional           Other                Shareholders'
                              ---------------------------         Paid-In   Comprehensive   Accumulated         Equity
                                   Shares        Amount           Capital   Income (Loss)       Deficit      (Deficit)
                              ---------------------------     -----------   -------------   ------------  ------------
<S>                                <C>        <C>            <C>            <C>              <C>           <C>
Balance at December 31, 1991           40      $    60        $       -      $      -         $     (1)     $    59
Issue of shares                                                                                                   -
Net loss                                                                                            (9)          (9)
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992           40      $    60        $       -      $      -         $    (10)          50
Issue of shares                                                                                                   -
Net loss                                                                                            (7)          (7)
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993           40      $    60        $       -      $      -         $    (17)          43
Issue of shares                                                                                                   -
Net loss                                                                                          (193)        (193)
Allocation of loss to
  atypical shares                                                                                   37           37
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994           40      $    60        $       -      $      -         $   (173)        (113)
Issue of shares                                                                                                   -
Net loss                                                                                          (341)        (341)
Allocation of loss to
  atypical shares                                                                                  379          379
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995           40      $    60        $       -      $      -         $   (135)         (75)
Issue of shares                                                                                                   -
Net loss                                                                                          (496)        (496)
Allocation of loss to
  atypical shares                                                                                  139          139
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996           40      $    60        $       -      $      -         $   (492)        (432)
Issue of shares                                                                                                   -
Net loss                                                                                          (597)        (597)
Allocation of loss to
  atypical shares                                                                                  312          312
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997           40      $    60        $       -      $      -         $   (777)        (717)
Issue of shares                                                                                                  -
Net loss                                                                                        (1,027)      (1,027)
Allocation of loss to
  atypical shares                                                                                  228          228
Other comprehensive (loss) -                                                                                      -
  foreign currency translation
  adjustments                                                                     (94)                          (94)
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998           40      $    60        $       -      $    (94)          (1,576)      (1,610)
Reorganization of capital on
  reverse acquisition           5,119,960
Deemed issuance of shares on
  acquisition of iQ Power
  Technology Inc.               4,471,770        5,495                                                        5,495
Stock based compensation                                            396                                         396
Exercise of warrants              139,850          349                                                          349
Net loss                                                                                        (2,157)      (2,157)
Other comprehensive (loss) -
  foreign currency translation
  adjustments                                                                     176                           176
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999    9,735,396        5,904              396            82           (3,733)       2,649
Net loss                                -            -                -             -           (2,359)      (2,359)
Other comprehensive (loss) -
  foreign currency translation
  adjustments                           -            -                -           (98)               -          (98)
Exercise of options                15,000           37                -             -                -           37
Stock based compensation                -            -               10             -                -           10
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000    9,745,406        5,941              406           (16)          (6,092)         239
Net loss                                -            -                -             -           (3,754)      (3,754)
Other comprehensive (loss) -
  foreign currency translation
  adjustments                           -            -                -            42                -           42
Issue of shares                 5,203,004        2,132                -             -                -        2,132
Stock based compensation                                          1,444                                       1,444
Exercise of options             1,002,500          501                -             -                -          501
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001   15,952,124        8,574            1,850            26         $ (9,846)    $    604
Net loss                                -            -                -             -             (634)        (634)
Other comprehensive (loss) -
  foreign currency translation
  adjustments                           -            -                           (285)               -         (285)
Issue of shares                 2,761,350        1,457                -             -                -        1,457
Stock based compensation                                           (109)                                       (109)
Exercise of options                20,000           10                -             -                -           10
----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2002       18,733,474       10,041            1,741      $   (259)        $(10,480)     $ 1,043
----------------------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Consolidated Statements of Cash Flows
(Expressed in United States dollars; all amounts in thousands)
(Unaudited)
================================================================================


<TABLE>

                                                         Cumulative from   Six months       Six months
                                                       date of inception        ended            ended
                                                          to June 30,        June 30,         June 30,
                                                                 2002            2002             2001
------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>            <C>
    OPERATING ACTIVITIES
    Net loss                                                  (11,504)           (634)          (3,440)
    Items not affecting cash
      Depreciation and amortization                               329              52               46
      Stock based compensation                                  1,713            (109)           2,329
    Changes in non-cash working capital
      (Increase) decrease in other receivable                    (153)             (2)             (29)
      (Increase) decrease in prepaids and deposits               (177)            (17)             (11)
      Increase (decrease) in accounts payable                     364             (75)              91
      Increase (decrease) in accrued liabilities                  268             (69)             (40)
      (Increase) decrease in other assets                        (116)            (32)             (84)
------------------------------------------------------------------------------------------------------
                                                               (9,276)           (886)          (1,138)
    INVESTING ACTIVITY
      Additions to property, plant and equipment                 (788)            (34)              (1)
------------------------------------------------------------------------------------------------------
    FINANCING ACTIVITIES
      Increase of bank overdraft                                    -               -               23
      Increase (decrease) in due to shareholder                   138               -              105
      Advances received from external parties                     299               4                -
      Cash acquired on business combination                     4,718               -                -
      Advances from subsidiary                                    581               -                -
      Issue of capital stock                                    4,347           1,467            1,222
      Issuance of atypical shares                               1,025               -                -
------------------------------------------------------------------------------------------------------
                                                               11,108           1,471            1,350
    (DECREASE) INCREASE IN CASH AND
      CASH EQUIVALENTS                                          1,044             551              211

    EFFECT OF FOREIGN EXCHANGE MOVEMENT                          (334)           (292)              99

    CASH AND CASH EQUIVALENTS,
      BEGINNING OF PERIOD                                           -             451              183
------------------------------------------------------------------------------------------------------
    CASH AND CASH EQUIVALENTS,
      END OF PERIOD                                               710             710              493
------------------------------------------------------------------------------------------------------

</TABLE>

          See accompanying notes to consolidated financial statements.



                                       4
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Quarter ended June 30, 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 June 30, 2002, the Company has
     a positive working capital position. The Company's ability to continue as a
     going concern is dependent upon the ability of the Company to attain future
     profitable  operations and/or to obtain the necessary financing to meet its
     obligations  and  repay  its  liabilities   arising  from  normal  business
     operations  when they become due. The  financial  statements do not include
     any   adjustments   to  reflect  the   possible   future   effects  on  the
     recoverability   and   classification   of  assets  or  the   amounts   and
     classification  of  liabilities  that may result  from the  outcome of this
     uncertainty.

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



                                       5
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Quarter ended June 30, 2002
(Expressed in United States dollars; tabular amounts in thousands,
except per share data)
================================================================================


2.   CONTINUING OPERATIONS (Continued)

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

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

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

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


3.   BASIS OF PRESENTATION

     The  unaudited  financial  statements  included  herein have been  prepared
     pursuant  to the rules  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 2001 Annual Report on Form 10-K.

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



                                       6
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Quarter ended June 30, 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

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

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

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

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

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

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


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

     (a)  Stock options

          The  Company  has  established  a Stock  Option  Plan  for  employees,
          officers,  directors,  consultants,  and  advisors.  The  Company  has
          reserved  3,448,000  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.  During the second  quarter of 2002,
          20,000  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
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Quarter ended June 30, 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 recognised over the exercise period. During
          the years ended December 31, 2001 and 2000, the Company issued options
          to individuals other than employees and directors which under SFAS No.
          123 are recognised as share-based  compensation.  If all services have
          been rendered by the date of grant,  the fair value of the options are
          recognized  as  compensation  expense as of that date.  SFAS No.  123,
          however,  allows the Company to  continue to measure the  compensation
          cost of employee and director related stock options in accordance with
          APB  25.  The  Company  has  therefore  adopted  the   disclosure-only
          provision of SFAS No. 123.

          On June 12, 2000, the Board of Directors  decreased the exercise price
          for the Stock Option Plan; from $2.50 to $1.50 for all options granted
          under and  outside of the plan.  On  January  16,  2001,  the Board of
          Directors decreased again the exercise price for the Stock Option Plan
          from $1.50 to $0.50 for all options  granted  under and outside of the
          plan. Due to the changes, all the options which were granted under the
          plan prior to the change in exercise price will be accounted for using
          variable plan accounting  under APB 25. Variable  accounting  requires
          that the intrinsic value, being the excess of the current market price
          at the end of each reporting period in excess of the exercise price of
          the repriced options, be expensed as non-cash stock based compensation
          expense, until such time as the repriced options are exercised, expire
          or are otherwise forfeited. Any increase in the intrinsic value of the
          repriced options will decrease reported  earnings,  and any subsequent
          decreases in value will increase reported earnings.  For those options
          which were granted outside of the plan prior ro the change in exercise
          price, the Company  recognizes  additional  compensation  cost for the
          excess of the fair value of the modified options issued over the value
          of the  original  option  at the  date  of the  modification.  For the
          quarter  ending on June 30,  2002,  $66,360  of  compensation  expense
          recovery was recognized in the financial statements.

     (b)  Incentive Share Plan

          In July 2001,  the Company  instituted  an  Incentive  Plan  reserving
          1,500,000  shares for issue to officers,  directors,  employees of the
          Company and its subsidiary and other persons, including consultants as
          an incentive. No incentive shares have been granted under this plan as
          of June 30, 2002.



                                       8
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Quarter ended June 30, 2002
(Expressed in United States dollars; tabular amounts in thousands,
except per share data)
================================================================================


4.   SHARE CAPITAL (Continued)

     (c)  Loss per share

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

     (d)  iQ share capital

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

     (e)  Issuance of shares due to private placements

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

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

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

     (f)  Issuance of shares due to consulting agreements

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




                                       9
<PAGE>

iQ POWER TECHNOLOGY INC.
(a development stage company)
Notes to the Consolidated Financial Statements
For the Quarter ended June 30, 2002
(Expressed in United States dollars; tabular amounts in thousands,
except per share data)
================================================================================


4.   SHARE CAPITAL (Continued)

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


5.   RELATED PARTY TRANSACTIONS

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

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

     (b)  The Company issued  convertible  debentures to John Lawson, a Director
          of the Company, in the aggregate  principal amount of CDN$300,000,  at
          the annual rate of 24%,  payable  monthly in arrears.  The convertible
          debentures  were  issued  pursuant  to the terms of a credit  facility
          dated December 13, 2000, and were secured by the assets of the Company
          and its subsidiary under the terms of a General Security  Agreement of
          equal date. The convertible  debentures were  convertible  into common
          shares of the Company, at the rate of $0.50 per share. The convertible
          debenture  was payable one month after  demand by the holder,  and the
          Company may prepay the  convertible  debenture  without  penalty.  The
          Company  received net proceeds in the amount of CDN$100,000  ($66,000)
          from the issuance of the  convertible  debenture in December 2000, and
          CDN$200,000   ($132,000)  in  January  2001.  No  fees  were  paid  in
          connection with this transaction. On May 24, 2001, the lender opted to
          convert CDN$77,365 ($50,000) of the convertible debenture into 100,000
          common  shares of the  Company.  On August 29,  2001 and on October 3,
          2001, the lender  converted  CDN$77,015  ($50,000) into 100,000 common
          shares  and   CDN$117,615   ($75,000)   into  150,000   common  shares
          respectively.   The  remaining  convertible  debenture  including  the
          outstanding  interest,  CDN$79,961 ($50,255) was converted on December
          31, 2001 into 100,510 common shares.

     (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,  of  which  one  is  a  director  of  the  Company.  The
          intangibles  purchased  relate to a German  patent,  an  international
          patent  application as well as the registered design "iQ". The Company
          and the shareholders  agreed that the  shareholders  would receive EUR
          205,000  from  future  income.  Any  amounts  paid will be  charged to
          operations  as a  current  expense.  No other  amounts  are due as the
          Company has not realized any applicable revenues or royalties.


6.   SEGMENT DISCLOSURES

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



                                       10
<PAGE>


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

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

Overview

The Company was  organized in 1991 to develop and  commercialize  batteries  and
electric  power  technology for the  automotive  industry and other  industries.
Since  that  date,  we have been  engaged  primarily  in  research  and  product
development  efforts.  Our  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 believes that it may be able to generate  revenues from
sales of its "MagiQ" battery in the second half of 2002. The Company anticipates
that it may, in the future, generate additional revenues from service agreements
with  battery  manufacturers  and  licensing  agreements,  although  the Company
currently has no such service or licensing  agreements in place. The Company has
incurred  substantial  losses to date,  and there can be no  assurance  that the
Company  will attain any  particular  level of revenues or that the Company will
achieve profitability.

The Company  believes that its historic  spending  levels are not  indicative of
future  spending  levels  because  it is in a period  in which it will  increase
spending on product  research  and  development,  marketing,  staffing and other
general  operating  expenses.  For  these  reasons,  the  Company  believes  its
expenses,  losses and  accumulated  deficit  during the  development  stage will
increase significantly before it generates material revenues.

Critical Accounting Policies

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



                                       11
<PAGE>

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 our reported  financial results include stock based
compensation.

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

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

Related Party Transactions

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

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

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

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

Revenues.  No revenues were recorded in either the three month period ended June
30, 2002 or three month period ended June 30, 2001. Management  anticipates that
a limited  production of MagiQTM  batteries will be completed late in the second
half of 2002 and that the Company may  generate  revenues  from the sale of such
batteries. However, no material revenues are expected to be generated in 2002.

Total Operating  Expenses.  The Company had total operating expenses of $467,000
for the three month period ended June 30, 2002,  compared to $2,806,000  for the
same period in 2001.  The primary  factor for the  difference  was the


                                       12
<PAGE>


non-cash  compensation.  For the three months  period  ended June 30, 2002,  the
Company  recorded a non-cash  compensation  income of  $66,000  compared  to the
non-cash compensation expense of $2,329,000 for the same period in 2001. Without
considering  non-cash  compensation,  operating  expenses for the second quarter
2002 were $533,000 ($477,000 - 2001) including research and development expenses
of $247,000 ($239,000) and marketing and general and administrative  expenses of
$286,000 ($238,000).

Research and  Development  Expenses.  Research  and  development  expenses  were
$247,000 for the three  months ended June 30, 2002  compared to $239,000 for the
same period in 2001,  an increase of $8,000 or 3.3%.  Research  and  development
personnel costs increased by $4,000 from $150,000 for the second quarter in 2001
to $154,000  for the second  quarter in 2002,  an  increase of 2.7%.  Laboratory
expenses  related to research  and  development  increased  for the three months
ended June 30, 2002 to $58,000  from $56,000 for the  comparable  period in 2001
(3.6%).  Research and development office expenses decreased from $21,000 for the
three month period  ending June 30, 2001 to $14,000 for the same period in 2002.
Consulting services increased from $nil for the second quarter in 2001 to $5,000
for the second  three  months in 2002 as the Company  used  consulting  services
related to its quality assurance  certification  process.  Our professional fees
associated  with  research  and  development  increased to $16,000 in the second
quarter of 2002, compared to $12,000 in 2001. The higher expenses were primarily
attributable to increased patent attorney fees.

Marketing  and General and  Administration  Expenses.  The  expenses  related to
marketing  and general and  administration  increased  to $286,000 for the three
month period ended June 30, 2002 from  $238,000 for the same period in 2001,  an
increase of $48,000 or 20.2%. This increase resulted from the  implementation of
the Company's  strategy to build awareness of its public corporate  presence and
its efforts to market the MagiQTM battery technology in 2002.  Professional fees
increased  to $106,000 for the three  months  period  ended June 30, 2002,  from
$53,000 for the same period in 2001,  due  primarily to auditing fees related to
the Company's  Securities and Exchange Commission filings and legal fees related
to planning the  commercialization  of the Company's products.  Expenditures for
marketing  activities  increased  from $1,000 for the three months  period ended
June 30, 2001 to $39,000 for the same period in 2002,  as the Company  updated a
study on the market for intelligent battery systems and smart energy management.
The overall  increase in marketing and general and  administrative  expenses was
partly offset by a decrease in investor relation  expenses,  which accounted for
$41,000 in the second quarter of 2002, compared to $76,000 in the second quarter
of 2001,  and a decrease in  consulting  services to $15,000 from  $25,000.  All
other  expenses  were stable for the three  month  period  ended June 30,  2002:
Personnel  expenses  at $43,000  ($41,000 - 2001);  Office  expenses  at $20,000
($18,000 - 2001); Management fees at $18,000 ($18,000 - 2001) and other expenses
at $2,000 ($4,000 - 2001).

The Company anticipates that the level of expenditures  related to its marketing
expenses will increase during 2002 resulting from its plan to increase marketing
efforts to introduce 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 $126,000 or $0.01 per share for the
second quarter of 2002,  compared to a net loss of $2,878,000 or $0.26 per share
during the same  period in 2001.  The  decrease  was  attributable  to a gain on
foreign  exchange of $341,000 for the three month periods  ending June 30, 2002,
compared  to a foreign  exchange  loss of $49,000  for the three  month  periods
ending June 30,  2001,  and the  differences  in losses  related to the non-cash
stock based  compensation  expense  recorded during the three month period ended
June 30, 2001. The Company  anticipates that it will continue to incur losses in
future periods until the Company is able to successfully commercialize its MagiQ
battery and energy management  technologies.  There can be no assurance that the
Company will have  sufficient  capital to  commercialize  its MagiQ  battery and
energy  management  technologies  or that  such  products  will be  commercially
successful.

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

Revenues.  No revenues  were  recorded in either the six month period ended June
30, 2002 or the six month  period ended June 30,  2001.  Management  anticipates
that a limited  production of MagiQTM  batteries  will be completed  late



                                       13
<PAGE>

in the second half of 2002 and that the Company may generate  revenues  from the
sale of such  batteries.  However,  no  material  revenues  are  expected  to be
generated in 2002.

Total Operating  Expenses.  The Company had total operating expenses of $933,000
for the six month  period ended June 30, 2002,  compared to  $3,326,000  for the
same period in 2001.  The primary  factor for the  difference  was the  non-cash
compensation.  For the six  months  period  ended  June 30,  2002,  the  Company
recorded a non-cash  compensation  income of $109,000  compared to the  non-cash
compensation  expense  of  $2,329,000  for the  same  period  in  2001.  Without
considering non-cash compensation, operating expenses for the first half of 2002
were $1,042,000 ($997,000 - 2001) including research and development expenses of
$507,000  ($521,000)  and marketing and general and  administrative  expenses of
$535,000  ($476,000).  Non-cash  compensation  expense is  expected to vary from
quarter-to-quarter  as a result of  fluctuating  market prices for the Company's
equity securities.

Research and Development  Expenses.  Research and development  expenses in total
were  $507,000 for the six months ended June 30, 2002,  compared to $521,000 for
the same  period in 2001,  a  decrease  of  $14,000.  Research  and  development
personnel  costs  decreased  by $33,000 to $294,000  for the first six months in
2002 from $327,000 for the first six months in 2001, as the Company concentrated
on finalizing  the personnel  intensive  pre-series  development  of the MagiQTM
battery  technology  during 2001.  Laboratory  expenses  related to research and
development  decreased  for the six months ended June 30, 2002 to $126,000  from
$135,000 for the comparable period in 2001.  Consulting  services increased from
$1,000 for the first two quarters in 2001 to $24,000 for the  comparable  period
in  2002,  as the  Company  used  consulting  services  related  to its  quality
assurance   certification   process  for  its  MagiQTM  Battery.   Research  and
development  office  expenses  decreased  from  $32,000 for the six month period
ended June 30, 2001 to $29,000  for the six month  period  ended June 30,  2002.
Professional fees associated with research and development  increased to $34,000
in the first half of 2002, compared to $26,000 in 2001. The higher expenses were
attributable to increased patent attorney fees.

Marketing  and General and  Administration  Expenses.  The  expenses  related to
marketing and general and administration increased to $535,000 for the six month
period  ended  June 30,  2002 from  $476,000  for the same  period  in 2001,  an
increase of $59,000 or 12.4%. This increase resulted from the  implementation of
the Company's  strategy to build awareness of its public corporate  presence and
its efforts to market the MagiQTM battery  technology in 2002.  Expenditures for
marketing  activities increased from $1,000 for the six months period ended June
30, 2001 to $59,000 for the same period in 2002, as the Company  updated a study
on the market for  intelligent  battery  systems  and smart  energy  management.
Investor  relations  expenses  increased to $125,000  for the six months  period
ended June 30, 2002,  from  $117,000 for the same period in 2001, an increase of
$8,000.  Other  general and  administrative  expenses for the six months  period
ended June 30,  2002 versus the  comparable  period in 2001  included  increased
personnel  related  expenses to $87,000 ($82,000 - 2001),  decreased  consulting
services to $48,000 ($55,000 - 2001),  increased  professional  fees to $124,000
($122,000 - 2001), and increased travel expenses to $15,000 ($9,000 - 2001). All
other general and  administrative  expenses were stable for the six month period
ended June 30, 2002:  Office  expenses at $35,000  ($36,000 - 2001);  Management
fees at $36,000 ($36,000 - 2001) and other expenses at $4,000 ($6,000 - 2001).

Net Loss. The Company incurred a net loss of $634,000 or $0.04 per share for the
first  half of 2002,  compared  to a net loss of  $3,440,000  or $0.33 per share
during the same period in 2001.  Besides the  mentioned  effect of the  non-cash
compensation  expenses,  the secondary  factor for the differences in losses was
related to the foreign exchange gain/loss  deviation of the comparable  periods:
For the six  months  period  ending  June 30,  2002 a foreign  exchange  gain of
$299,000 was  recorded,  compared to a foreign  exchange loss of $91,000 for the
six months period ending June 30, 2001. The Company anticipates that losses will
increase  marginally,  as it expects to begin generating revenues from a limited
production of MagiQTM batteries in the last half of 2002.  However,  no material
revenues are expected to be  generated in 2002.  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.



                                       14
<PAGE>

Liquidity and Capital Resources

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

As of June 30,  2002,  the Company had cash and cash  equivalents  of  $710,000,
compared to $451,000 at December  31, 2001.  The Company had working  capital of
$570,000 at June 30, 2002, compared to $145,000 at December 31, 2001.

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

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

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

The Company  anticipates that it will require an additional $500,000 to $750,000
in financing to meet its on-going  short term and long term  obligations  during
2002 and to fund its plan of operation for 2002.  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.  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 further  commitments  for equity  financing and no
commitments  for credit  facilities,  revolving  credit  agreements  or lines of
credit that could provide additional working capital.

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

Obligations and Commitments

iQ Germany is obligated to pay to Horst Dieter Braun,  that  company's  founding
President and Peter Braun, our President,  EUR 205,000 (approximately  $200,000)
in  connection  with iQ Germany's  acquisition  of the original iQ



                                       15
<PAGE>

technology and other intellectual property rights in 1995. 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.

On  May  7,  2001,  the  Company  entered  into a  European  Investor  Relations
Consulting Agreement with Magdalena Finance Corp. ("Magdalena"). Under the terms
of the agreement,  Magdalena agreed to provide the Company with certain investor
relations services in Europe for a term of one year,  beginning May 1, 2001. The
Company  agreed to pay  Magdalena a consulting  fee in the amount of $62,500 for
such  services,  payable by issuing  Magdalena a total of 250,000  common shares
with a deemed  value of $0.25 per share,  issuable  as  follows:  20,850  common
shares of the Company during the first eleven months and 20,650 common shares in
the final month of the  agreement.  As of June 30, 2002,  the Company had issued
Magdalena all 250,000 common shares under the  agreement.  On September 1, 2001,
the Company and Magdalena  entered into a supplement to the original  agreement,
under  which  the  Company  agreed  to pay  Magdalena  a bonus  of  $70,000  and
additional compensation of $25,000 per month for four months in consideration of
additional  services,  including  negotiating a letter of intent with Porsche to
test the iQ technology and to coordinate the  preparation and  dissemination  of
not less than one in-depth research report to qualified institutional investors.
Since  the  additional   services  were  not  rendered  no  additional   monthly
compensation was due.

On  July  1,  2001,  the  Company  entered  into a  Financial  Public  Relations
Consulting Agreement for Germany with Holtermann & Team GmbH ("H&T").  Under the
terms of the agreement, H&T agreed to provide the Company with certain financial
public relations  services in Germany for a term of one year,  beginning July 1,
2001.  The Company  agreed to pay H&T a consulting fee in the amount of EUR7,500
(approximately  $6,500)  per month for such  services.  Of the  consulting  fee,
EUR5,000 is due monthly while the  remaining  EUR2,500 is payable by issuing H&T
common  shares of the  Company  with a deemed  value of $1.48 per  share.  These
shares are to be issuable on a quarterly basis. As of June 30, 2002, the Company
had issued H&T 12,900 common shares under the  agreement.  The agreement was not
extended beyond the initial term of 12 months ending June 30, 2002.

On October 23, 2001, the Company entered into a contractual  agreement with Jack
Wynn & Co.,  Inc., a financial  publicist.  The contract is for a term of twelve
months and  involves a monthly fee of $6,000.  The  agreement  was  cancelled in
April 2002.

The Company's  capital  requirements  depend on several  factors,  including the
success and progress of its product  development  programs,  the  resources  the
Company  devotes to developing  its  products,  the extent to which its products
achieve  market  acceptance,  and other factors.  The Company  expects to devote
substantial  cash for research and  development.  The Company cannot  adequately
predict the amount and timing of 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:

Since November 2000, iQ Germany has been awarded the certification in accordance
with the  international  standards  organization  ("ISO")  and Verein  Deutscher
Automobilzulieferer ("VDA"), the Association of German automotive suppliers. ISO
and  VDA  certifications  are  generally  required  for  battery  suppliers  and
suppliers of electronic  goods to the  automotive  industry.  In March 2002, the
certification  was re-awarded and expanded to ISO 9001/2000 and VDA 6.1 and 6.2.
This new standard  certifies the Quality Assurance System of iQ Germany being in
accordance



                                       16
<PAGE>

with the high requirements of the ISO/VDA standards for a producing company.  No
governmental or regulatory approvals are required for the development of battery
technologies.

In September 2001, the Company displayed its "MagiQTM" intelligent battery, iQ's
first product for mass production, at the Frankfurt International Auto Show IAA.
This resulted in numerous  industry  contacts with car  manufacturers and TIER 1
suppliers.

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

The Company completed development of the MagiQTM battery and started the initial
production run. The Company has entered procurement  contracts with suppliers to
provide the components for the ramp-up of the production in accordance  with the
Company's quality requirements and at fixed negotiated costs.

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

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

As part of our strategic plan, over the next 12 months, we intend to concentrate
our resources on research and development,  production,  marketing and financing
activities.

Research and Development

Our research and development strategy over the next twelve months is to:

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

We  anticipate  that  we will  spend  approximately  $850,000  on  research  and
development for the fiscal year ending December 31, 2002.

Production

Our production strategy over the next twelve months is to:



                                       17
<PAGE>

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

We anticipate that we will spend  approximately  $150,000 on production  related
planning activities for the fiscal year ending December 31, 2002.

Marketing

Our marketing strategy over the next twelve months is to:

     o    enter into  development  contracts  with  customers of the  automotive
          industry  and  other  industries  to  apply  our  technology  to their
          individual  demand  with  the  goal of  producing  and  supplying  the
          products  that  will be  developed  for these  customers  in their own
          production plants;

     o    expand our marketing activities of our MagiQTM battery;

     o    market the iQ  technology  and our software as part of our  technology
          for solutions  regarding SOC and SOH status  indications for batteries
          to car manufacturers and their Tier 1 suppliers.

We anticipate that we will spend  approximately  $200,000 on marketing and sales
for the fiscal year ending December 31, 2002.

Financial

We intend to seek  additional  financing to expand our 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.

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

Administrative and General Operating

We  estimate  that our  general  administrative  and  operating  budget  will be
approximately $600,000 during our fiscal year ending December 31, 2002.

We  anticipate  that our total  operating  budget  for the  fiscal  year  ending
December 31, 2002 will be approximately  $1,900,000.  We anticipate that we will
require  additional  financing of approximately  $500,000 to $750,000 to satisfy
our working capital requirements through December 31, 2002.

We  completed  a private  placement  in  January  of 2002 and in June  2002.  We
anticipate that we will need to undertake additional financings during 2002. See
"Recent Sales of Unregistered  Securities" and "Liquidity and Capital Resources"
above.  We may need more  financing  if we  experience  delays,  cost  overruns,
additional  funding needs for joint ventures or other  unanticipated  events. We
cannot  assure you that we will be able to obtain more  financing or that, if we
do, it will be on favorable terms or on a timely basis.

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

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



                                       18
<PAGE>

     o    sell or wind up and liquidate our business.

Any of these  action may affect our  ability to offer  competitive  products  or
compete  in the  market.  Our  inability  to offer a  competitive  product or to
effectively compete will affect our ability to continue as a going concern.

Personnel

We do not expect any significant changes in our personnel strategy over the next
twelve  months.  Our  strategy  is to  maintain  our  research  and  development
capabilities  and  we may  hire  personnel  in  marketing  and  sales  once  the
commercial production of our MagiQTM battery is commenced.

Other Trends and Uncertainties

Foreign Currency Translation Risk

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

Going Concern

We are still in the  development  stage and could fail before  implementing  our
business  strategy.  We may  continue  to incur net losses  for the  foreseeable
future and our auditors  have  prepared the  accompanying  financial  statements
assuming that we will continue as a going  concern.  Our auditors have expressed
uncertainty as to our ability to remain a going concern.  See "Item 1. Financial
Statements -- Note 2."


Part II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As of June 30, 2002,  there is no material  litigation  pending against us or iQ
Germany.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Securities.

During the quarter  ended June 30,  2002,  the Company  issued a total of 41,500
common shares to Magdalena  Finance Corp., a non-U.S.  Person outside the United
States,  in  consideration  for services  provided under the terms of a European
Investor  Relations  Consulting  Agreement.  See  "Management's  Discussion  and
Analysis of Financial  Results-  Obligations and  Commitments."  The shares were
issued in reliance upon exception from registration available under Regulation S
promulgated under Securities Act of 1933, as amended (the "Securities Act").

On  July  1,  2001,  the  Company  entered  into a  Financial  Public  Relations
Consulting Agreement for Germany with Holtermann & Team GmbH ("H&T"), a non U.S.
Person outside the United States.  Under the terms of the agreement,  H&T agreed
to provide the Company  with  certain  financial  public  relations  services in
Germany for a term of one year,  beginning  July 1, 2001.  The Company agreed to
pay H&T a consulting  fee in the amount of EUR 7,500 ($6,822) per month for such
services.  Of the  consulting  fee, EUR 5,000  ($4,548) is due monthly while the
remaining  EUR 2,500  ($2,274)  is payable by issuing  H&T common  shares with a
deemed value of $1.48 per share, issuable on a quarterly basis.



                                       19
<PAGE>

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

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

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

The Company's  annual general meeting of shareholders  was held on June 28, 2002
in Vancouver, British Columbia pursuant to the Canada Business Corporations Act.
A total of 820,000 common shares of the Company were represented in person or by
proxy at the annual  meeting,  consisting  of  approximately  4.38% of the total
number of common shares of the Company  outstanding  on June 3, 2002, the record
date  for  the  annual  general  meeting.  At  the  annual  general  meeting,  2
shareholders  were  represented  in person or by proxy to vote on the  following
matters:

     1.   Number of Directors

At the annual general meeting, all of the shares present at the meeting voted to
establish six directors positions for the ensuing year.

     2.   Election of Directors

At the annual general meeting, all of the shares present at the meeting voted to
elect the following nominees,  each of whom was a director prior to the meeting,
to the board for the ensuing year. Each director  elected will hold office until
the next annual general meeting or until his or her successor is duly elected or
appointed  unless his or her office is earlier  vacated in  accordance  with the
Articles of the Corporation or unless he or she becomes disqualified to act as a
director.

                                FOR       AGAINST       ABSTAINED       WITHHELD
                                ---       -------       ---------       --------
     Hans Ambos               820,000        -               -              -
     Peter Braun              820,000        -               -              -
     Gunther Bauer            820,000        -               -              -
     Russell French           820,000        -               -              -
     John Lawson              820,000        -               -              -
     Gregory Sasges           820,000        -               -              -



                                       20
<PAGE>

     3.   Appointment of Auditor

At the annual  general  meeting,  all of the shares present at the meeting voted
for  the  re-appointment  of  Deloitte  Touche,  Chartered  Accountants,  as the
Corporation's auditor until the next annual general meeting of shareholders at a
remuneration  to be fixed by the board of directors.  Deloitte Touche were first
appointed  auditor of the  Corporation  in 1998 and have held the position since
then.

     4.   Change in Corporate Name

At the annual  general  meeting,  all of the shares present at the meeting voted
for a resolution to enable the  Corporation  to change its name should the board
of directors  determine it to be in the best interests of the  Corporation,  the
Corporation  is seeking  approval of its  shareholders  to a special  resolution
which would approve a change in the name of the  Corporation  to 3099458  Canada
Inc. or such other name as the board of  directors  may approve so as. Under the
Canada Business Corporations Act, the board of directors is, in turn, authorized
to change a designating number name to a verbal name.

     5.   Creation of Preferred Shares

At the annual  general  meeting,  all of the shares present at the meeting voted
for a resolution to create a class of an unlimited  number of Preferred  Shares,
issuable  in one or  more  series  to be  determined  by  the  directors  of the
Corporation, as a consequence of which the rights, privileges,  restrictions and
conditions of both the Common Shares of the Corporation and the Preferred Shares
of the Corporation.  As a consequence of the special resolution being passed and
effected,  the Preferred  Shares of the  Corporation  may from time to time have
priority over the Common Shares of the Corporation in certain matters, including
without limitation,  the right to receive dividends and the right to receive the
remaining   property  and  assets  of  the  Corporation  in  the  event  of  the
dissolution, liquidation, or winding-up of the Corporation, whether voluntary or
involuntary,  or any other  distribution of assets of the Corporation  among its
shareholders  for  the  purpose  of  winding-up  its  affairs,  interest  rates,
conversion prices, voting rights, redemption prices, and maturity dates.

     6.   Consequential Amendments of the Articles

At the annual  general  meeting,  all of the shares present at the meeting voted
for a resolution that would amend the  Corporation's  Articles to permit (1) the
establishment  of the registered  office of the  Corporation by province  rather
than by municipality,  and (2) the possibility of holding shareholders' meetings
outside of Canada  providing the same were  permitted  under the Articles of the
Corporation.

     7.   Stock Options

At the annual  general  meeting,  all of the shares present at the meeting voted
for a  resolution  to amend the  Corporation's  employee  stock  option  plan to
reserve for issuance  pursuant to the Plan,  subject to such approvals as may be
required by the regulatory bodies, in the aggregate, that number of shares equal
to the sum of all shares  reserved and issued on the  exercise of options  under
the  Plan  together  with  20% of  the  issued  and  outstanding  shares  of the
Corporation  (4,714,000  shares),   subject  to  increase  or  decrease  through
subdivision  or   consolidation   of  the  outstanding   Common  Shares  of  the
Corporation.

     8.   Incentive Plan

At the annual  general  meeting,  all of the shares present at the meeting voted
for a resolution to amend the Corporation's 2001 Incentive Plan to provide that:



                                       21
<PAGE>

     a.   the  restrictions  on transfer of any shares awarded or sold under the
          Plan  would  lapse on the last day of the  fiscal  period in which the
          Corporation   shall  have  generated   cumulative  net  revenues  from
          inception of  US$2,500,000  or more,  calculated  in  accordance  with
          United States generally accepted accounting principles;

     b.   the shares  awarded or sold under the Plan shall be  forfeited  to the
          Corporation if the Corporation shall not have generated cumulative net
          revenues  from  inception  of  US$2,500,000  or  more,  calculated  in
          accordance   with  United   States   generally   accepted   accounting
          principles, prior to December 31, 2006; and

     c.   increase  the number of shares set aside for issue under the plan from
          1,500,000 common shares to 2,500,000 common shares.

     9.   Board of Directors Remuneration

At the annual  general  meeting,  all of the shares present at the meeting voted
for a resolution to approve an initiative providing for the cash compensation of
directors in recognition of the services provided by the directors in serving on
the board of directors of the  Corporation  and attending  board  meetings.  The
initiative  provides  for an annual  stipend of $2,500 upon  appointment  to the
board together with an honorarium of US$250 for each board meeting attended.

     10.  Amendment of By-law Number One

At the annual  general  meeting,  all of the shares present at the meeting voted
for a resolution to amend the Corporation's by-laws to permit (1) a reduction in
the  percentage of Canadian  residents on the board of directors to 25%, (2) the
participation  by  directors  in board  meeting  by any means of  communication,
whether   telephone  or   electronic,   and  (3)  the   possibility  of  holding
shareholders' meetings outside of Canada.

     11.  Approval of Acts of Directors

At the annual  general  meeting,  all of the shares present at the meeting voted
for a  resolution  to ratify and  confirm  all acts,  deeds and things  done and
proceedings taken by the directors and officers of the Corporation on its behalf
since the last annual general meeting of shareholders held in fiscal year 2002.

The election of directors, the appointment of an auditor, and all other items of
business passed at the meeting and described above were unanimously  approved by
the 820,000 votes cast on each resolution. No votes were cast against any of the
proposals and there were no Abstentions.

ITEM 5. OTHER INFORMATION

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following Exhibits are filed as part of this report:

                                  EXHIBIT INDEX
     Exhibit
     Number         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            Certificate  of  Amendment  dated July 23, 2002 for iQ Power
                    Technology Inc.

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

     6.1(1)         Form of Atypical Share Exchange Agreement

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


                                       22
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       23
<PAGE>

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

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

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

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

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

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

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

     6.31(1)        1998 Stock Option Plan

     6.32(1)        Form of Stock Option Agreement

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

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

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

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

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

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

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

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

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



                                       24
<PAGE>

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

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

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

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

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

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

     6.58(4)        General Security  Agreement dated December 27, 2000, between
                    iQ Power Technology Inc. and John Lawson

     6.59(4)        Agreement of Subordination in Priority in Association with a
                    Conditional   Waiver  of  Claim  by  and  between  IQ  Power
                    Technology Inc. and iQ Battery Research and Development GmbH
                    dated May 2, 2001

     6.60(5)        European    Investor    Relations    Consulting    Agreement
                    Supplemental  Agreement  # 1 by and  between the Company and
                    Magdalena Finance Corp. dated September 1, 2001.

     6.61(5)        Contractual  Agreement  by and  between the Company and Jack
                    Wynn & Co., Inc., dated October 23, 2001.

     6.62           Finders  Agreement by and between iQ Power  Technology  Inc.
                    and Hereford Group Limited.

     6.63           Finders Agreement dated June 5, 2002 by and between iQ Power
                    Technology Inc. and Jorg Schweizer.

     7.1(1)         List of Material Foreign Patents

    99.1            Section 906 Certification of Chief Executive Officer

    99.2            Section 906 Certification of Acting Chief Financial Officer
---------------------
(1)  Previously filed as an exhibit to the registrant's  registration  statement
     on Form SB-1 on December 10, 1998 (File No. 333-68649).
(2)  Previously filed as an exhibit to the registrant's  registration  statement
     on Form SB-1/A (Amendment No. 1) on March 18, 1998 (File No. 333-68649).
(3)  Previously  filed as an exhibit to the  registrant's  annual report on Form
     10-KSB for the year ended December 1, 1999.
(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  annual report on Form
     10-KSB for the year ended December 31, 2001.


     (b)  Reports on Form 8-K.

None.



                                       25
<PAGE>



                                   SIGNATURES

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

August 14, 2002.

                                       iQ POWER TECHNOLOGY INC.


                                       By: /s/ Peter E. Braun
                                           ------------------------------------
                                           Peter E. Braun,
                                           President, Chief
                                           Executive Officer and
                                           acting Chief Financial
                                           Officer (principal
                                           executive officer and
                                           principal financial
                                           officer)







                                       26