# 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, 2003
| | ---------------------------------------------

# OR

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

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

Commission file number
000-26165

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

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

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

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

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

The
number of outstanding common shares, without par value, of the registrant at August 4, 2003
was 24,396,564.

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

---

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

|                                     |  |                                                                                       |  | Page No.
|------------------------------------ |  | ------------------------------------------------------------------------------------- |  | --------
|PART IINTERIM FINANCIAL INFORMATION |  |                                                                                      
|Item 1.                              |  | Unaudited Consolidated Balance Sheets                                                 |  | 1       
|                                     |  | Unaudited Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)    |  | 2       
|                                     |  | Unaudited Consolidated Statements of Shareholders' Equity (Deficit)                   |  | 3       
|                                     |  | Unaudited Consolidated Statements of Cash Flows                                       |  | 4       
|                                     |  | Notes to Unaudited Consolidated Financial Statements                                  |  | 5       
|Item 2.                              |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 13      
|Item 3.                              |  | Controls and Procedures                                                               |  | 23      
|PART IIOTHER INFORMATION            |  |                                                                                      
|Item 1.                              |  | Legal Proceedings                                                                     |  | 23      
|Item 2.                              |  | Changes in Securities and Use of Proceeds                                             |  | 23      
|Item 3.                              |  | Defaults Upon Senior Securities                                                       |  | 24      
|Item 4.                              |  | Submission of Matters to a Vote of Security Holders                                   |  | 24      
|Item 5.                              |  | Other Information                                                                     |  | 26      
|Item 6.                              |  | Exhibits and Reports On Form 8-K                                                      |  | 26      
|Signatures                           |  | 29                                                                                   

---

# 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)

---

|                                                     | June 30,
2003 | December 31,
2003
|---------------------------------------------------- | ------------- | -----------------
|                                                    
|ASSETS                                               |               |                  
|                                                     |              
|Current Assets                                       |              
|Cash and cash equivalents                            |               | 376              
|Receivable from related parties                      |               | 64               
|Other receivables                                    |               | 124              
|Prepaids and deposits                                |               | 115              
|Other current assets                                 |               | 248              
|                                                    
|Total current assets                                 |               | 927              
|                                                     |              
|Non-current Assets                                   |              
|Equipment, net                                       |               | 422              
|                                                    
|Total non-current assets                             |               | 422              
|                                                     |              
|TOTAL ASSETS                                         |               | 1,349            
|                                                    
|LIABILITIES AND SHAREHOLDERS' EQUITY                 |              
|                                                     |              
|LIABILITIES                                          |              
|Current liabilities                                  |              
|Bank overdraft                                       |               | 4                
|Accounts payable                                     |               | 744              
|Accrued payroll and employees benefits               |               | 219              
|Advances                                             |               | 51               
|Accrued liabilities                                  |               | 129              
|                                                    
|Total current liabilities                            |               | 1,147            
|                                                     |              
|                                                    
|TOTAL LIABILITIES                                    |               | 1,147            
|                                                     |              
|SHAREHOLDERS' EQUITY                                 |              
|                                                     |              
|Authorized:                                          |              
|An unlimited number of common shares of no par value |              
|Issued and outstanding:                              |              
|20,348,227 common shares at December 31, 2002        |              
|23,606,004 common shares at June 30, 2003            |               | 11,593           
|Capital surplus/Additional paid-in                   |               | 2,064            
|Accumulated other comprehensive (loss) income        |               | (799             
|Accumulated deficit, during development stage        |              
|(after loss allocation to silent partners)           |               | (12,656          
|                                                    
|TOTAL SHAREHOLDERS' EQUITY                           |               | 202              
|                                                     |              
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           |               | 1,349            
|                                                    

See accompanying notes to
consolidated financial statements.

1

---

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)

---

|                                      | Shares | Amount     | Accumulated
Additional
Paid-In
Capital | Accumulated
Other"
Comprehensive
Income (Loss) | Accumulated
Deficit | Total
Shareholders'
Equity
(Deficit)
|------------------------------------- | ------ | ---------- | -------------------------------------- | ---------------------------------------------- | ------------------- | ------------------------------------
|                                     
|Balance at December 31, 1991          |        | 40         |                                        | $        60                                    |                     | $      --                           
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1992          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1993          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1994          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1995          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1996          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1997          |        | 40         |                                        | 60                                             |                     | --                                  
|Issue of shares                       |        |            |                                        |                                                |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Allocation of loss to atypical shares |        |            |                                        |                                                |                     |                                     
|Other comprehensive (loss) -          |        |            |                                        |                                                |                     |                                     
|foreign currency translation          |       
|adjustments                           |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1998          |        | 40         |                                        | 60                                             |                     | --                                  
|Reorganization of capital on          |       
|reverse acquisition                   |        | 5,119,960  |                                        |                                                |                     |                                     
|Deemed issuance of shares on          |       
|acquisition of iQ Power               |       
|Technology Inc.                       |        | 4,471,770  |                                        | 5,495                                          |                     |                                     
|Stock based compensation              |        |            |                                        |                                                |                     | 396                                 
|Exercise of warrants                  |        | 139,850    |                                        | 349                                            |                     |                                     
|Net loss                              |        |            |                                        |                                                |                     |                                     
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        |            |                                        |                                                |                     |                                     
|                                     
|Balance at December 31, 1999          |        | 9,731,620  |                                        | 5,904                                          |                     | 396                                 
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Exercise of options                   |        | 15,000     |                                        | 37                                             |                     | --                                  
|Stock based compensation              |        | --         |                                        | --                                             |                     | 10                                  
|                                     
|Balance at December 31, 2000          |        | 9,746,620  |                                        | 5,941                                          |                     | 406                                 
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Issue of shares                       |        | 5,203,004  |                                        | 2,132                                          |                     | --                                  
|Stock based compensation              |        |            |                                        |                                                |                     | 1,444                               
|Exercise of options                   |        | 1,002,500  |                                        | 501                                            |                     | --                                  
|                                     
|Balance at December 31, 2001          |        | 15,952,124 |                                        | $   8,574                                      |                     | $ 1,850                             
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Issue of shares                       |        | 4,376,103  |                                        | 1,992                                          |                     | --                                  
|Stock based compensation              |        |            |                                        |                                                |                     | (279)                               
|Exercise of options                   |        | 20,000     |                                        | 10                                             |                     | --                                  
|                                     
|Balance at December 31, 2002          |        | 20,348,727 |                                        | $ 10,576                                       |                     | $ 1,571                             
|Net loss                              |        | --         |                                        | --                                             |                     | --                                  
|Other comprehensive (loss) -          |       
|foreign currency translation          |       
|adjustments                           |        | --         |                                        | --                                             |                     | --                                  
|Issue of shares                       |        | 3,117,777  |                                        | 961                                            |                     | --                                  
|Stock based compensation              |        |            |                                        |                                                |                     | 493                                 
|Exercise of options                   |        | 140,000    |                                        | 56                                             |                     | --                                  
|                                     
|Balance at March 31, 2003             |        | 23,606,004 |                                        | $ 11,593                                       |                     | $ 2,064                             
|                                     

See accompanying notes to
consolidated financial statements.

2

---

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)

---

|                                                | Cumulative from
date of inception
to June 30 | Three months ended June 30, | Six months ended June 30,
|----------------------------------------------- | -------------------------------------------- | --------------------------- | -------------------------
|
|                                               
|SALES AND OTHER REVENUE                         |                                              | 182                         |                          
|                                               
|GROSS MARGIN                                    |                                             
|                                                |                                             
|EXPENSES                                        |                                             
|Research and development expenses               |                                             
|Personnel (incl. stock based compensation)      |                                              | 4,214                       |                          
|Laboratory                                      |                                              | 1,665                       |                          
|Office & Travel                                 |                                              | 613                         |                          
|Consulting services                             |                                              | 637                         |                          
|Professional fees                               |                                              | 874                         |                          
|                                               
|Total Research & Development expenses           |                                              | 8,003                       |                          
|                                                |                                             
|Marketing and general & administrative expenses |                                             
|Personnel (incl. stock based compensation)      |                                              | 1,802                       |                          
|Financing                                       |                                              | 583                         |                          
|Office & Travel                                 |                                              | 681                         |                          
|Consulting services                             |                                              | 663                         |                          
|Professional fees                               |                                              | 1,029                       |                          
|Management fees                                 |                                              | 288                         |                          
|Marketing activities                            |                                              | 386                         |                          
|Investor relations                              |                                              | 905                         |                          
|Research memberships                            |                                              | 100                         |                          
|Provision for investment                        |                                              | 150                         |                          
|Other                                           |                                              | 194                         |                          
|                                               
|Total Marketing and G&A expenses                |                                              | 6,781                       |                          
|                                                |                                             
|                                               
|TOTAL OPERATING EXPENSES                        |                                              | 14,784                      |                          
|                                                |                                             
|Interest expense                                |                                              | 179                         |                          
|                                               
|TOTAL EXPENSES                                  |                                              | 14,963                      |                          
|                                                |                                             
|Interest and other income                       |                                              | (149                        | )                        
|(Gain)/loss on foreign exchange                 |                                              | (952                        | )                        
|                                                |                                             
|INCOME/(LOSS) BEFORE INCOME TAX                 |                                              | (13,680                     | )                        
|                                                |                                             
|Income tax                                      |                                              | --                          |                          
|                                                |                                             
|NET INCOME/(LOSS)                               |                                              | (13,680                     | )                        
|                                               
|                                                |                                             
|Other comprehensive income (loss)               |                                              | (800                        | )                        
|                                                |                                             
|COMPREHENSIVE INCOME/(LOSS)                     |                                              | (14,480                     | )                        
|                                               
|Basic and diluted loss per share, on net loss   |                                              | (1.50                       | )                        
|Basic and diluted weighted average              |                                             
|number of shares outstanding                    |                                              | 9,124,369                   |                          
|                                               

See accompanying notes to
consolidated financial statements.

3

---

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

---

|                                             | Cumulative from
date of inception
to June 30, | Six Months ended June 30,
|-------------------------------------------- | --------------------------------------------- | -------------------------
|
|                                            
|OPERATING ACTIVITIES                         |                                               |                          
|Net loss                                     |                                               | (13,680                  
|Items not affecting cash                     |                                              
|Depreciation and amortization                |                                               | 430                      
|Stock based compensation                     |                                               | 2,254                    
|Changes in non-cash working capital          |                                              
|(Increase) decrease in other receivable      |                                               | (136                     
|(Increase) decrease in prepaids and deposits |                                               | (108                     
|Increase (decrease) in accounts payable      |                                               | 681                      
|Increase (decrease) in accrued liabilities   |                                               | 422                      
|(Increase) decrease in other assets          |                                               | (216                     
|                                            
|                                             |                                               | (10,353                  
|                                             |                                              
|INVESTING ACTIVITY                           |                                              
|Additions to property, plant and equipment   |                                               | (801                     
|                                            
|                                             |                                              
|FINANCING ACTIVITIES                         |                                              
|Increase of bank overdraft                   |                                               | 2                        
|Increase (decrease) in due to shareholder    |                                               | 138                      
|Advances received from external parties      |                                               | 351                      
|Cash acquired on business combination        |                                               | 4,718                    
|Advances from subsidiary                     |                                               | 581                      
|Issue of capital stock                       |                                               | 5,643                    
|Issuance of atypical shares                  |                                               | 1,025                    
|                                            
|                                             |                                               | 12,458                   
|                                             |                                              
|(DECREASE) INCREASE IN CASH AND              |                                              
|CASH EQUIVALENTS                             |                                               | 1,304                    
|                                             |                                              
|EFFECT OF FOREIGN EXCHANGE MOVEMENT          |                                               | (928                     
|                                             |                                              
|CASH AND CASH EQUIVALENTS,                   |                                              
|BEGINNING OF PERIOD                          |                                               | --                       
|                                            
|                                             |                                              
|CASH AND CASH EQUIVALENTS,                   |                                              
|END OF PERIOD                                |                                               | 376                      
|                                            

See accompanying notes to
consolidated financial statements.

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

4

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(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,
2003, the Company on a consolidated basis has a negative working capital position due to
the significant liabilities of its Germany subsidiary, iQ Battery. 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 $0.70 per unit for proceeds
of $713,541, with each unit consisting of one common share of the Company and one
non-transferable warrant exercisable for a period of six months following closing and
entitling the holder to purchase one additional common share of the Company for US$1.00
(see note 5(e) for more details on the warrants).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

5

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

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

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

| | From
February through June 2003, the Company raised an additional $820,300 in capital through
the private placement of 2,563,437 units of the Company at $0.32 per unit, each such unit
consisting of one common share of the Company and one non-transferable warrant exercisable
for a period of twelve months following closing and entitling the holder to purchase one
additional common share of the Company for $0.42.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
Company has used the proceeds to fund research and development of iQ Batterys
technology, to expand the Companys marketing and sales activities, to fund the
proposed acquisition of certain assets and technology employed by a US-based battery
manufacturer in the manufacture of specialized automotive and storage batteries, and for
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, 2003, the Companys current financial condition requires the infusion of
additional capital in order to continue its current operations. If the Company is unable
to obtain the additional financing, the Company will be unable to meet all of its
financial obligations. There is no assurance that the Company will be able to secure
additional financing or that such financing will be on terms beneficial to the existing
shareholders.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

6

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

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

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

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

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

|                                                          | Number of
Common Shares | Amount($ 000)
|--------------------------------------------------------- | ----------------------- | -------------
|Balance, January 1, 1998 (iQ Power)                       |                         | 787,896      
|Private placement, issued cash                            |                         | 1,483,874    
|                                                         
|Balance, December 31, 1998                                |                         | 2,271,770    
|                                                         
|Shares issued for cash                                    |                         | 2,200,000    
|Issue costs                                               |                         | --           
|                                                         
|Balance, June 17, 1999                                    |                         | 4,471,770    
|Adjustment for                                            |                        
|reverse acquisition on June 17, 1999                      |                         | --           
|                                                         
|                                                          |                         | 4,471,770    
|                                                         
|Issued to effect the reverse acquisition                  |                         | 5,120,000    
|Warrants exercised during the year                        |                         | 139,850      
|                                                         
|Balance, December 31, 1999                                |                         | 9,731,620    
|                                                         
|Options exercised during the year                         |                         | 15,000       
|                                                         
|Balance, December 31, 2000                                |                         | 9,746,620    
|                                                         
|Private placements, issued for cash (incl. Finder's Fees) |                         | 4,597,944    
|Shares issued for conversion of debt                      |                         | 400,000      
|Shares issued for external stock based compensation       |                         | 205,060      
|Options exercised during the year                         |                         | 1,002,500    
|                                                         
|Balance, December 31, 2001                                |                         | 15,952,124   
|                                                         
|Private placements, issued for cash (incl. Finder's Fees) |                         | 4,225,853    
|Shares issued for external stock based compensation       |                         | 150,250      
|Options exercised during the year                         |                         | 20,000       
|                                                         
|Balance, December 31, 2002                                |                         | 20,348,227   
|                                                         
|Private placements, issued for cash (incl. Finder's Fees) |                         | 2,996,479    
|Shares issued for stock based compensation                |                         | 121,298      
|Options exercised during the year                         |                         | 140,000      
|                                                         
|Balance, June 30, 2003                                    |                         | 23,606,004   

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

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

| | The
Company has established a Stock Option Plan for employees, officers, directors,
consultants, and advisors. The Company has reserved 4,714,000 common shares for issuance
under the Stock Option Plan. In the second quarter of 2003, 140,000 shares were issued on
the exercise of stock options granted under the stock option plan. Options granted for
issuance under the Stock Option Plan generally are not transferable, and the exercise
price of stock options must be at least equal to 100% of the fair market value of the
common shares on the date of the grant.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

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

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

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

| | On
June 12, 2000, the Board of Directors decreased the exercise price for the Stock Option
Plan; from $2.50 to $1.50 for all options granted under and outside of the plan. On
January 16, 2001, the Board of Directors decreased again the exercise price for the Stock
Option Plans from $1.50 to $0.50 for all options granted under and outside of the plan.
On January 18, 2002, the Board of Directors decreased the exercise price of the 1,415,000
options granted under the Plan on June 28, 2001, from $1.37 to $1.00. On June 6, 2003,
the Board of Directors reset the exercise price of all options granted under the Plan to
$0.40 per share, a premium to the current market price of the Companys shares at
the time of the repricing.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Due
to the changes, all the options which were granted under the plan prior to the change in
exercise price will be accounted for using variable plan accounting under APB 25.
Variable accounting requires that the intrinsic value, being the excess of the current
market price at the end of each reporting period in excess of the exercise price of the
repriced options, be expensed as non-cash stock based compensation expense, until such
time as the repriced options are exercised, expire or are otherwise forfeited. Any
increase in the intrinsic value of the repriced options will decrease reported earnings,
and any subsequent decreases in value will increase reported earnings. For those options
which were granted outside of the plan prior to the change in exercise price, the Company
recognizes additional compensation cost for the excess of the fair value of the modified
options issued over the value of the original option at the date of the modification.
According to APB 25 the Company recorded no stock based compensation in the first quarter
of 2003. In the second quarter 2003, US$493,000 of stock based compensation was
recognized in the financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

8

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

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

|                                         | 3 months ended
June 30,
2003 | 6 months ended
June 30,
2003 | 3 months ended
June 30,
2002 | 6 months ended
June 30,
2002
|---------------------------------------- | ---------------------------- | ---------------------------- | ---------------------------- | ----------------------------
|                                        
|Net loss                                 |                              |                              |                              |                             
|As reported                              |                              | $    (754                    | )                            | $  (1.255                   
|Add (Deduct): Total stock-based employee |                             
|compensation expense determined          |                             
|under fair value based method for all    |                             
|awards net of related tax effects        |                              | $       493                  |                              | $        493                
|                                        
|Pro forma net loss                       |                              | $    (261                    | )                            | $      (762                 
|                                         |                             
|Loss per share (basic and diluted)       |                             
|As reported                              |                              | $  (0.04                     | )                            | $    (0.06                  
|SFAS No. 123 pro forma                   |                              | $     0.03                   |                              | $       0.03                
|                                        
|Pro forma net loss                       |                              | $  (0.01                     | )                            | $    (0.03                  

| | The
weighted average fair value, calculated using the Black-Scholes option pricing model
value of options granted under the stock option plan during the three and six months
ended June 30, 2002 was $0.32 per share. The fair value of these options was estimated at
the date of grant using a weighted average volatility factor of 85%, a dividend yield of
0%, a weighted average expected life of the stock options of 3 years, and a risk free
interest rate of 3.43%. For the three and six months ended June 30, 2003, no stock
options were granted to employees.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | In
July 2001, the Company instituted an Incentive Plan reserving shares for issue to
officers, directors, and employees of the Company and its subsidiary as an incentive. The
number of shares set aside for issue under the incentive share plan is 2,500,000 common
shares. No incentive shares have been granted under this plan as of June 30, 2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

9

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

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

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

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

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

| | In
February through June 2003, the Company raised $820,300 in capital through the private
placement of 2,563,437 units of the Company at $0.32 per unit, each such unit consisting
of one common share of the Company and one non-transferable warrant exercisable for a
period of twelve months following closing and entitling the holder to purchase one
additional common share of the Company for $0.42. The subscribers to the private
placement were non-U.S. persons outside the United States in reliance upon an exemption
from registration under Regulation S of the Securities Act of 1933, as amended. The
Company incurred finders fees to non-U.S. persons outside the United States, in
connection with the offering consisting of 175,900 common shares at a deemed price of
$0.32 per share. The cost of the finders fee was netted against the proceeds
obtained from the financing. The finders fees were paid out in June 2003. 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 $505,000. The fair value was calculated using the Black-Scholes
option-pricing model. These warrants were offered in the private placement in order to
increase investor interest, align the interest of prospective investors with
shareholders, and potentially allow them to invest in the Company at a future date.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | In
August 2002, the Company entered into a Financial Public Relations Adviser Consulting
Agreement with Joerg Schweizer, a non-U.S. person outside the United States. The Company
agreed to pay Joerg Schweizer a consulting fee in the amount of EUR 5,000 (approximately
$5,300) per month for such services. Of the consulting fee, EUR 2,000 is due monthly
while the remaining EUR 3,000 is payable by issuing Joerg Schweizer common shares,
issuable on a quarterly basis. The agreement has an initial term of 12 months. As of June
30, 2003, the Company had issued Joerg Schweizer 73,200 common shares under the
agreement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

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

| | In
August 2002, the Company entered into a Media Relations Consulting Agreement with Andreas
Gloetzl, a non-U.S. person outside the United States. The agreement had an initial term
of August 1, 2002 through March 15, 2003. The Company agreed to pay Andreas Gloetzl a
consulting fee in the amount of $33,800 by issuing Andreas Gloetzl common shares,
issuable as follows: The first issuance of 25,000 shares in October 2002, additional
20,000 shares in December 2002, the last installment of 20,000 shares in March 2003. As
of June 30, 2003, the Company had issued Andreas Gloetzl all 65,000 common shares under
the agreement. The agreement was not extended.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002, the Company entered into a Officer Engagement Agreement with Marco Graf
von Matuschka, our Chief Financial Officer. The Company agreed to pay Marco Graf von
Matuschka a consulting fee in the amount of $3,000 per month for such services. Of the
consulting fee, one half is payable by issuing 3,333 common shares. The agreement had an
initial term ending March 31, 2003, renewable on a quarterly basis thereafter. As of June
30, 2003, the Company had issued Marco Graf von Matuschka 24,998 common shares under the
agreement. Marco Graf von Matuschka resigned as the Chief Financial Officer of the
Company effective on June 30, 2003, having provided notice of his intention to do so on
May 16, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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, 2003 of $18,000(2002
                     $18,000) were paid to a company with a common director.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|(c) |  | iQ Battery acquired patents and know-how improving the current output of a
                    chargeable battery at low outside temperatures and the registered design
                    iQ based on a contract dated March 15, 1995 from two shareholders,
                    one of which is a director of the Company. The intangibles purchased relate to a
                    German patent, an international patent application as well as the registered
                    design iQ. The Company and the shareholders agreed that the
                    shareholders would receive DM 400,000 (approximately $220,000) from future
                    income. Any amounts paid will be charged to operations as a current expense. No
                    other amounts are due as the Company has not realized any applicable revenues or
                    royalties.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) |  | As of June 30, 2003, the Company has receivables of $64,000 in connection with
                    loan agreements with three shareholders, two of which are directors of the
                    Company. These loans date from prior years.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

---

iQ POWER TECHNOLOGY INC.
(a development stage company) 
Notes to the Consolidated Financial Statements
For the Quarter Ended June 30, 2003
(Expressed in United States dollars; tabular amounts in thousands except per
share data)

---

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

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

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

| | In
September 2002, the Company announced that it had entered into a letter of intent for the
acquisition of the business and assets of Gel Electric Technologies, Inc. (Gel)
headquartered in Los Angeles, California, USA. In the course of this agreement iQ Power
made a prepayment of $150,000 to Gel in the year ended 2002. Gel was obligated to
reimburse the prepayment by notice of iQ Power. In January 2003, the Company made an
additional prepayment of $75,000 to Gel. For the year ended December 31 2002, the Company
reserved $150,000 of the prepayments as provision for investment due to the weak financial
position of Gel and the likelihood that Gel may be unable to reimburse the prepayment on
demand. Notwithstanding these reservations (which deal with the collectibility of the
funds advanced rather than the acquisition of the Gel technology and assets) the Company
continues to negotiate for the acquisition of the Gel technology and other assets in a
manner appropriate to the international business model currently being adopted by the
Company. In January 2003, the Company made an additional advance of $75,000 to Gel. In
light of the ongoing negotiations, the Company will review any 2003 advances in support of
the acquisition of the Gel technology and other assets at the earlier of the end of the
negotiations or the current financial year to determine their appropriate financial value
to the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | Subsequent
to the completion of this report, the Company has funded the Gel-project with an
additional $150,000. This advance is secured through corporate and personal guarantees by
recipients.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

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

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

The Registrant cautions readers not
to place undue reliance on any such forward-looking statements, which speak only as of the
date made. Such forward-looking statements are based on the beliefs and estimates of the
Registrants management as well as on assumptions made by and information currently
available to the Registrant at the time such statements were made. The Registrant
disclaims any obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.

The financial statements of iQ Power
are stated in U.S. dollars and are prepared in accordance with United States generally
accepted accounting principles (US GAAP). The following management discussion and analysis
is qualified in its entirety by, and should be read in conjunction with, the consolidated
financial statements and notes thereto, included elsewhere in this quarterly report.

# Overview

The Company is an early stage company
which was organized in 1991 to develop and commercialize batteries and electric power
technology for the automotive industry and other industries. Since that date, it has been
engaged primarily in research and product development efforts. The Company has not derived
revenues from operations.

The Companys primary product is
a smart automotive starter battery, the MagiQTM battery, which
combines several proprietary features designed to optimize automotive starter battery
efficiency. The Company initially planned to begin manufacturing and marketing the
MagiQTM battery in 2002. However, one of the external components failed to meet
the Companys quality standards during an initial production run of the
MagiQTM battery in April 2002. The manufacturer of the component was required
to re-engineer its manufacturing process to meet the Companys quality standards,
which caused substantial delays in the Companys scheduled delivery of batteries to
automobile manufacturers for final testing. During the first half of 2003, the Company
delivered a limited number of its MagiQTM batteries for a pilot program as the
first step in the Companys plan to commercialize MagiQTM batteries. The
Company anticipates that it will begin commercial production of the MagiQTM
battery during the fourth quarter of 2003 or first half of 2004, assuming adequate
financing is available.

13

---

The Company had a working capital
deficient of approximately $220,000 at June 30, 2003, and will need to raise additional
financing for working capital purposes. The Company does not anticipate it will generate
any revenues from the sale of MagiQTM batteries, until at least the fourth
quarter of 2003 or the first half of 2004, assuming adequate financing is available and
the Company is able to commence commercial production of its batteries. See Need for
Additional Capital, below.

As part of its battery
commercialization strategy, the Company entered into a letter of intent in 2002 to acquire
all of the assets of Gel Electric Technologies, Inc. (Gel), a company engaged
in the business of manufacturing specialized automotive and storage batteries that use
sealed VRLA gelled-electrolyte (GEL), sealed VRLA starved-electrolyte (AGM), and sealed
lead acid flooded (WET) technologies, for approximately $2,250,000. GEL and AGM batteries
are generally more efficient than batteries using conventional liquid acid compounds,
however, battery manufacturers have experienced technological difficulties in
manufacturing these batteries due to the complexity of the technologies. Gel has developed
technologies and processes to manufacture high quality GEL and AGM batteries. Gel
currently has a manufacturing facility in California.

Since entering into the letter of
intent, the Company advanced Gel $375,000 in interim funding and the Companys
management has conducted due diligence on the assets and technologies of Gel. As a result
of the Companys due diligence, the Company elected not to proceed with the
acquisition under the original terms. The Company is currently negotiating to acquire some
of the technologies and assets of Gel for approximately $500,000, payable in part from
$375,000 the Company has advanced to Gel in interim financing. If the acquisition of the
assets and technology is completed, the Company plans to integrate the iQ Power and the
Gel technologies to meet a developing market for smart stand-by power sources. There can
be no assurance that the Company will acquire these assets as anticipated or that the
Company will be able to raise the funds required to acquire the assets should the parties
agree on the terms of such acquisition. There also can be no assurance, assuming the
assets are acquired, that the Company will be able to exploit the anticipated synergies
between the iQ technologies and the acquired Gel technology. The Company anticipates that
it will be required to raise additional capital following the acquisition to fully exploit
the assets. See Need for Additional Capital, below.

The Company anticipates that future
revenues, if any, will be derived from the sale of MagiQTM batteries and
licensing of its technologies. The Company currently has no service or licensing
agreements in place and the Company does not anticipate that it will receive any material
revenues from service or license arrangements during 2003. The Company has incurred
substantial losses to date, and there can be no assurance that the Company will attain any
particular level of revenues or that the Company will achieve profitability.

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

# 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.

14

---

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

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

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

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

# Related Party
Transactions

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

The Company's Results of Operations
for the Three Months Ended June 30, 2003 Compared to the Three Months Ended June 30, 2002

Revenues.  No
revenues were recorded in either the three month period ended June 30, 2003           or
the three month period ended June 30, 2002.

Total Operating Expenses. The
Company had total operating expenses of $988,000 for the three month period ended June 30,
2003, compared to $467,000 for the same period in 2002. Total operating expenses for the
three month period ended June 30, 2003 included research and development expenses of
$431,000 ($198,000  2002) and marketing and general and administrative expenses of
$557,000 ($269,000  2002). Total operating expenses increased by $521,000 or 112%
for the three month period ended June 30, 2003, compared to the same period in 2002. The
primary factors contributing to increased operating expenses were the non-cash stock-based
compensation expense in the second quarter 2003 of $493,000, a reversal of non-cash
stock-based compensation expenses in the three month period ended June 30, 2002 of
$66,000, and the strengthening of the Euro versus the US dollar. The overall effect of the
non-cash stock-based compensation accounted for an expense increase of $559,000 in the
three month period ended June 30, 2003, compared to the same period in 2002 (see, note
4(a)).

15

---

Research and Development
Expenses. Research and development expenses in total were $431,000 for the three
months ended June 30, 2003 compared to $198,000 for the same period in 2002, an increase
of $233,000 or 118%. Research and development personnel costs increased by $240,000 from
$105,000 for the second quarter in 2002 to $345,000 for the second quarter in 2003. The
stock-based compensation effect accounted for $217,000 of the total increase in personnel
related expenses; an additional increase of $30,000 was due to the exchange rate
difference of the Euro versus the US dollar in the two compared periods. Laboratory
expenses related to research and development increased from $58,000 for the three months
ended June 30, 2002 to $71,000 for the comparable period in 2003 which was partly due to
the Companys engagement in the PEIT-Project (see Plan of Operation). Research and
development office & travel expenses decreased from $14,000 for the three month period
ending June 30, 2002 to $8,000 for the same period in 2003. Consulting services decreased
from $5,000 for the second quarter in 2002 to $2,000 for the same period in 2003. The
Companys professional fees associated with research and development decreased to
$5,000 in the second quarter of 2003, compared to $16,000 for the same period in 2002.

Marketing and General and
Administration Expenses. The expenses related to marketing and general and
administration increased to $557,000 for the three month period ended June 30, 2003 from
$269,000 for the same period in 2002, an increase of $288,000 or 107%. Personnel related
expenses increased by $348,000 to $374,000 for the three month period ended June 30, 2003
from $26,000 for the same period in 2002. The stock-based compensation effect (a reversal
in 2002, an expense in 2003) accounted for $342,000 of the total increase in personnel
related expenses. Professional fees decreased to $63,000 for the second quarter in 2003,
compared to $106,000 for the second quarter in 2002 due to a decrease in accounting
expenses in the second quarter 2003 compared to the same period in 2002. Investor
relations expenses decreased to $26,000 for the three months ended June 30, 2003, from
$41,000 for the same period in 2002, a decrease of $15,000. This decrease in investor
relations expense resulted from the restructuring of investor relations agreements in mid
2002. Other expenses related to marketing and general and administration for the quarter
ended June 30, 2003 included: increased office & travel expenses at $27,000 ($21,000
 second quarter 2002); decreased consulting fees at $10,000 ($15,000  second
quarter 2002); decreased marketing activities at $36,000 ($39,000  second quarter
2002); management fees at $18,000 ($18,000  second quarter 2002); and all other
expenses at $3,000 ($3,000  second quarter 2002).

The Company anticipates that the
level of expenditures related to its marketing and general and administration expenses
will increase during the last half of 2003 and in 2004 as it plans to increase marketing
efforts to introduce and commercialize the MagiQTM battery and its other
technologies. 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 $754,000 or $0.04 per share for the second quarter of 2003, compared to a
net loss of $126,000 or $0.01 per share during the same period in 2002. The Company
incurred a gain on foreign exchange of $238,000 for the three months period ended June 30,
2003, compared to a gain on foreign exchange of $341,000 for the same period in 2002.

The Company's Results of Operations
for the Six Months Ended June 30, 2003 Compared to the Six Months Ended June 30, 2002

Revenues.  No
revenues were recorded in either the six month period ended June 30, 2003 or
          the six month period ended June 30, 2002. The Company delivered a limited
number           of its MagiQTM batteries to automobile manufacturers and
industry           suppliers for a pilot program as the first step in the Companys
plan to           commercialize MagiQTM batteries. The Company does not
anticipate that           it will generate any significant revenues from the sale of MagiQTM          batteries
until it successfully introduces MagiQTM batteries to a           broad
commercial market or one or more car manufacturers install           MagiQTM batteries
as original manufacturer equipment in their           vehicles, assuming the Company can
raise sufficient financing to commercialize           its MagiQTM batteries.

Total Operating Expenses. The
Company had total operating expenses of $1,578,000 for the six month period ended June 30,
2003, compared to $933,000 for the same period in 2002. Total operating expenses

16

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for the six month period ended June
30, 2003 included research and development expenses of $712,000 ($426,000  2002) and
marketing and general and administrative expenses of $866,000 ($507,000  2002).
Total operating expenses increased by $645,000 or 69% for the six month period ended June
30, 2003, compared to the same period in 2002. The primary factors contributing to
increased operating expenses were the non-cash stock-based compensation expense in the
second quarter 2003, a reversal of non-cash stock-based compensation expenses in the six
month period ended June 30, 2002, and the strengthening of the Euro versus the US dollar.
The overall effect of the non-cash stock-based compensation accounted for an expense
increase of $602,000 (see, Note 4(a)).

Research and Development
Expenses. Research and development expenses in total were $712,000 for the six months
ended June 30, 2003 compared to $426,000 for the same period in 2002, an increase of
$286,000 or 67%. Research and development personnel costs increased by $318,000 from
$213,000 for the first half of 2002 to $531,000 for the first half of 2003. Stock-based
compensation accounted for $249,000 of the total increase in personnel related expenses;
an additional increase of $67,000 was due to the exchange rate difference of the Euro
versus the US dollar in the two periods. Laboratory expenses related to research and
development increased from $126,000 for the six months ended June 30, 2002 to $143,000 for
the comparable period in 2003 which also was due to the exchange rate difference of the
Euro versus the US dollar in the two compared periods. Research and development office
& travel expenses decreased from $29,000 for the six month period ending June 30, 2002
to $14,000 for the same period in 2003. Consulting services decreased from $24,000 for the
six month period ending June 30, 2002 to $10,000 for the same period in 2003, as the
Company had incurred expenses for consulting services related to its quality assurance
certification process in the first quarter of 2002. The Companys professional fees
associated with research and development decreased to $14,000 in the first half of 2003,
compared to $34,000 in the first half of 2002.

Without taking the stock-based
compensation into account, the Company anticipates that research and development expenses
will be slightly higher in 2003 as it continues development of its BEM-Battery Energy
Manager® and SEM-Smart Energy Manager® technologies. See Plan of
Operation.

Marketing and General and
Administration Expenses. The expenses related to marketing and general and
administration increased to $866,000 for the six month period ended June 30, 2003 from
$507,000 for the same period in 2002, an increase of $359,000 or 71%. Personnel related
expenses increased $365,000 to $424,000 for the six month period ended June 30, 2003 from
$59,000 for the same period in 2002. The stock-based compensation effect (a reversal in
2002, an expense in 2003) accounted for $353,000 of the total increase in personnel
related expenses. Consulting fees increased by $12,000 to $60,000 for the six months ended
June 30, 2003, from $48,000 for the six months ended June 30, 2002, as the Company
increased its use of consultants to assist it with business development and capital
raising efforts. Professional fees increased to $156,000 for the first half of 2003,
compared to $124,000 for the first half of 2002 due to the Companys increased
expenses for the negotiations and due diligence related to the acquisition of Gel.
Investor relations expenses decreased to $57,000 for the six months ended June 30, 2003,
from $125,000 for the same period in 2002, a decrease of $68,000. This decrease in
investor relations expense resulted from the restructuring of investor relations
agreements in mid 2002. Other expenses related to marketing and general and administration
for the six months ended June 30, 2003 included: increased office & travel expenses at
$60,000 ($50,000  first half 2002); management fees at $36,000 ($36,000 
2002); increased marketing activities at $61,000 ($59,000  2002) and all other
expenses at $12,000 ($6,000  2002).

The Company anticipates that the
level of expenditures related to its marketing and general and administration expenses
will increase during 2003 as it plans to increase marketing efforts to introduce and
commercialize the MagiQTM battery. The Company also expects to increase its
efforts to enter into service and licensing arrangements to commercialize its MagiQTMbattery and its related energy management technologies. Expenditures related to
general and administration might also increase as an immediate consequence of a successful
closing of the financing negotiations (compensation for related transaction costs).

17

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Net Loss. The Company incurred
a net loss of $1,255,000 or $0.06 per share for the six month period ended June 30, 2003,
compared to a net loss of $634,000 or $0.04 per share during the same period in 2002. The
Company incurred a gain on foreign exchange of $329,000 for the six months period ended
June 30, 2003, compared to a gain on foreign exchange of $299,000 for the same period in
2002.

The Company anticipates that it will
continue to incur losses in future periods until the Company is able to successfully
commercialize its MagiQTM battery and energy management technologies. There can
be no assurance that the Company will have sufficient capital to commercialize its
MagiQTM battery and energy management technologies or that such products will
be commercially successful. The MagiQTM battery is being manufactured by a
third-party manufacturer for limited sales in Europe, which is anticipated to begin in
late 2003 or early 2004, assuming adequate financing is available. There can be no
assurance that the Company will be able to complete additional financings, or  if
completed  that those will be at favorable terms for the Company. There can be no
assurance that the Companys efforts to commercialize the MagiQTM battery
will be successful or that it will not experience delays in introducing its products to
the market.

# Liquidity and Capital
Resources

Since inception, the Company has
financed its operations primarily through sales of its equity securities. From inception
to June 30, 2003, the Company had raised approximately $12,600,000 (net of issuance costs)
from the sale of such securities. As of June 30, 2003, the Company had cash and cash
equivalents of $376,000, compared to $331,000, at December 31, 2002. The Company had a
working capital deficit of $220,000 at June 30, 2003, compared to a working capital
deficit of $148,000 at December 31, 2002. In light of the Companys working capital
position and prospects at December 31, 2002, the Companys auditors expressed
substantial doubt about the ability of the Company to continue as a going concern. The
Companys financial statements are prepared using United States generally accepted
accounting principles applicable to a going concern, and do not reflect adjustments to the
carrying value of assets and liabilities, the reported expenses and balance sheet
classifications that would be necessary if the appropriateness of the going concern
assumption were not appropriate. Such adjustments could be material.

In November 2002, the Company
announced a private placement of up to 1,715,000 units at $0.35 per unit for proceeds of
$600,000, with each unit consisting of one common share of the Company and one
non-transferable warrant exercisable for a period of twelve months following closing to
purchase one additional common share of the Company for $0.45. The Company issued
1,572,853 units for proceeds of $550,500 in November and December 2002. An additional
150,000 units for proceeds of $52,500 were issued in February 2003. The Company paid a
finders fees in connection with the offering consisting of 107,142 common shares in
February 2003.

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

In February through June 2003, the
Company raised $820,300 in capital through the private placement of 2,563,437 units at
$0.32 per unit, each such unit consisting of one common share of the Company and one
non-transferable warrant exercisable for a period of twelve months following closing to
purchase one additional common share of the Company for $0.42. The Company paid a
finders fee in connection with the offering consisting of 175,900 common shares at a
deemed price of $0.32 per share.

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

18

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

The Company anticipates that it will
require an additional $1,400,000 to $1,700,000 in financing to meet its on-going short
term and long term obligations during 2003 and to fund its plan of operation. See
Plan of Operation. The Company plans to finance its capital needs principally
from the proceeds of its securities offerings and, to the extent available, lines of
credit. In addition, the Company expects to generate revenues from the sales of its
products in late 2003 or in 2004.

The Company is currently negotiating
to acquire some of the technologies and assets of Gel for approximately $500,000, payable
in part from $375,000 advanced to Gel by the Company. The Company is also evaluating
possible plans to build a battery production facility in Germany and currently has letters
of intent for government subsidies and credit financing for building the facility. The
Company currently does not have sufficient cash or working capital to pursue either of
these opportunities, and the Company would be required to raise additional financing, on
acceptable terms, to complete the acquisition of assets and technologies from Gel and/or
to build a manufacturing facility.

# Obligations and
Commitments

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

In August 2002, the Company entered
into a Financial Public Relations Adviser Consulting Agreement with Joerg Schweizer, a
non-U.S. person outside the United States. The Company agreed to pay Mr. Schweizer a
consulting fee in the amount of EUR 5,000 (approximately $5,300) per month for such
services, of which EUR 2,000 is payable in cash and EUR 3,000 is payable by issuing Mr.
Schweizer common shares on a quarterly basis. The agreement has an initial term of 12
months. As of June 30, 2003, the Company had issued Mr. Schweizer 73,200 common shares
under the agreement.

In November 2002, the Company entered
into a Officer Engagement Agreement with Marco Graf von Matuschka, our Chief Financial
Officer. The Company agreed to pay Marco Graf von Matuschka a consulting fee in the amount
of $3,000 per month for such services, of which $1,500 is payable in cash and $1,500 is
payable by issuing Marco Graf von Matuschka common shares. The agreement had an initial
term ending March 31, 2003, renewable on a quarterly basis thereafter. As of June 30,
2003, the Company had issued Marco Graf von Matuschka 24,998 common shares under the
agreement. On May 16, 1998, Marco Graf von Matuschka resigned as the Chief Financial
Officer of the Company effective on June 30, 2003.

The Companys capital
requirements depend on several factors, including the success and progress of its product
development programs, the resources it devotes to developing its products, the extent to
which its products achieve market acceptance, and other factors. The Company in the past
has, and in the future expects to, devote substantial cash and other resources to research
and development efforts. The Company will also require additional capital if it completes
the acquisition of assets and/or technologies from Gel or undertakes to build or acquire a
battery manufacturing facility. There can be no assurance that sufficient capital will be
available for either of these transactions or that either of these transactions will be
completed.

19

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In addition, the Company may not be
able to adequately predict the amount and timing of its future cash requirements in light
of the unpredictable demand, if any, for its MagiQTM battery and the status of
its plans related to the acquisition of certain assets and technologies of Gel, plans
related to building a battery manufacturing facility in Germany, and plans related to its
continuing development of its BEM-Battery Energy Manager® and SEM-Smart Energy
Manager® technologies.

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 completed development of
the MagiQTM battery and during the first half of 2003 started initial pilot
production for testing by automobile manufacturers and industry suppliers. The Company
also refined contracts with all suppliers necessary to provide the components that meet
the Companys production and quality requirements at negotiated fixed costs.

The Company is currently evaluating
production options to enable it to expand its production capacities, including negotiating
with battery manufacturers for possible manufacturing arrangements and exploring an
opportunity to build a manufacturing facility in the City of Hof, Germany. In connection
with the manufacturing facility project, the Company has entered into a letter of intent
with the City of Hof, Germany to built a pilot production plant as part of a planned
automotive cluster, and the Company applied for government funds in April 2002, and is
currently negotiating with banks and investment firms to raise financing for the project.
The Company received letters of intent from two German banks for financing a portion of
the project and will require additional financing to pursue the opportunity to construct
the manufacturing facility.

The Company is currently negotiating
to acquire some of the technologies and assets of Gel for approximately $500,000, payable
in part from $375,000 the Company has advanced to Gel in interim financing.

The Company has delivered smart
batteries equipped with the iQ modules and an additional electronic for data recording and
storage for a project called PEIT (Powertrain Equipped with Intelligent Technology). The
participants in the project PEIT (including the Company, DaimlerChrysler, Knorr Bremse and
Continental AG) integrated one vehicle with intelligent Powertrain X-by-wire technology
for a simulated testing in September 2002, and are currently in the process of developing
a vehicle for street testing. The Company is in the process of completing the design of
the Energy managing unit for the project, parts of which have already been delivered. The
Companys SEM Smart Energy Management application (SEM), which is
incorporated in the Powertrain X-by-wire technology, was introduced at the International
Auto Show for Trucks in Frankfurt by the Company and DaimlerChrysler in September 2000.

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

The Companys plan of operations
for the next twelve months, includes undertaking the following activities:

20

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Research and Development.  The
Company intends to allocate approximately $850,000 during the year ending December 31,
2003 for research and development efforts. These efforts are expected to include: refining
the SEM and BEM Battery Energy Management (BEM) technologies and designs,
completing third party testing and validation programs for the MagiQTM battery,
continuous refinement to the MagiQTM battery technologies and design,
completing the design of the energy management technology for the intelligent Powertrain
X-by-wire technology project, completing development and implementation of continue state
of charge (SOC) and state of health (SOH) software and continuing research in the field of
power line communication with the DC-BUS technology.

Production.  The
Company intends to allocate approximately $400,000 during the year ending
          December 31, 2003 for production activities. These activities are expected to
          include: completing an initial pilot production of the MagiQTM          battery
for testing by automobile manufacturers and battery industry suppliers;
          evaluating mass production manufacturing alternatives; evaluating the
          feasibility of constructing a manufacturing facility in Germany; evaluating
          quality management and assurance programs of suppliers and workflows;
          negotiating joint ventures, partnership agreements, cooperation agreements or
          similar agreements with battery manufacturers; developing a program to
          continuously improve production processes, optimize cost structures and improve
          product quality; and implementing adequate software tools for production
          planning and scheduling (PPS) and enterprise resource planning (ERP). The
          Companys production activities are expected to increase substantially if
          the Company acquires assets and technologies from Gel or commercial production
          of the MagiQTM battery is commenced during the fourth quarter.

Marketing.  The
Company intends to allocate approximately $200,000 during the year ending
          December 31, 2003 for marketing efforts. Marketing activities are expected to
          include: increase marketing efforts related to the MagiQTM battery
          system to automobile manufacturers, original equipment manufacturers (OEM)
          customers and after market (AM) distributors; marketing the Companys
          solutions related to state of charger (SOC) and state of health (SOH) status
          indications for batteries to car manufacturers and Tier 1 suppliers; marketing
          customized application of the Companys technology for energy storage
          (MagiQTM) to non-automotive industries and for other applications;
          and creating awareness and end-user demand for the MagiQTM battery
          system and the Companys technology for energy management solutions (BEM,
          SEM).

Financing.  The
Company intends to allocate approximately $150,000 during the year ending
          December 31, 2003 for capital raising efforts, including seeking additional
          financing to expand the Companys operations through debt and/or equity
          financings, possible joint venture arrangements and governmental loans and/or
          grants. Expenditures for financing activities may increase substantially due to
          the condition of the current financial markets and possible changes to the
          Companys capital requirements.

Administrative and General
Operating.   The Companys administrative and general operating budgets for the
year ending December 31, 2003 is $900,000. Administrative and general operating
expenditures may increase if the Company acquires assets and technologies from Gel or
commercial production of the MagiQTM battery is commenced during the fourth
quarter.

# Need for Additional
Capital

The Company anticipates that its
total operating budget for fiscal year ending December 31, 2003 will be approximately
$2,500,000. During the six month period ended June 30, 2003, the Company used cash of
approximately $529,000 in operating activities. The Company had a working capital deficit
of approximately $220,000 at June 30, 2003. The Company anticipates that it will require
additional financing of approximately $1,400,000 to $1,700,000 to satisfy its working
capital requirements through December 31, 2003.

In the event that the Company
completes the acquisition of certain of the assets and technologies of Gel, its total
budget for the fiscal year ended 2003 is expected to increase significantly.

In addition, the Company will need to
raise additional capital in the near future to continue as a going concern. See
Liquidity and Capital Resources above. The Company may experience delays, cost
overruns, additional funding needs for joint ventures or other unanticipated events that
will increase the

21

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Companys need to raise
additional financing. The Company cannot assure you that it will be able to obtain more
financing or that, if it does, it will be on favorable terms or on a timely basis.

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

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

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

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

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

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

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

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

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

# Personnel

The Company does not expect any
significant changes in its personnel strategy over the next twelve months. However, if the
Gel acquisition is completed, the overall number of employees of the Company will increase
by approximately 10 employees due to the inclusion of the Gel workforce. The
Companys personnel strategy is to maintain its research and development capabilities
and the Company may hire personnel in marketing and sales once the commercial production
of the MagiQTMbattery is commenced.

# Other Trends and
Uncertainties

# Foreign Currency Translation
Risk

US dollars forwarded to our German
subsidiary are translated into Euros for German accounting purposes as soon as the funds
are used for their operations. In the consolidation process these loans are translated
back into US dollars resulting in foreign exchange gains or losses at the Companys
German subsidiary. In the first half of 2003, due to the strengthening of the Euro versus
the US dollar, the Company incurred foreign exchange gains of $329,000. The Company
believes its risk of foreign currency translation is limited to these inter-company
transactions. The Company does not currently engage in hedging or other activities to
control the risk of foreign currency translation, but may do so in the future, if
conditions warrant.

# Going Concern

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

22

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# ITEM 3.   Controls and
Procedures

Evaluation of Disclosure Controls
and Procedures.   The Companys Chief Executive Officer and Chief Financial
Officer have evaluated the effectiveness of the Companys disclosure controls and
procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities
Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the
period covered by this quarterly report (the Evaluation Date). Based on such
evaluation, such officers have concluded that, as of the Evaluation Date, the
Companys disclosure controls and procedures are effective in alerting them on a
timely basis to material information relating to the Company required to be included in
our reports filed or submitted under the Exchange Act.

Changes in Internal Controls over
Financial Reporting.   During the most recent fiscal quarter, there have not been
any significant changes in the Companys internal controls over financial reporting
or in other factors that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

# Part II  OTHER
INFORMATION

# ITEM 1.   LEGAL
PROCEEDINGS

As of June 30, 2003, there is no
material litigation pending against the Company.

# ITEM 2.   CHANGES IN
SECURITIES AND USE OF PROCEEDS

# Sales of Unregistered
Securities.

During the quarter ended June 30,
2003, the Company issued the following securities in reliance upon exemptions from the
registration requirements of the Securities Act of 1933, as amended.

As of June 30, 2003, the Company had
issued Joerg Schweizer, a non-U.S. person outside the United States, 73,200 common shares
under the terms of a Financial Public Relations Adviser Consulting Agreement. The shares
were issued in reliance upon an exception from the registration requirement of the
Securities Act under Regulation S.

As of June 30, 2003, the Company had
issued Marco Graf von Matuschka, a non-U.S. person outside the United States, 24,998
common shares under the terms of an Officer Engagement Agreement. The shares were issued
in reliance upon an exception from the registration requirement of the Securities Act
available under Regulation S.

In February through June 2003, the
Company raised $820,300 through the private placement of 2,563,437 units of the Company
at $0.32 per unit, each such unit consisting of one common share of the Company and one
non-transferable warrant exercisable for a period of twelve months following closing and
entitling the holder to purchase one additional common share of the Company for $0.42.
The subscribers to the private placement were non-U.S. persons outside the United States
in reliance upon an exemption from registration under Regulation S of the Securities Act
of 1933, as amended. The Company paid a finders fees to non-U.S. persons outside
the United States in connection with the private placement consisting of 175,900 common
shares at a deemed price of $0.32 per share. The finders fee shares were issued in
June 2003. The shares were issued pursuant to an exemption from registration 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 reports on Form 10-KSB for the years ended
December 31, 2002 and 2001 under Item 5. Market for Common Equity and Related
Shareholder Matters  Recent Sale of Unregistered Securitiesand in the Companys
quarterly report on Form 10-QSB for the quarter ended March 31, 2003 under Item 2.
Changes in Securities and Use of Proceeds filed with the

23

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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 and under
Item 2. Changes in Securities and Use of Proceeds of the Companys
quarterly report on Form 10-QSB for the quarter ended March 31, 2003 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 30, 2003, in Vancouver, British Columbia pursuant
to the Canada Business Corporations Act. A total of 1,317,490 common shares of the Company
were represented in person or by proxy at the annual meeting, consisting of approximately
6% of the total number of common shares of the Company outstanding on June 4, 2003, the
record date for the annual general meeting. At the annual general meeting, 5 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 director positions for the
ensuing year. The resolution was approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

2.   Election of Directors

At the annual  general  meeting,
 the  following  nominees,  each of whom other than Rudolf Heinz was a director  prior to
the meeting, were elected to the board for the ensuing year by the vote indicated
opposite their respective names:

|Name             | For | Withhold 
|---------------- | --- | ---------
|Hans Ambos       |     | 1,317,490
|Dr. Gunter Bauer |     | 1,317,490
|Peter Braun      |     | 1,317,490
|Russell French   |     | 1,317,490
|Rudolf Heinz     |     | 1,317,490
|Gregory Sasges   |     | 1,317,490

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. The
resolution was approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

24

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# 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. The resolution was approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

# 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 to 3099458 Canada Inc. or such other name as the board of directors may
approve should the board of directors determine it to be in the best interests of the
Corporation. Under the Canada Business Corporations Act, the board of directors is, in
turn, authorized to change a designating number name to a verbal name. The resolution was
approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

# 5.   Authority to Change
Registered Officer

At the annual general meeting, all of
the shares present at the meeting voted for a special resolution, that would allow the
Articles of the Corporation together with the By-laws of the Corporation to be amended to
provide for the establishment of the registered office of the Corporation in such
territory or province of Canada as the Board of Directors may by resolution determine. The
resolution was approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

# 6.   Stock Options

At the annual general meeting, all of
the shares present at the meeting voted for a resolution authorizing the amendment of 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 (5,828,000 shares), subject to increase or decrease through subdivision
or consolidation of the outstanding Common Shares of the Corporation. The resolution was
approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

# 7.   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

25

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initiative provides for an annual
stipend of $2,500 upon appointment to the board together with an honorarium of $250 for
each board meeting attended. The resolution was approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

# 8.   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 resolution was approved by the vote indicated below:

|For       | Against | Withheld | Abstain | Broker Non-votes
|--------- | ------- | -------- | ------- | ----------------
|1,317,490 |         | --       |         | --              

# ITEM 5.   OTHER
INFORMATION

On May 16, 2003, Marco Graf von
Matuschka resigned as the Chief Financial Officer of the Corporation, effective June 30,
2003. Marco Graf von Matuschka continues to serve as Finance & Controlling Officer of
iQ Battery Research & Development GmbH, the Companys wholly-owned German
subsidiary.

On June 30, 2003, Rudolf Heinz was
appointed as director of the Corporation.

ITEM 6.    EXHIBITS AND REPORTS ON
FORM 8-K

The following Exhibits are filed as
part of this report:

EXHIBIT INDEX

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

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

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

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

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

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

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

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

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

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

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

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

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

26

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

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

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

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

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

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

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

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

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

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

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

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

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

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

27

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

|10.34(12) |  | Consulting
Agreement by and between iQ Power Technology Inc. and Marco Graf v. Matuschka
|--------- |  | ----------------------------------------------------------------------------------------

|31.1 |  | Section
302 Certification of Chief Executive Officer and acting Principal Financial Officer
|---- |  | -------------------------------------------------------------------------------------------

|32.1 |  | Section
906 Certification of  Chief Executive Officer and acting Principal Financial Officer
|---- |  | --------------------------------------------------------------------------------------------

_________________

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

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

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

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

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

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

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

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

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

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

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

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

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

| | Form 8-K filed with the
Securities and Exchange Commission on June 12, 2003.
| | ----------------------------------------------------------------------------

28

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# 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 13, 2003.

| | IQ POWER TECHNOLOGY INC.


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

29

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