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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION** Washington, D.C. 20549

FORM 10-KSB/A

**x******ANNUAL
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended **December 31, 2003**

** ̈******TRANSITION
  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ______________

Commission file number**000-21753**

ULTRAGUARD WATER SYSTEMS CORP.
  Name of Small Business Issuer in Its Charter

|**NEVADA**                             | **88-0263701**    
|-------------------------------------- | ------------------
|State of Incorporation                 | I.R.S. Employer   
|                                       | Identification No.
|                                       |                   
|**914 SHERWOOD AVENUE**                |                   
|**COQUITLAM, B.C.  CANADA**            | **V3K 1A6**       
|Address of Principal Executive Offices | Zip code          
|                                       |                   
|**604-540-8282**                       |                   
|Issuer's Telephone Number              |                   

Securities registered under Section 12(b) of the Act: **NONE** Securities registered under Section 12(g) of the Act:


**COMMON STOCK, PAR VALUE $0.001 PER SHARE**
  Title of class

Check whether the issuer: (1) filed all reports required to
  be filed by Section13 or 15(d) of the Exchange Act during the past 12 months
  (or for such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days. Yes**x******No** ̈******

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation SB is not contained in this form, and no disclosure
  will be contained, to the best of registrant's knowledge, in definitive proxy
  or information statements incorporated by reference in Part III of this Form
  10-KSB or any amendments to this Form 10-KSB** ̈******

The issuer's revenues for its most recent fiscal year were
  $32,669

The aggregate market value of the voting and non voting common
  equity held by non-affiliates of the issuer amounting to in aggregate 17,153,570
  computed by reference to the price at which the common equity was sold, or the
  average bid and asked price of such common equity, on April 8,2004 was $1,243,643.
  The number of shares outstanding of the issuer's only class of Common Stock
  $.001 par value was 23,553,570 on April 12, 2004.

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TABLE OF CONTENTS

|PART I       |                                                                                                      |     
|------------ | ---------------------------------------------------------------------------------------------------- | ----
|             |                                                                                                      | Page
|             |                                                                                                      |     
|Risk Factors |                                                                                                      | 3   
|             |                                                                                                      |     
|Item 1.      | Description of Business                                                                              | 4   
|             |                                                                                                      |     
|Item 2.      | Description of Property                                                                              | 9   
|             |                                                                                                      |     
|Item 3.      | Legal Proceedings                                                                                    | 9   
|             |                                                                                                      |     
|Item 4.      | Submission of Matters to a Vote of Security
      Holders                                            | 9   
|             |                                                                                                      |     
|PART II      |                                                                                                      |     
|             |                                                                                                      |     
|Item 5.      | Market for Common Equity and Related Stockholder
      Matters                                       | 10  
|             |                                                                                                      |     
|Item 6.      | Management's Discussion and Analysis or
      Plan of Operation                                      | 10  
|             |                                                                                                      |     
|Item 7.      | Financial Statements                                                                                 | 15  
|             |                                                                                                      |     
|Item 8.      | Changes in and Disagreements with Accountants
      on Accounting and Financial Disclosure           | 32  
|             |                                                                                                      |     
|PART III     |                                                                                                      |     
|             |                                                                                                      |     
|Item 9.      | Directors, Executive Officers, Promoters,
      and Control Persons                                  | 32  
|             |                                                                                                      |     
|Item 10.     | Executive Compensation                                                                               | 33  
|             |                                                                                                      |     
|Item 11.     | Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters | 33  
|             |                                                                                                      |     
|Item 12.     | Certain Relationships and Related Transactions                                                       | 34  
|             |                                                                                                      |     
|Item 13.     | Exhibits and Reports on Form 8-K                                                                     | 36  

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PART I

RISK FACTORS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH "SELECTED
  FINANCIAL DATA" AND ULTRAGUARDS' CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
  THERETO. INFORMATION DISCUSSED HEREIN MAY INCLUDE FORWARD-LOOKING STATEMENTS
  REGARDING FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY'S,
  AND ARE SUBJECT TO A NUMBER OF RISKS AND OTHER FACTORS WHICH COULD CAUSE THE
  ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING
  STATEMENTS. AMONG THESE FACTORS ARE: GENERAL BUSINESS AND ECONOMIC CONDITIONS;
  CUSTOMER ACCEPTANCE AND DEMAND FOR THE COMPANY'S PRODUCTS; THE COMPANY'S OVERALL
  AVILITY TO DESIGN, TEST AND INTRODUCE NEW PRODUCTS ON A TIMELY BASIS; THE NATURE
  OF THE MARKETS ADDRESSED BY THE COMPANY'S PRODUCTS; AND OTHER RESK FACTORS LISTED
  FROM TIME TO TIME IN DOCUMENTS FILED BY THE COMPANY WITH THE SEC.

WE ARE SUBJECT TO THE RISKS, EXPENSES, PROBLEMS AND DIFFICULTIES FREQUENTLY
  ENCOUNTERED IN THE ESTABLISHMENT OF A RESTRUCTURED BUSINESS, ESPECIALLY IN THE
  CONTINUALLY EVOLVING, INTENSELY COMPETITIVE, POTABLE WATER TREATMENT INDUSTRY.

Investment in our common stock involves a high degree of risk. Prospective investors should carefully consider the following risk factors in addition to other information in this annual report before purchasing our common stock.

We have generated no profits to date and have accumulated losses to December 31, 2003 fiscal yearend amounting to $727,102 and a working capital deficit of $679,178. We cannot assure that we will become profitable at any time in the foreseeable
future.

We have never earned substantial operating revenue. We have been dependent on equity financing to pay operating costs and to cover operating losses. If we are unable to do so, we face a risk of insolvency.

The auditors' report on our December 31, 2003 consolidated financial statements includes an additional paragraph that identifies conditions which raise substantial doubt about our ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.

Because of our limited operating and sales history, we cannot make reliable projections of our future revenues and operating costs.

If we are able to generate sales, we may have to hire additional personnel to service our customers and to continue development of our technology. We may also have to incur additional marketing and overhead expenses. As a result of our lack of
historical sales, we cannot make reliable projections of the number of additional personnel we will require, the cost of employing those personnel, or the level of marketing and overhead expenses we will incur. We thus have no assurance that any
revenue we earn will be sufficient to cover the cost of earning that revenue, or to generate operating profits.

Because our work force is small, with only 2 full time people and 1 part time, employed either as officers, employees or contractors, we are vulnerable to the loss of key people or to rapid expansion.

We employ only 3 people (full and part-time) either as officers, employees or contractors. We try to employ people with skill sets that match the specific fields important to our business. As a result, the departure of a single person could
materially adversely affect our business. We do not have key man insurance on any of the people we employ.

Qualified technical personnel are in great demand in all high technology industries. Accordingly, it may be difficult for us to replace people who depart, or to hire additional people we may require if we are able to generate substantial sales.

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Because the market price of our common stock has been particularly volatile, purchasers of our common stock face a high degree of market risk.

The market price of our common stock has experienced extreme fluctuations. We believe that the fluctuations in our stock price have resulted primarily from market perceptions of the speculative value of our business opportunities. The susceptibility
of our stock price to fluctuation exposes purchasers of our stock to a high degree of risk.

Because we have generated no profits from inception to December 31, 2003, and our business has not been profitable with accumulated losses of $739,394 from inception to December 31, 2003, we may not be able to raise the additional capital we
need.

We will require additional capital to continue the development of our products, to pay the costs of marketing those products, or to cover operating losses until we are able to become profitable. As we have never generated operating profits or
significant sales revenue, we may not be able to raise the amount of capital we require.

Several other factors may also hinder our efforts to raise capital. They include the following:

- Our share price has been highly volatile during 2001, 2002 and 2003. The
    volatility of our share price may deter potential investors.
- Subsequent to the beginning of 2000, many technology companies have experienced
    financial difficulties and rapidly declining share prices. As a result, potential
    investors may be less willing to invest in technology companies generally.
- Subsequent to the beginning of 2000, capital markets have become tighter
    generally, with less financing available for technology companies.
- Capital markets have become tighter due to international tensions beginning
    on September 11, 2001.

Because we will have to raise additional capital through equity sales and in payment of expense and services, the interests of shareholders may be diluted.

To raise additional capital we may have to issue additional shares, which may dilute the interests of existing shareholders substantially. Alternatively, we may have to borrow large sums, and assume obligations to make substantial interest and
capital payments. We may also have to sell significant interests in some or all of our products. If we are able to raise additional capital, we cannot assure that it will be on terms that enhance the value of our common shares.

Because our stock may be subject to "low price stock" rules, the market for our stock may be limited.

The Securities and Exchange Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price less than $5.00. Our stock is presently covered by those rules, and may continue to be so. The
penny stock rules require broker-dealers to make a special suitability determination before selling our stock to investors who are not either regular customers or accredited investors. As a result, the potential market for our stock may be
limited.

ITEM 1.                DESCRIPTION
  OF BUSINESS

Our financial statements are presented in United States dollars, and dollar figures stated in this annual report refer to United States dollars (except where specified otherwise). As our head office is in Canada, many of our transactions are
completed in Canadian dollars ("C$"). For purposes of this annual report, other than amounts extracted from our financial statements, Canadian dollar amounts have been converted to United States dollars at an exchange rate of Cdn$1.00 = US$0.7135
being the average exchange rate during the year ended December 31, 2003.

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Business Development

Vancouver-based UltraGuard Water System Corp ("UltraGuard") or ("Company"), (formerly Service Systems International, Ltd.), through its previously owned subsidiary UV Systems Technology, Inc. ("UVS") are committed to a legacy of a healthy planet for
future generations through the development and commercialization of superior, cost-effective, environmentally friendly, ultraviolet-based water treatment products and systems.

For the period up to February 2002 we were the designer, manufacturer and marketer of state of the art ultraviolet disinfection systems for wastewater disinfection with additional application possibilities in potable water. During fiscal 2002 the
Company's business changed from a focus on wastewater disinfection to the purification of potable water using ultraviolet and filtration.

In fiscal 2002 our Company discontinued manufacturing of the wastewater products and entered into various agreements to change it business focus. The wastewater business was licensed to Clearwater Industries Ltd (See details in ITEM 6 
MANAGEMENTS DISCUSSIONS). The emphasis of our business remained in ultraviolet disinfection, however we now target drinking water with systems developed for low-flow drinking water application. The products currently developed and under development
are used to disinfect and filter water. The systems identified are, Point of Entry (POE) purification system, which is installed where the water enters the home, and Point of Use (POU) purification system, which is located at the faucet.

In December 2002 we entered an additional business segment; the manufacturing and marketing of a primary, alternative and emergency power generating Magnesium-Air power cell. Through a reverse acquisition concluded on December 31, 2002 UltraGuard
Water Systems Corp. ("UltraGuard") acquired all of the outstanding stock of Innovative Fuels Cell Technologies Inc ("IFCT"). UltraGuard issued 6,000,000 common shares to the shareholders of IFCT to acquire IFCT and its wholly owned Austrian
incorporated subsidiary UltraGuard Water Systems GmbH ("UG GmbH"). For accounting purposes the acquisition was treated as the acquisition of UltraGuard by IFCT with IFCT as the accounting acquirer (reverse acquisition). As a result, the historical
financial statements prior to the acquisition date are those of IFCT from September 30, 2002 (date of inception of IFCT). UltraGuard and IFCT, as at December 31, 2002, reverted to being a development stage Company.

IFCT is a Nevada corporation incorporated on September 30, 2002. IFCT is the holder of an option ("the Option Agreement") to purchase worldwide manufacturing and marketing rights to a 12-volt Magnesium-Air Semi Fuel Cell (Fuel Cell) from MagPower
Systems Inc. ("MagPower") for use with UltraGuard's Point of Use Ultraviolet Water Purification System and for ancillary uses such as lighting, radio and other low energy electrical needs.

As a condition of the Option Agreement, IFCT is required to sell a minimum quantity of 2000 Fuel Cell units in fiscal 2003. The drawings and technical information due from MagPower is still incomplete, therefore marketing efforts have not focus on
product sale. Using the services of strategically located consultants within developing countries have we have concentrated on product awareness.

The Company was incorporated in Nevada in August 1990 under the name Service Systems International Ltd and was inactive until eight Canadian and European individuals acquired it in July 1995. The investor's intent was to develop the Company into the
United States marketing arm of UV Systems Technology Inc., which was incorporated in British Columbia, Canada in 1993. The Company issued 1,600,000 shares of its restricted common stock ("Common Stock") to certain individual stockholders and one of
our officers, as repayment of cash paid to others for expenses related to the acquisition. On October 15,2002 the Company changed its name to UltraGuard Water Systems Corp.

Or offices are located at 914 Sherwood Avenue, Coquitlam British Columbia, Canada, V3K 1A6, our telephone number is (604) 540-8282 and our Internet website address is www.ultraguard.com. References in this
document to we, us, our, and the company include Innovative Fuel Cell Technologies Inc and UltraGuard Water Systems GmbH, unless the context otherwise requires. ULTRA GUARDR and "WAVY LINES & DESIGNS" logo are our registered
trademarks. Any other trademarks or trade names referred to in this document are the property of their respective owners. All monetary figures in the document are in United States dollars except Canadian dollars which are indicated as "C$".

To advance our marketing objectives in wastewater disinfection using ultraviolet, in September 1995 we entered into a marketing distribution agreement (embodying an earlier oral agreement) with UV Systems Technology Inc (UVS), for marketing rights
for the UltraGuardR system in eight US Western states. In July

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1996 we entered into a funding agreement with UVS. During this period, we structured an agreement with two principals and certain minority shareholders and exchanged common stock to acquire 50.69% of UVS. Under subsequent agreement with the two
principal shareholders Working Opportunity Fund and MDS Ventures Pacific, Inc, (49.39%), dated February 14, 2000 we acquired the remaining 49.31% of common stock and all outstanding preferred stock of UVS.

During 2002, the Company was unable to raise the additional funds necessary to continue the operations of UVS and with UVS liabilities exceeding assets by a significant amount, the board of directors and investors determined that by selling UVS the
Company could continue viable operations pursuing a new product focus (see Our Products). On December 31, 2002 the Company entered into various agreements for the disposition of UVS and the removal of the UVS debt and receivable carried on the
Company's financial statements. Manufacturing and marketing of the UVS technology had been discontinued by the Company and was licensed to Clearwater Industries in February 2002. The purchaser of UVS was 659999 BC Ltd, a corporation controlled by
two officers and directors of the Company. Terms of the sale included the transfer by UVS to the Company of all current and future revenue that may accrue as a result of the UVS technology, which was all revenue the Company could have accrued had it
not sold UVS. The intent of 659999 BC Ltd is to keep UVS inactive. Full details of these agreements are available on Form 8K filed with the SEC on January 15, 2003.

On December 31, 2002 the Company acquired through a reverse acquisition, 100 % of Innovative Fuel Cell Technologies Inc ("IFCT"), a Nevada Incorporated company, the holder of an option to purchase a worldwide license from MagPower Systems Inc
(MagPower) for their air magnesium fuel cell technology for use with the Company's point of use ultraviolet disinfection equipment. The purchase price in the option agreement was C$100,000 and 400,000 shares of the Company's common stock. Once the
option is exercised, MagPower is to provide the Company with the technical information necessary for the manufacture and sale of the air fuel cell battery (Fuel Cell). The Fuel Cell will provide the necessary power to operate ultraviolet
disinfection systems, lighting and ancillary equipment in areas of the world where no other forms of electrical power is available. The product has applications in remote areas of all countries worldwide. Applications in developing countries such as
Africa, some of the Middle East countries and China, where large numbers of the population are not serviced by an electrical grid and do not have a safe water supply, are market areas. The Company issued six million shares of its common stock to the
shareholders of IFCT for 100% of IFCT. Included in the IFCT assets was the Austrian Company, UltraGuard Water Systems GmbH ("GmbH). The incorporation of GmbH was made by IFCT in contemplation of its sale of IFCT to the Company. GmbH was set up to
manufacture and market Point of Use UV produces in Germany and the European Union Countries ("EU") to exploit the EU and other European markets potential. The market potential was increased when the European Commission recently brought in strict
guidelines ("EU Water Framework Directive"). Effective January 2004 member states must ensure that drinking water meets stringent guidelines to protect the quality of the water (both hot and cold) that consumers receive from their taps; the Point of
Use. In addition GmbH will manufacture the Fuel Cell products for the various world markets.

On March 14, 2003 the Company exercised the license for the Fuel Cell. The license agreement was signed between MagPower and the Company's wholly owned subsidiary, IFCT. The Company will pay C$102,500, and issue five hundred shares of the Company's
common stock. Payments terms were modified to reflect the delivery of technical information necessary to enable the Company to manufacture the Fuel Cell and additional rights of use. The terms of the signed license agreement included additional
rights of use of the fuel cell for ancillary services to power items such as lighting and other ancillary uses for which IFCT increased the cash payable by C$2,500 to a total amount of Cnd$102,500 and increased the number of Company shares that
would be paid by 100,000 to a total of 500,000. On signing, the Company paid C$5,000 and delivered 200,000 common shares of UltraGuard. The balance of the license fee was to be paid, C$5,000 on April 1, 2003; this payment was made on March 21, 2003
and 100,000 common shares of the Company due on May 1, 2003 were delivered. Payments due in the amount of C$7,500 on the first of each month thereafter until MagPower delivers the technical drawings and information for manufacturing, were not paid,
leaving a balance of C$88,800 unpaid. Subsequent to December 31, 2003 the Company and MagPower executed an amendment to the license agreement providing for the forgiveness of the outstanding balance owed to MagPower amounting to C$88,800 and
delivery to MagPower of the remaining 200,000 shares of the Company's stock in exchange for the granting of a sublicense to MagPower to purchase and sell the Company's ultraviolet water purification systems in combination with the Fuel Cell. The
territory covered by this amendment includes Africa, India, China, Afghanistan, Kazakhstan, Bangladesh, Pakistan, Malaya, Singapore, South Korea and Japan. The amendment includes the right for the Company to enter into any of these countries and
appoint sub-licensee if MagPower has not previously appointed sub-licensees.

Under the original license, minimum annual quantities of 2000 Fuel Cell units must be sold and a royalties of C$25.00 per Fuel Cell will be paid to MagPower based on number of units sold. Additional details of these acquisition transactions were
filed with the SEC on Form 8-K on January 14, 2003.

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OUR PRODUCTS

POINT OF USE AND POINT OF ENTRY

Our Point of Use (POU) and Point of Entry (POE) ultraviolet purification systems with or without filtration are used for the drinking water and water for human contact. The POE is attached to the water supply line at its entry point into a building;
the POU is attached under a sink directly in advance of the faucet. These products will meet the needs and requirements of the population of the North American marketplace. In Europe our Austrian company UltraGuard Water Systems GmbH is developing a
POU product for the specific and demanding requirements of the European market.

In December 2002 we acquired the rights to a magnesium-air fuel cell system developed by MagPower Systems Inc. The magnesium air fuel cells will be manufactured to the specifications and technical data to be furnished by the developer MagPower
Systems Inc. The magnesium air fuel cells provide greater safety and cost savings over the better-known hydrogen fuel cells. Both cell produce electricity through an electrochemical reaction but magnesium-based fuel cells are more environmentally
friendly, easier to recycle, more versatile and more efficient because they are simpler and safer.

Magnesium-Air Fuel Cells are cleaner; they support the global push for a sustainable environment. They are easily recycled, clean and consume no fossil fuels, produce no toxic emissions, thus reducing harmful greenhouse effects. To recharge the
cell, you basically remove the spent magnesium core, replace it with a new core and add salt or seawater electrolyte.

Magnesium-Air Fuel Cells are safer; the simple magnesium anode and natural electrolyte make this cell less combustible than a hydrogen fuel cell. Unlike hydrogen fuel cells, which use pure hydrogen, with magnesium-based fuel cells, no safety sealed
fuel storage is required, its fuel can be magnesium or magnesium-alloy. No special safety permits are required for transportation by plane. The magnesium-based fuel cell has an indefinite shelf life because the electrolyte can be removed before
storing the cell. When power is needed, the electrolyte is poured back into the cell. Electrolyte in a non-magnesium fuel cell, power generator or battery cannot be removed, stored and reused by the consumer. This sustainability provides a reliable
source of power for emergency situations.

The magnesium air fuel cell will be packaged with the UV POU and POE purification systems to provide a permanent or portable purification system for either temporary service application, emergency stand-by or for remote dwellings or villages where
electrical power is unavailable.

The UV disinfection system is sold under its registered trademark, UltraGuard® SLR System. The UltraGuard® system incorporates: 1) low-pressure, high intensity, high efficiency UV lamps, 2) infinitely variable
ultraviolet lamp controllers, 3) a patented high-performance reactor module, 4) patented flow-balanced weirs, and 5) an automatic quartz sheath cleaning system. Currently this product is primarily sold for municipal wastewater disinfection. However,
our UV technology can be applied to many treatment needs. These include industrial process water disinfection, potable water disinfection, and other fluid and air disinfection. UV disinfection systems have none of the safety issues with which
chlorination systems must deal. UV has the advantage of being relatively simple to operate and maintain. UV disinfection is a physical, rather than chemical process, using UV radiation to permeate bacterial and viral cell walls and prevent the cells
from replicating.

On January 26, 2001, we entered into a Strategic Alliance Agreement (and associated agreements) with US Filter's Wallace and Tiernan Products group (USFilter) to market our Ultra Guard® wastewater UV System in North, South and Central America
and the Caribbean, filed with the SEC on Form 8-K on February 27, 2001.

On February 5, 2002 we signed an agreement with Clearwater Technologies Inc wherein Clearwater agreed to assume the manufacturing for new UV projects. This agreement included Clearwater's requirements to supply these products to our Strategic
Alliance partner, USFilter and to adhere to the terms and conditions contained within the USFilter Strategic Alliance Agreement. AS well, Clearwater was required to provide warranty services on previously delivered UV products. The Company was to be
paid a royalty on sales, the percentage scaled upward as the total sale volume increases. Clearwater failed to live up to its commitment, failed to pay the Company funds owed and generally failed to perform its commitments under the USFilter
Strategic Alliance Agreement. In August 2003 USFilter terminated the Alliance Agreement (and associated agreements).

On July 23, 2003 UVS issued writ against Clearwater for recovery of amounts owing.

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MARKETING.

The Company's UV POU and POE purification systems will be marketed under the brand name UltraFlo and the fuel cell system will be brand named UltraCell. Our UltraFlo products will be sold through distributor companies and directly through our
website. An E-commerce marketing section to be setup within our website will permit retail users to purchase products and components directly. In addition, UltraCell products will be marketed through MagPower, under a recently amended license
agreement (on February 4, 2004), and by the Company through distributors to be setup in the various countries. Setting up the representative and distributor network for the UltraFlo and UltraCell products will be an ongoing process. Until MagPower's
development program on the fuel cell is complete, the signing up of distributors has been delayed. Until the fuel cell product becomes market ready in mid to late 2004 the Company's focus will be on identifying future distributors and promoting
awareness of the UltraCell product through consultants in strategic market locations. Strategic partners will be identified with whom we will form alliances. As well, home name brand distributors, large plumbing contractors, building developers, etc
will be approached to market the UltraFlo products.

In Korea, our wastewater product Licensee Vitzrosys manufactures exclusively for the Korean and non-exclusively for the Asian Market.

CUSTOMERS

The POE and POU UltraFlo UV purification system will be sold world wide, to a population, which has become very concerned about the safety of the water they consume.

Water quality is generally deteriorating worldwide. The UNESCO World Water Development Report states "disinfection at the point of use is consistently the most cost-effective intervention". With outbreaks of e-coli and other bacteria occurring in
the municipal water supply (Walkerton, Ontario), surface water and the aquifer, the population is becoming increasingly concerned that water needs special handling to make it safe. The occurrence of contaminates in the water supply (Giardia, and
Cryptosporidium cysts), which cannot be deactivated by chlorine give people cause for concern. Ultraviolet and filtration can deactivate or remove these cysts as well as bacteria and virus from drinking water, making it safe for consumption.
Concerns about the drinking water supply even in areas with municipal water treatments facilities, has driven consumers to bottled water, delivery water and home filtration. We believe these consumers are potential clients for the POE and POU
UltraFlo UV purification systems. UltraGuard Water Systems GmbH (now discontinued operations) was set up to manufacture the POU UltraFlo UV produces in Germany and market it the European Union Countries ("EU") to exploit the EU and other European
markets potential. The market potential was increased when the European Commission recently brought in strict guidelines ("EU Water Framework Directive"). Effective January 2004 member states must ensure that drinking water meets stringent
guidelines to protect the quality of both hot and cold water that consumers receive from their taps; the Point of Use.

In areas where electrical power is unavailable, the Magnesium-Air Power Cell (UltraCell) will provide a source of power to the population of the world's most remote areas. On the African continent, in countries such as South Africa the UltraFlo POU
purification systems in combination with the UltraCell we can provide safe, clean drinking water. In addition, the UltraCell will supply power to those remote areas for lighting and basic services such as radio, television and even computers. Any
area in the countries of the world where a reliably, full time electrical supply is unavailable or where natural or human caused disasters may interrupt the electrical power supply, can use the UltraCell as a full time or emergency standby power
source.

The Company competes with many other producers of UV equipment and other water treatment technologies, many of which are more established and have significantly greater resources. We compete with technologies currently in use, including
chlorination, ozonation, reverse osmosis and micro filtration. Competitive factors include system effectiveness, safety regulation costs, operational cost and practicality of application and potential adverse health effects. We are not unaware of
any competing technologies using fuel cells in conjunction with UV; nor are we aware of any magnesium air fuel cells in use to power ultraviolet systems, lighting and related services.

Our business is conducted from British Columbia, Canada. We are not subject to any special regulatory requirements above those that are applicable to businesses in general in Canada and the United States.

We are not aware of any regulations that would adversely affect our ability to market our products

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EMPLOYEES

As of December 31, 2003, the Company had three (3) full time employees. Two (2) of the full-time employees are engaged in management activities, and one (1) is engaged in office services.

ITEM 2.                DESCRIPTION
  OF PROPERTY

In September, 2003, the Company's executive offices were relocated to 914 Sherwood Avenue, Coquitlam, British Columbia. The premises have approx. 400 square feet of executive offices. Currently the company is leasing the existing space on a
month-to-month basis. No Insurance plans cover the contents.

ITEM 3.                LEGAL
  PROCEEDINGS

On October 20, 1998 a suit was filed in the Supreme Court of British Columbia by Thomas O'Flynn against Service Systems, Kenneth Fielding (Service Systems' President and Director), and Charles P Nield (a former Director and Vice President of the
Company). O'Flynn alleges that in April of 1996, he purchased shares of Service Systems' common stock based on a representation that they would be free trading in 40 days of "the filing of a prospectus". He further alleges that, in September of
1996, he purchased additional shares of common stock based on the representation that the shares would be free trading within 40 days of the common stock becoming free trading. O'Flynn alleges that the representation was a warranty and was
incorrect. He further alleges that he suffered a loss because the share price decreased while he was holding the shares. He seeks damages for breach of warranty, negligence, misrepresentation and breach of fiduciary duty. The amount claimed is not
specified. The Company filed an answer denying the claims and continues to actively defend the suit. Examination for discovery of Charles P Nield was conducted in June 1999, since then there has been no further activity.

On April 25, 2003, Chelverton Fund Limited filed a suit in the Supreme Court of British Columbia against the Company for non-payment of debt in the amount of $155,000. The Company entered an appearance and filed a defense against this claim and
attempted to negotiate a settlement. Chelverton filed additional information that supported their claim and the Company responded with a "no defines" position and judgment was issued in the amount of $193,944 (C$234,642) including interest and legal
costs On April 5, 2004 the Company appeared in Supreme Court to provide to Chelverton and the court, specific information pertaining to the Company's assets and its ability to pay the judgment including interest. The hearing was adjourned; the
Company will be required to provide additional detailed financial information.

On June 6th, 2003 a group of shareholders consisting of the original owners of Innovative Fuel Cell Technologies Inc (Shareholder Group) filed a consent resolution, which among other things elected a new slate of directors and revised the
company by-laws. The Company refused to accept the consent resolution or by-laws as in the opinion of the Company's legal counsel, the consent resolutions were not in accordance with Nevada Statutes or the filing requirements of Security and
Exchange Commission. At a directors meeting held June 9th, 2003, the Company elected two additional directors; Edward a White and Erin Strench to the Company board, bringing the total number of directors to five. On June 16, 2003 the
Shareholder Group filed for and obtained a temporary restraining order (TRO) against the Company and its five director prohibiting the Company from among other things, issuing stock, transferring assets, changing management and other actions that
would affect the status quo of the Company. In addition two shareholders issued writs against the four directors, alleging breach of fiduciary duty in respect of the issue of certain common shares to John Gaetz, Ken Fielding and others. On
June 24, 2003, in discussions between legal counsel for plaintiff, respondent and the hearing Judge; Judge Adams, the TRO was vacated and a date of July 2, 2003 was set for a new TRO hearing to be held in Reno, Nevada. At the July 2, 2003 TRO
hearing Judge Adams did not grant a TRO and requested the plaintiff and respondent file a series of three briefs outlining their position. The first brief was filed on July 11, 2003 by our counsel. The plaintiff responded on July 18, 2003 and our
counsel filed the final brief on July 25, 2003. The Company's counsel has responded to the various other suits filed against the Company and its directors. The Company had attempted during the second quarter to have these cases moved from Nevada
State court to federal court and in the third quarter we were advised that these cases would be heard in federal court. Subsequent to December 31, 2003, in March 2004 the Company's legal counsel filed to withdraw from the action as a result of
non-payment of legal fees. The court approved the withdrawal in two of the four cases. By April 29, 2004, the Plaintiff and the Defendant must file a proposed pre-trial order with the Federal Court, which upon approval, the Court will set down for
trial. In the interim the parties to this dispute are attempting to reach a settlement in all matters. The Company and the Directors have been attempting to settle this matter out of court and continues to make progress in that regard, expecting
that early in the second quarter the matter should be settled.

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

9

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PART II

ITEM 5.                MARKET
  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is traded in the over-the-counter market and is listed on the Over the Counter Bulletin Board under the symbol "UGRD.OB". The following table sets forth for the periods indicated the high and low bid prices of our common
stock as reported by the OTC-BB during each quarter. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions. The period from Fiscal Year 2001 up to September 30 of the
fiscal year 2002 shows share values before effect of a 1:50 reverse split, the last numbers in brackets shows values after effect of the 1:50 reverse split. All figures shown in the fiscal year ended December 31, 2003 are in actual values reported
by the OTC-BB.

|FISCAL YEAR 2001                       |             |   |             |   | 
|-------------------------------------- | ----------- | - | ----------- | - | 
|Quarter ended March 31,
      2001     | 0.33(16.50  | ) | 0.71(35.50  | ) | 
|Quarter ended June 30,
      2001      | 0.155 (7.75 | ) | 0.40 (20.00 | ) | 
|Quarter ended September
      30, 2001 | 0.12 (6.00  | ) | 0.27 (13.50 | ) | 
|Quarter ended December
      31, 2001  | 0.95 (47.50 | ) | 0.22 (11.00 | ) | 
|                                       |             |   |             |   | 
|FISCAL YEAR 2002                       |             |   |             |   | 
|Quarter ended March 31,
      2002     | 0.04(2.00   | ) | 0.15 (7.50  | ) | 
|Quarter ended June 30,
      2002      | 0.02(1.00   | ) | 0.05 (2.50  | ) | 
|Quarter ended September
      30, 2002 | 0.02(1.00   | ) | 0.04 (2.00  | ) | 
|*Quarter ended December
      31, 2002 | (0.30       | ) | (1.00       | ) | 
|*Post reverse split                    |             |   |             |   | 
|                                       |             |   |             |   | 
|FISCAL YEAR 2003                       |             |   |             |   | 
|Quarter ended March 31,
      2003     | 0.20        |   | 1.06        |   | 
|Quarter ended June 30,
      2003      | 0.07        |   | 0.70        |   | 
|Quarter ended September
      30, 2003 | 0.06        |   | 0.17        |   | 
|Quarter ended December
      31, 2003  | 0.06        |   | 0.16        |   | 

As of December 31, 2001 there were approximately 175 holders of record of the common stock.

Our authorized capital stock consists of 100,000,000 shares of common stock with a par vale of $0.001 per share. The holders of outstanding shares of our common stock are entitled to receive dividends out of assets legally available at times and in
amounts as the board of directors may from time to time determine. Holders of common stock are entitled to one vote per share on all matters on which the holders of common stock are entitled to vote. The common stock is not entitled to pre-emptive
rights and may not be redeemed or converted. Upon liquidation, dissolution or winding up, the assets legally available for distribution to our shareholders are divided among the holders of the common stock in proportion to the number of shares of
common stock held by each of them, after payments of all of our debts and liabilities.

The Company has never had profits and has never paid cash dividends on its common stock. It is our intention to retain future earnings, if any, to provide funds for business operations and, accordingly, we do not anticipate paying any cash dividends
on our common stock in the foreseeable future. However, we are under no restriction as to the payment of dividends.

OTHER COMMON STOCK SALES

During the quarter ended December 31, 2003 the Company issued the following shares for the listed consideration

|Date | Shares      | Residency | Consideration | Exemption
|---- | ----------- | --------- | ------------- | ---------
|     | Citizenship | Valued at |               |          

|Dec 4/03                        | 400,000   | US     | $40,000  | S-8*
|------------------------------- | --------- | ------ | -------- | ----
|Dec 5/03                        | 1,050,000 | Taiwan | $105,000 | S-8*
|*Registered on December 2, 2003 |           |        |          |     

ITEM 6.               
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS AND FINANCIAL CONDITION.

The following discussion and analysis should be read in conjunction with our
  consolidated financial statements and notes and the information included under
  the caption "Risk Factors"

10

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included elsewhere in this document. Except for historical information, the following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions and
our current beliefs regarding revenues we might earn if we are successful in implementing our business strategies. See "Special Note Regarding Forward-Looking Statements" for further information regarding forward-looking statements. Our actual
results may differ materially from the results discussed in the forward-looking statements as a result of a number of factors, many of which are beyond our control, including those factors discussed under "Risk Factors" and other headings in this
document, which could, among other things, cause the price of our common stock to fluctuate substantially.

As a result of the reverse takeover of Innovative Fuel Cell Technologies Inc. on December 31, 2003, the Company's status changed to that of a development stage company. Therefore consolidated balance sheets of UltraGuard Water Systems Corp and the
related consolidated statements of operations and cash flows and stockholders' equity, include operations for the period from September 30, 2002 (Date of Inception) to December 31, 2003.As a development stage company, we have generated total revenue
to December 31, 2003 of $32,669. This amount was received for royalty and UV component sales, unrelated to the fuel cell acquisition.

We have incurred aggregate net losses of approximately $739,394 million during the period from our inception on September 30, 2002 to December 31, 2003. We will likely continue to incur significant additional operating losses as marketing efforts
continue. Operating losses may fluctuate from quarter to quarter as a result of differences in the timing of expenses incurred and when revenue is recognized.

PLAN OF OPERATION

During fiscal 2004, we plan to continue product awareness marketing of the UltraGuard® fuel cell technology, the point of use and point of entry ultraviolet disinfection systems and filtration products. This marketing will be financed through
the sale of equity shares and with common stock issued for services.

BASIS OF PRESENTATION

The financial statements include accounts of Ultraguard Water Systems Corp. and its 100% owned subsidiary, Innovative Fuel Cell Technologies Inc.

Critical Accounting Policies and Changes to Existing Accounting Policies

On December 12, 2001, the Securities and Exchange Commission issued cautionary advice regarding the disclosure of critical accounting policies. Critical accounting policies are those that our management believes are both most important to the
portrayal of our financial condition and results, and that require difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that involve uncertainty.

We believe the "critical" accounting policies we use in preparation of our financial statements are as follows:

Revenue Recognition. Product sales are recognized at the time goods are shipped to customers. System and project revenue are recognized utilizing the percentage of completion method based upon materials installed and labour costs incurred.
All related costs including any contract revisions or changes are recognized in the period in which they occur.

UltraGuard recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition." Revenue will be recognized only when the price is fixed or determinable, persuasive evidence of
an arrangement exists, the service is performed, and collectibility is reasonably assured.

11

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Foreign currency

Translation of foreign currency transactions and balances:

Revenue, expenses and non-monetary balance sheet items in foreign currencies are translated into US dollars at the rate of exchange prevailing on the transaction dates. Monetary balance sheet items are translated at the rate prevailing at the
balance sheet date. The resulting exchange gain or loss is included in general and administration expenses.

In the years ended December 31, 2003 and December 31, 2002 inflation has had a limited impact on our operations. However, there can be no assurance that inflation will not have a material adverse effect on our results of operations in the future.

Quantitative and Qualitative Disclosures about Market Risk

As at December 31, 2003 we have not entered into or acquired financial instruments that have a material market risk. We have no financial instruments for trading or other purposes or derivative or other financial instruments with off balance sheet
risk. All financial assets and liabilities are due within the next twelve months and are classified as current assets or liabilities in the consolidated balance sheet provided with this annual report.

To December 31, 2003, the majority of our cash costs have been realized or incurred in Canadian dollars. To date we have not entered into foreign currency contracts to hedge against foreign currency risks between the Canadian dollar or other foreign
currencies and our reporting currency, the United States dollar. Generally.

RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003

The following selected financial data for the years ended December 31, 2001 through December 31, 2003 have been derived from the Company's audited consolidated financial statements. This information is provided to assist the reader in understanding
the discussion, which follows. For full information, the reader should refer to the audited consolidated financial statements and related notes for the periods discussed.

|                                                        |   |                     |   |   |              |   |   | (Restated-Note 11)  | 
|------------------------------------------------------- | - | ------------------- | - | - | ------------ | - | - | ------------------- | 
|                                                        |   | Accumulated from    |   |   |              |   |   | For the Period From | 
|                                                        |   | September 30,2002   |   |   | For the Year |   |   | September 30,2002   | 
|                                                        |   | (Date of Inception) |   |   | Ended        |   |   | (Date of Inception) | 
|                                                        |   | to December 31,     |   |   | December 31  |   |   | to December 31,     | 
|                                                        |   | 2003                |   |   | 2003         |   |   | 2002                | 
|                                                        |   | (Audited)           |   |   | (Audited)    |   |   | (Audited)           | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Project revenue                                         | $ | 32,699              |   | $ | 32,699       |   | $ | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Project costs                                           |   | 33,968              |   |   | 33,968       |   |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Gross profit from projects                              |   | (1,299              | ) |   | (1,299       | ) |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|General and administrative                              |   | 595,921             |   |   | 583,629      |   |   | 12,292              | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Imputed Interest                                        |   | -                   |   |   |              |   |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Provision for lawsuit losses                            |   | 27,000              |   |   | 27,000       |   |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Interest, net of interest income and interest recovered |   | 54,117              |   |   | 54,117       |   |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Foreign Exchange Loss                                   |   | 20,100              |   |   | 20,100       |   |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Loss on discontinued operations                         |   | 40,957              |   |   | 40,957       |   |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Net loss for the year                                   |   | 739,394             |   |   | 727,102      |   |   | 12,292              | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Loss per common and common equivalent share             | $ | (0.05               | ) | $ | (0.05        | ) | $ | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Total assets                                            |   | 148,183             |   |   | 63,699       |   |   | -                   | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Total liabilities                                       |   | 765,596             |   |   | 635,655      |   |   |                     | 
|                                                        |   |                     |   |   |              |   |   |                     | 
|Total stockholders' equity (deficit)                    |   | 617,413             |   |   | 571,956      |   |   |                     | 

12

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TWELVE-MONTH PERIOD - DECEMBER 31, 2003 COMPARED DECEMBER 31, 2002.

The Company operations and results reflect the reverse takeover effective
  December 31, 2003.Certain disclosures and financial statement amounts have been
  restated as of December 31, 2002 and 2003, previous years results are eliminated
  and therefore not available for comparison. The December 31, 2002 operating
  results are now those of IFCT from September 30, 2002 (Date of Inception) to
  December 31, 2002.

For the year ended December 31, 2002 net loss has been restated to decrease the loss from $657,617 to $12,292 and net loss per share has been restated to decrease the loss per share from $0.06 per share to nil.

For the year ended December 31, 2003 net loss has been restated to decrease the loss from $840,573 to $727,102 and net loss per share remained unchanged at $0.05 per share.

The balance sheets as at December 31, 2002 and 2003 were restated to remove $1,025,291 of capitalized manufacturing technology and the stockholders' equity section was revised to eliminate the stockholders' equity of UltraGuard. Previously reported
stockholders' equity as at December 31, 2002 of $453,335 has been reduced by $1,025,291 to a stockholders' deficit of $571,956 and the previously reported stockholders' equity as at December 31, 2003 of $407,878 has been reduced by $1,025,291 to a
stockholders' deficit of $617,413.

There was no change in stockholders' equity as a result of the reduced valuation of the warrants. Class "C" warrants were considered to have no value and thus annual charges of $113,470 were terminated as at December 31, 2002. The cash flow
statement for the fiscal year ended December 31, 2002 was restated accordingly and only certain disclosures were made for the year ended December 31, 2003.

Since IFCT was in the development stage these financial statements were revised to include certain required disclosures for Development Stage Enterprises pursuant to Statement of Financial Accounting Standard ("SFAS") No. 7 including accumulated
from inception disclosures for the statement of operations and cash flows and stockholders' equity. Notes 1, 3 and 4 have been significantly revised to reflect the reverse acquisition.

Revenues.For fiscal 2003, we reported revenues of $32,669.

Direct
  Project Costs.For fiscal 2003, we reported project costs of $33,968.

Gross
  Profit.For fiscal 2003, we reported gross loss of $1,299

General
  and Administrative Expense.For fiscal 2003, we reported expenses of $684,846.
  A $27,000 provision has been set up to cover the estimated possible loss to
  pay a claim made by a former employee for wrongful dismissal (See Note 9 in
  the Financial Statements). Interest expenses incurred primarily as interest
  on loans payable, amounted to $54,117. A foreign exchange loss of $20,100 was
  incurred as a result of losses due to a weakening US dollar as compared to the
  other currencies.

Discontinued Operations.For fiscal 2003, we reported$40,957 as a cost for discontinued operation incurred due to the closing of our Austrian operations. This was closed due to our inability to raise sufficient funds to cover its operational
expenses.

Net
  Loss for the Period.For fiscal 2003, we reported a net loss of $727,102.

Net
  Loss per Share.For fiscal 2003, we reported a net loss per share of ($0.05)

TWELVE-MONTH PERIOD - DECEMBER 31, 2002 COMPARED TO DECEMBER 31, 2001.

Due to the reverse takeover, fiscal 2002 and 2001 results have been eliminated through consolidation and are therefore not available for comparison..

The nature of our business may be expected to include a normal lag time between the incurring of operating expenses and the collection of contract receivables. In addition, we are dependent on sales by licensees for any royalty revenue and will
depend on sales from distributors, licensees and sales agents for product sales. For these and other reasons, we may experience periods of limited working capital and may be expected to require financing for working capital during those periods.

In addition, we will require financing over and above our current resources to sustain our operations and expand our marketing efforts. We cannot assure that the additional financing can be obtained on a timely

13

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basis, on terms that are acceptable or if at all.

Our cash position at December 31, 2003 was $1,834.

On February 25, 2004 we received $21,000 and on Mar 9, 2004 we received $13,000 from Elco Bank & Trust Company Ltd. These loans bear interest at 10%, are unsecured and due on December 21, 2004.

We expect that, during fiscal 2004, as and if sales increase, we will continue to depend on receipt of additional funds through public or private equity or debt sales or other lender financing, to fund the subcontract manufacturing of products sold,
and general operational and sales expenses. Except as previously indicated, no arrangements are currently in place to raise funds, although we actively continue to seek sources. Failure to receive these funds may be expected to have a material
adverse effect on our company.

During 2003 we financed our operations in part, from proceeds of sales of restricted common stock, loans from other and loans from related parties and shareholders of UVS.

14

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ITEM 7.                CONSOLIDATED
  FINANCIAL STATEMENTS

|Index to Consolidated Financial
      Statements              
|--------------------------------------------------------------
|                                                              
|Independent Auditors' Report                                  
|                                                              
|Consolidated Balance Sheets                                   
|                                                              
|Consolidated Statements of Operations                         
|                                                              
|Consolidated Statements of Cash
      Flows                   
|                                                              
|Consolidated Statement of Stockholders'
      Equity (Deficit)
|                                                              
|Notes to the Consolidated Financial
      Statements          

15

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| | Independent Auditors' Report
      To the Board of Directors and Stockholders of 
        UltraGuard Water Systems Corp. (A Development Stage Company)
      We have audited the accompanying consolidated balance
        sheets of UltraGuard Water Systems Corp. (A Development Stage Company)
        as of December 31, 2003 and 2002, and the related consolidated statements
        of operations and cash flows and stockholders' equity for the period from
        September 30, 2002 (Date of Inception) to December 31, 2003 and the period
        from September 30, 2002 (Date of Inception) to December 31, 2002 and the
        year ended December 31, 2003. These consolidated financial statements
        are the responsibility of the Company's management. Our responsibility
        is to express an opinion on these consolidated financial statements based
        on our audits.
      We conducted our audits in accordance with the Standards
        of the Public Company Accounting Oversight Board (United States). Those
        standards require that we plan and perform the audit to obtain reasonable
        assurance about whether the financial statements are free of material
        misstatement. An audit includes examining, on a test basis, evidence supporting
        the amounts and disclosures in the financial statements. An audit also
        includes assessing the accounting principles used and significant estimates
        by management, as well as evaluating the overall financial statement presentation.
        We believe that our audits provide a reasonable basis for our opinion.
      In our opinion, the consolidated financial statements
        referred to above present fairly, in all material respects, the financial
        position of UltraGuard Water Systems Corp. as of December 31, 2003 and
        2002, and the results of its operations and its cash flows and stockholders'
        equity for the period from September 30, 2002 (Date of Inception) to December
        31, 2003 and the period from September 30, 2002 (Date of Inception) to
        December 31, 2002 and the year ended December 31, 2003 in conformity with
        generally accepted accounting principles used in the United States of
        America.
      As discussed in Note 11, the Company changed its method
        of recording the acquisition of Innovative Fuel Cells Technologies Inc.
      The accompanying consolidated financial statements have
        been prepared assuming UltraGuard Water Systems Corp. will continue as
        a going concern. As discussed in Note 1 to the financial statements, UltraGuard
        Water Systems Corp. has not generated profitable operations since inception
        and has a working capital deficit of $697,178 as at December 31, 2003.
        These factors raise substantial doubt about UltraGuard Water Systems Corp.'s
        ability to continue as a going concern. Management's plans in regard to
        these matters are also discussed in Note 1. These financial statements
        do not include any adjustments, which might result from the outcome of
        this uncertainty.
      Chartered Accountants
        Vancouver, Canada
      April 8, 2004 except as to Note 11, which is as of September
        1, 2004 | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

16

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UltraGuard Water Systems Corp.
  (A Development Stage Company) 
  Consolidated Balance Sheets 
  (Expressed in US dollars)

|                                                                    | (Restated  Note 11) |   | (Restated  Note 11) |  
|------------------------------------------------------------------- | -------------------- | - | -------------------- | -
|                                                                    | December 31,         |   | December 31,         |  
|                                                                    | 2003                 |   | 2002                 |  
|                                                                    | $                    |   | $                    |  
|ASSETS                                                              |                      |   |                      |  
|                                                                    |                      |   |                      |  
|Current Assets                                                      |                      |   |                      |  
|                                                                    |                      |   |                      |  
|Cash and short-term
      investments                               | 1,834                |   | 40,206               |  
|Accounts receivable                                                 | 2,971                |   | 945                  |  
|Inventory and contract
      work in progress                       |                     |   | 6,638                |  
|Prepaid
      expenses and deposits                                 | 63,613               |   | 14,039               |  
|                                                                    |                      |   |                      |  
|Total Current Assets                                                | 68,418               |   | 61,828               |  
|                                                                    |                      |   |                      |  
|Property and Equipment (Note 4)                                     | 204                  |   | 286                  |  
|                                                                    |                      |   |                      |  
|Other Assets                                                        |                      |   |                      |  
|                                                                    |                      |   |                      |  
|Manufacturing
      Technology (Note 1)                             | 79,561               |   | 1,585                |  
|                                                                    |                      |   |                      |  
|Total Assets                                                        | 148,183              |   | 63,699               |  
|                                                                    |                      |   |                      |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                      |                      |   |                      |  
|                                                                    |                      |   |                      |  
|Current Liabilities                                                 |                      |   |                      |  
|                                                                    |                      |   |                      |  
|Accounts payable                                                    | 194,080              |   | 123,947              |  
|Accrued liabilities
      (Note 9(d))                               | 55,747               |   | 40,157               |  
|Wages and vacation
      pay payable                                | 3,004                |   | 1,621                |  
|Customer deposits                                                   |                     |   | 11,719               |  
|Loans payable (Note
      5)                                        | 310,542              |   | 439,124              |  
|Amounts
      owing to related parties (Note 6)                     | 202,223              |   | 19,087               |  
|                                                                    |                      |   |                      |  
|Total Current Liabilities                                           | 765,596              |   | 635,655              |  
|                                                                    |                      |   |                      |  
|Stockholders' Equity (Deficit)                                      |                      |   |                      |  
|                                                                    |                      |   |                      |  
|Common stock, (Note 7) $.001 par value,                             |                      |   |                      |  
|                                                                    |                      |   |                      |  
|100,000,000 shares
      authorized,                                |                      |   |                      |  
|                                                                    |                      |   |                      |  
|22,453,565 and 10,852,565
      issued respectively (21,453,565 and |                      |   |                      |  
|9,852,565
      outstanding respectively)                           | 22,454               |   | 10,853               |  
|                                                                    |                      |   |                      |  
|Additional paid-in
      capital                                    | 420,227              |   | (570,517             | )
|                                                                    |                      |   |                      |  
|Deferred compensation
      (Note 7(h))                             | (320,700             | ) |                     |  
|                                                                    |                      |   |                      |  
|Deficit Accumulated During the Development
      Stage              | (739,394             | ) | (12,292              | )
|                                                                    |                      |   |                      |  
|Total Stockholders' Equity (Deficit)                                | (617,413             | ) | (571,956             | )
|                                                                    |                      |   |                      |  
|Total Liabilities and Stockholders'
      Equity (Deficit)          | 148,183              |   | 63,699               |  
|                                                                    |                      |   |                      |  
|Contingencies (Notes 1 and 9)                                       |                      |   |                      |  
|Subsequent Events (Note 10)                                         |                      |   |                      |  

(See Accompanying Notes to the Consolidated Financial Statements)

17

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UltraGuard Water Systems Corp.
  (A Development Stage Company) 
  Consolidated Statements of Operations  
  (Expressed in US dollars)

|                                                              |                     |   |              |   | (Restated  Note 11) | 
|------------------------------------------------------------- | ------------------- | - | ------------ | - | -------------------- | 
|                                                              | Accumulated from    |   |              |   | For the Period from  | 
|                                                              | September 30, 2002  |   | For the Year |   | September 30, 2002   | 
|                                                              | (Date of Inception) |   | Ended        |   | (Date of Inception)  | 
|                                                              | to December 31,     |   | December 31, |   | to December 31,      | 
|                                                              | 2003                |   | 2003         |   | 2002                 | 
|                                                              | $                   |   | $            |   | $                    | 
|                                                              |                     |   |              |   |                      | 
|Project Revenue                                               | 32,669              |   | 32,669       |   |                     | 
|                                                              |                     |   |              |   |                      | 
|Project Costs                                                 | 33,968              |   | 33,968       |   |                     | 
|                                                              |                     |   |              |   |                      | 
|Total Gross Profit (Loss)                                     | (1,299              | ) | (1,299       | ) |                     | 
|                                                              |                     |   |              |   |                      | 
|Expenses                                                      |                     |   |              |   |                      | 
|                                                              |                     |   |              |   |                      | 
|Foreign exchange loss                                         | 20,100              |   | 20,100       |   |                     | 
|General and administrative                                    | 595,921             |   | 583,629      |   | 12,292               | 
|Interest                                                      | 54,117              |   | 54,117       |   |                     | 
|Provision
      for lawsuit (Note 9(d))                       | 27,000              |   | 27,000       |   |                     | 
|                                                              |                     |   |              |   |                      | 
|Total Expenses                                                | 697,138             |   | 684,846      |   | 12,292               | 
|                                                              |                     |   |              |   |                      | 
|Net Loss from Operations                                      | 698,437             |   | 686,145      |   | 12,292               | 
|                                                              |                     |   |              |   |                      | 
|Other:                                                        |                     |   |              |   |                      | 
|                                                              |                     |   |              |   |                      | 
|Loss
      from discontinued operations (Note 1)              | 40,957              |   | 40,957       |   |                     | 
|                                                              |                     |   |              |   |                      | 
|                                                              | 40,957              |   | 40,957       |   |                     | 
|                                                              |                     |   |              |   |                      | 
|Net Loss for the Year                                         | 739,394             |   | 727,102      |   | 12,292               | 
|                                                              |                     |   |              |   |                      | 
|Net Loss per Share                                            |                     |   | (0.05        | ) |                     | 
|                                                              |                     |   |              |   |                      | 
|Weighted Average Number of Shares Outstanding after           |                     |   |              |   |                      | 
|giving retroactive effect to the reverse acquisition (Note 1) |                     |   | 15,863,000   |   | 10,853,000           | 

(Diluted loss per share has not been presented as the result is anti-dilutive.)

(See Accompanying Notes to the Consolidated Financial Statements)

18

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UltraGuard Water Systems Corp.
  (A Development Stage Company) 
  Consolidated Statements of Cash Flows  
  (Expressed in US dollars)

|                                                     |                     |   |              |   | (Restated  Note 11) |  
|---------------------------------------------------- | ------------------- | - | ------------ | - | -------------------- | -
|                                                     | Accumulated from    |   |              |   | For the Period from  |  
|                                                     | September 30, 2002  |   | For the Year |   | September 30, 2002   |  
|                                                     | (Date of Inception) |   | Ended        |   | (Date of Inception)  |  
|                                                     | to December 31,     |   | December 31, |   | to December 31,      |  
|                                                     | 2003                |   | 2003         |   | 2002                 |  
|                                                     | $                   |   | $            |   | $                    |  
|                                                     |                     |   |              |   |                      |  
|Cash Flows From Operating Activities                 |                     |   |              |   |                      |  
|                                                     |                     |   |              |   |                      |  
|Net Loss                                             | (739,394            | ) | (727,102     | ) | (12,292              | )
|                                                     |                     |   |              |   |                      |  
|Adjustments to reconcile
      net loss to cash      |                     |   |              |   |                      |  
|                                                     |                     |   |              |   |                      |  
|Depreciation and amortization                        | 82                  |   | 82           |   |                     |  
|Foreign exchange                                     | 20,100              |   | 20,100       |   |                     |  
|Shares issued for consulting and legal services      | 392,162             |   | 392,162      |   |                     |  
|Shares issued for related party compensation         | 81,120              |   | 81,120       |   |                      |  
|Loan interest accrued                                | 49,126              |   | 49,126       |   |                     |  
|Accrual of related party wages                       | 24,319              |   | 24,319       |   |                     |  
|                                                     |                     |   |              |   |                      |  
|Change in non-cash
      working capital items       |                     |   |              |   |                      |  
|                                                     |                     |   |              |   |                      |  
|(Increase) in accounts receivable                    | (2,037              | ) | (2,025       | ) | (12                  | )
|Decrease in inventory and contract work in progress  | 6,638               |   | 6,638        |   |                     |  
|(Increase) in prepaid expenses and deposits          | (39,574             | ) | (39,574      | ) |                     |  
|Increase in accounts payable, accrued liabilities,   |                     |   |              |   |                      |  
|wages and vacation
      pay payable and customers'  |                     |   |              |   |                      |  
|deposits                                             | 93,741              |   | 79,852       |   | 13,889               |  
|                                                     |                     |   |              |   |                      |  
|Net Cash From (Used in) Operating Activities         | (113,717            | ) | (115,302     | ) | 1,585                |  
|                                                     |                     |   |              |   |                      |  
|Cash Flows Used in Investing Activities              |                     |   |              |   |                      |  
|                                                     |                     |   |              |   |                      |  
|Manufacturing
      technology acquired              | (8,361              | ) | (6,776       | ) | (1,585               | )
|                                                     |                     |   |              |   |                      |  
|Net Cash Used in Investing Activities                | (8,361              | ) | (6,776       | ) | (1,585               | )
|                                                     |                     |   |              |   |                      |  
|Cash Flows From Financing Activities                 |                     |   |              |   |                      |  
|                                                     |                     |   |              |   |                      |  
|Cash received in reverse
      acquisition           | 2,410               |   |             |   | 2,410                |  
|Proceeds from loans                                  | 159,298             |   | 121,502      |   | 37,796               |  
|Repayment
      of loans                             | (37,796             | ) | (37,796      | ) |                     |  
|                                                     |                     |   |              |   |                      |  
|Net Cash Provided by Financing Activities            | 123,912             |   | 83,706       |   | 40,206               |  
|                                                     |                     |   |              |   |                      |  
|Increase (Decrease) in Cash                          | 1,834               |   | (38,372      | ) | 40,206               |  
|                                                     |                     |   |              |   |                      |  
|Cash - Beginning of the Period                       |                    |   | 40,206       |   |                     |  
|                                                     |                     |   |              |   |                      |  
|Cash - End of the Period                             | 1,834               |   | 1,834        |   | 40,206               |  
|                                                     |                     |   |              |   |                      |  
|Non-Cash Investing and Financing Activities:         |                     |   |              |   |                      |  
|                                                     |                     |   |              |   |                      |  
|Shares issued for
      manufacturing technology     | 71,200              |   | 71,200       |   |                     |  
|Shares issued to settle
      debt and loans payable | 137,163             |   | 137,163      |   |                     |  
|                                                     |                     |   |              |   |                      |  
|Supplementary Information                            |                     |   |              |   |                      |  
|                                                     |                     |   |              |   |                      |  
|Cash paid for interest                               | 4,991               |   | 4,991        |   | 856                  |  
|Cash paid for income
      taxes                     |                    |   |             |   |                     |  

(See Accompanying Notes to the Consolidated Financial Statements)

19

---

UltraGuard Water Systems Corp.
  (A Development Stage Company)
  Consolidated Statement of Stockholders' Equity (Deficit) 
  From September 30, 2002 (Date of Inception) to December 31, 2003
  (Expressed in US dollars)

|                                                                                     |            |   |        |   |            |   |              |   | Deficit     |   |          |  
|------------------------------------------------------------------------------------ | ---------- | - | ------ | - | ---------- | - | ------------ | - | ----------- | - | -------- | -
|                                                                                     |            |   |        |   |            |   |              |   | Accumulated |   |          |  
|                                                                                     |            |   |        |   | Additional |   |              |   | During the  |   |          |  
|                                                                                     | Issued     |   | Common |   | Paid In    |   | Deferred     |   | Development |   |          |  
|                                                                                     | Shares     |   | Stock  |   | Capital    |   | Compensation |   | Stage       |   | Total    |  
|                                                                                     | #          |   | $      |   | $          |   | $            |   | $           |   | $        |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Balance  September 30, 2002 (Date of Inception)                                     |           |   |       |   |           |   |             |   |            |   |         |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Stock issued for subscription                                                        | 6,000,000  |   | 6,000  |   | (6,000     | ) |             |   |            |   |         |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Adjustments for reverse acquisition (Note 1)                                         |            |   |        |   |            |   |              |   |             |   |          |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|-  elimination of shares of Innovative Fuel Cell Technologies,
      Inc. ("IFCT")   | (6,000,000 | ) | (6,000 | ) | 6,000      |   |             |   |            |   |         |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|-  add shares issued to shareholders of IFCT to effect
      reverse acquisition     | 6,000,000  |   | 6,000  |   |           |   |             |   |            |   | 6,000    |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|-  add issued shares of UltraGuard Water Systems Corp.
      for the net liabilities |            |   |        |   |            |   |              |   |             |   |          |  
|assumed by IFCT at net book value                                                    | 4,852,565  |   | 4,853  |   | (570,517   | ) |             |   |            |   | (565,664 | )
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Net loss for the period                                                              |           |   |       |   |           |   |             |   | (12,292     | ) | (12,292  | )
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Balance  December 31, 2002                                                          | 10,852,565 |   | 10,853 |   | (570,517   | ) |             |   | (12,292     | ) | (571,956 | )
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Issuance of shares for MagPower License Agreement                                    | 400,000    |   | 400    |   | 70,800     |   |             |   |            |   | 71,200   |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Issuance of shares for consulting expenses                                           | 5,575,000  |   | 5,575  |   | 639,287    |   |             |   |            |   | 644,862  |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Issuance of shares for legal expenses                                                | 600,000    |   | 600    |   | 67,400     |   |             |   |            |   | 68,000   |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Issuance of shares for related party compensation                                    | 2,400,000  |   | 2,400  |   | 78,720     |   |             |   |            |   | 81,120   |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Issuance of shares for debt                                                          | 70,000     |   | 70     |   | 6,383      |   |             |   |            |   | 6,453    |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Issuance of shares for West Peak Security Loss                                       | 1,556,000  |   | 1,556  |   | 129,154    |   |             |   |            |   | 130,710  |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Issuance of shares for notes receivable                                              | 1,000,000  |   | 1,000  |   | 99,000     |   |             |   |            |   | 100,000  |  
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Less: funds not yet received                                                         |           |   |       |   | (100,000   | ) |             |   |            |   | (100,000 | )
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Deferred compensation                                                                |           |   |       |   |           |   | (320,700     | ) |            |   | (320,700 | )
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Net loss for the year                                                                |           |   |       |   |           |   |             |   | (727,102    | ) | (727,102 | )
|                                                                                     |            |   |        |   |            |   |              |   |             |   |          |  
|Balance, December 31, 2003                                                           | 22,453,565 |   | 22,454 |   | 420,227    |   | (320,700     | ) | (739,394    | ) | (617,413 | )

(See Accompanying Notes to the Consolidated Financial Statements)

20

---

|1. | Reverse Acquisition, Nature of Operations and Continuance
        of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | On December 31, 2002 ("the acquisition date"), UltraGuard
        Water Systems Corp. ("UltraGuard") acquired all of the outstanding stock
        of Innovative Fuels Cell Technologies Inc ("IFCT"). UltraGuard issued
        5,000,000 common shares to the shareholders of IFCT to acquire IFCT and
        its wholly-owned Austrian incorporated subsidiary UltraGuard Water Systems
        GmbH ("UG GmbH"). UltraGuard also issued 1,000,000 common shares to UG
        GmbH as part of the transaction. These shares are considered treasury
        shares and are not outstanding. For accounting purposes the acquisition
        was treated as the acquisition of UltraGuard by IFCT with IFCT as the
        accounting acquirer (reverse acquisition). As a result, the historical
        financial statements prior to the acquisition date are those of IFCT from
        September 30, 2002 (date of inception of IFCT). See Note 3 for Operations
        of UltraGuard prior to the reverse acquisition. UltraGuard and IFCT, as
        at December 31, 2002, reverted back to being a development stage Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | IFCT is a Nevada corporation incorporated on September
        30, 2002. IFCT is the holder of an option ("the Option Agreement") to
        purchase worldwide manufacturing and marketing rights to a 12-volt Magnesium-
        Air Semi Fuel Cell (Fuel Cell) from MagPower Systems Inc. ("MagPower")
        for use with UltraGuard's Point of Use Ultraviolet Water Purification
        System and for ancillary uses. IFCT was assigned the Option Agreement
        on October 1, 2002 from a related party. The only cost incurred by the
        related party was a Cnd$2,500 down payment for the Option Agreement. A
        balance owing of Cnd$97,500 is payable and 400,000 shares of UltraGuard
        is to be issued to complete the Option Agreement. On March 14, 2003, a
        License Agreement was executed between MagPower and IFCT. The terms of
        the License Agreement included additional rights to use the Fuel Cell
        for ancillary services to power items such as lighting and radio. As consideration
        for the additional rights, IFCT increased the option payments to be made
        to Cnd$100,000 and increased the number of common shares of UltraGuard
        to be issued to 500,000. On March 6, 2003, UltraGuard issued 400,000 shares
        into trust subject to certain criteria. On signing of the License Agreement
        IFCT paid Cnd$5,000 and delivered 200,000 common shares of UltraGuard
        to the vendors of MagPower. An additional Cnd$5,000 was paid on March
        21, 2003 for the payment due on April 1, 2003. Commencing on May 1, 2003,
        Cnd$7,500 was due and unpaid, however delivery of additional 100,000 common
        shares of UltraGuard was made on May 1, 2003. The remaining balance is
        due on the first of each month thereafter until MagPower delivers the
        technical drawings at a rate of Cnd$7,500 per month; and Cnd$15,000 per
        month thereafter until the full amount has been paid. Concurrent with
        the receipt of the technical drawings from the vendor, the remaining 200,000
        common shares of UltraGuard will be delivered (100,000 common shares from
        trust and 100,000 common shares from treasury). The payments due from
        May 1, 2003 monthly through September 30, 2003 amounting to Cnd$25,000
        were not paid as at December 31, 2003. On February 2, 2004, UltraGuard
        and MagPower amended the agreement to sublicense to MagPower, in certain
        countries in the world, UltraGuard's ultraviolet products for sale and
        use by MagPower (or its sublicenses) with MagPower's magnesium fuel cell.
        As well, the February 2, 2004 agreement provided for issuance and delivery
        of the remaining 200,000 common shares (100,000 common shares from trust
        and 100,000 common shares from treasury), and cancellation by MagPower
        of the remaining C$88,800 owing by UltraGuard and IFCT as a condition
        of the License Agreement.
|  
|   | As a condition of the Option Agreement, IFCT was
        required to sell a minimum quantity of 2000 Fuel Cell units in fiscal
        2003. The drawings and technical information due from MagPower is still
        incomplete, therefore marketing efforts have not concentrated on product
        sale but on product awareness. The license will be amortized on a straight-line
        basis over five years once the option agreement has been completed. Royalties
        of C$25.00 per cell will be paid to MagPower based on number of units
        sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | The total consideration paid for the License Agreement
        as at December 31, 2003 was $79,561, which includes the value of 400,000
        common shares being $71,200.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | These consolidated financial statements have been
        prepared in accordance with United States generally accepted accounting
        principles, on a going concern basis, which contemplates the realization
        of assets and the satisfaction of liabilities and commitments in the normal
        course of business. As at December 31, 2003, the Company has not recognized
        significant revenue, has a working capital deficit of $697,178, and has
        accumulated operating losses of $739,394 since inception of IFCT being
        September 30, 2002. The continuation of UltraGuard and IFCT is dependent
        upon the continuing financial support of creditors and stockholders and
        obtaining short-term and long-term financing, the completion of product
        development and achieving profitability. These conditions raise substantial
        doubt about UltraGuard's and IFCT's ability to continue as a going concern.
        These financial statements do not include any adjustments that might arise
        from this uncertainty.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

21

---

|1. | Reverse Acquisition, Nature of Operations
        and Continuance of Business (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | During fiscal 2003, due to lack of finances,
        UltraGuard and IFCT discontinued its operation in Europe and closed UG
        GmbH and will concentrate its efforts on the North American market where
        its UV products and fuel cell products will be manufactured through subcontractors
        and will be marketed in North America through the Internet, wholesalers
        and sales representatives. A loss from discontinued operations of $40,957
        was charged to operations. Included in this loss is a write off of an
        intercompany loan between UltraGuard and UG GmbH of $11,230. There were
        no other assets or liabilities included in the loss from discontinued
        operations.                                                                                                                                                                                                                                                                                        
|  
|   | See Note 10, Subsequent Events, for loan
        proceeds of $34,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | Consolidated financial statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | These financial statements include the
        accounts of UltraGuard. IFCT (a Nevada Corporation) and IFCT's Austrian
        based UltraGuard Water Systems GmbH (UG GmbH). The operations of UG GmbH
        were discontinued during fiscal 2003. All significant intercompany transactions
        and balances have been eliminated and costs of the closing of UG GmbH
        have been recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | On December 31, 2002 ("the acquisition
        date"), UltraGuard Water Systems Corp. ("UltraGuard") acquired all of
        the outstanding stock of Innovative Fuels Cell Technologies Inc ("IFCT").
        UltraGuard issued 5,000,000 common shares to the shareholders of IFCT
        to acquire IFCT and its wholly-owned Austrian incorporated subsidiary
        UltraGuard Water Systems GmbH ("UG GmbH"). UltraGuard also issued 1,000,000
        common shares to UG GmbH as part of the transaction. These shares are
        considered treasury shares and are not outstanding. For accounting purposes
        the acquisition was treated as the acquisition of UltraGuard by IFCT with
        IFCT as the accounting acquirer (reverse acquisition). As a result, the
        historical financial statements prior to the acquisition date are those
        of IFCT from September 30, 2002 (date of inception of IFCT). See Note
        3 for Operations of UltraGuard prior to the reverse acquisition.
|  
|   | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | Cash and cash equivalents include cash
        on hand, in banks and all highly liquid investments with maturity of three
        months or less when purchased. Cash equivalents are stated at cost, which
        approximates market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   | Property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | Property and equipment are recorded at
        cost. Depreciation is computed on a straight-line method using an estimated
        useful life of five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | Product sales are recognized at the time
        goods are shipped by customers. System and project revenue are recognized
        utilizing the percentage of completion method based upon materials installed
        and labour costs incurred. All related costs including any contract revisions
        or changes are recognized in the period in which they occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   | UltraGuard recognizes revenue in accordance
        with Securities and Exchange Commission Staff Accounting Bulletin No.
        104 ("SAB 104"), "Revenue Recognition." Revenue will be recognized only
        when the price is fixed or determinable, persuasive evidence of an arrangement
        exists, the service is performed, and collectibility is reasonably assured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | Estimates and assumptions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | The preparation of financial statements
        in conformity with generally accepted accounting principles used in the
        United States requires management to make estimates and assumptions that
        affect the reported amounts of assets and liabilities in the financial
        statements and accompanying notes. Actual results could differ from these
        estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | Foreign currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

22

---

|2. | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   | Basic and Diluted Net Income (Loss)
        Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | UltraGuard computes net income (loss)
        per share in accordance with SFAS No. 128, "Earnings per Share". This
        statement requires presentation of both basic and diluted earnings per
        share (EPS) on the face of the income statement. Basic EPS is computed
        by dividing net income (loss) available to common shareholders (numerator)
        by the weighted average number of common shares outstanding (denominator)
        during the period. Diluted EPS gives effect to all dilutive potential
        common shares outstanding during the period including stock options, using
        the treasury stock method, and convertible preferred stock, using the
        if- converted method. In computing Diluted EPS, the average stock price
        for the period is used in determining the number of shares assumed to
        be purchased from the exercise of stock options or warrants. Diluted EPS
        excludes all dilutive potential common shares if their effect is anti
        dilutive.                                                                                                                                     
|  
|   | Accounting for Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | UltraGuard accounts for stock based compensation
        in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation."
        This statement requires that stock awards granted subsequent to January
        1, 1995, be recognized as compensation expense based on their fair value
        at the date of grant. Alternatively, a company may account for granted
        stock awards under Accounting Principles Board Opinion (APB) No. 25, "Accounting
        for Stock Issued to Employees," and disclose pro forma income amounts
        which would have resulted from recognizing such awards at their fair value.
        UltraGuard has elected to account for stock- based compensation for employees
        under APB No. 25 and make the required pro forma disclosures for compensation
        expense in accordance with SFAS No. 123. UltraGuard accounts for stock
        issued for services to non-employees in accordance with SFAS No. 123.
        Compensation expense is based on the fair market value of the stock award
        or fair market value of the goods and services received whichever is more
        reliably measurable.
|  
|   | Comprehensive Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   | SFAS No. 130, "Reporting Comprehensive
        Income," establishes standards for the reporting and display of comprehensive
        loss and its components in the financial statements. As at December 31,
        2003, UltraGuard has no items that represent comprehensive loss and, therefore,
        has not included a schedule of comprehensive loss in the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | SFAS No. 144, "Accounting for the Impairment
        or Disposal of Long-Lived Assets" establishes a single accounting model
        for long-lived assets to be disposed of by sale including discontinued
        operations. SFAS 144 requires that these long-lived assets be measured
        at the lower of the carrying amount or fair value less cost to sell, whether
        reported in continuing operations or discontinued operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | UltraGuard's financial instruments consist
        of cash, prepaid expenses, accounts payable, accrued liabilities, advances
        from related and non-related parties. Unless otherwise noted, it is management's
        opinion that UltraGuard is not exposed to significant interest, currency
        or credit risks arising from these financial instruments. The fair value
        of cash, accounts payable and accrued liabilities, advances from related
        parties and other advances approximates their carrying value due to the
        immediate or short-term maturity of these financial instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   | Concentration of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | Financial instruments that potentially
        subject UltraGuard to credit risk consist principally of cash. Cash was
        deposited with a high credit quality institution.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

23

---

|2. | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   | In December 2003, the United States Securities and
        Exchange Commission issued Staff Accounting Bulletin No. 104, "Revenue
        Recognition" (SAB 104), which supersedes SAB 101, "Revenue Recognition
        in Financial Statements." The primary purpose of SAB 104 is to rescind
        accounting guidance contained in SAB 101 related to multiple element revenue
        arrangements, which was superseded as a result of the issuance of EITF
        00-21, "Accounting for Revenue Arrangements with Multiple Deliverables."
        While the wording of SAB 104 has changed to reflect the issuance of EITF
        00-21, the revenue recognition principles of SAB 101 remain largely unchanged
        by the issuance of SAB 104. The adoption of SAB 104 did not have a material
        impact on UltraGuard's financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | In May 2003, the FASB issued SFAS No. 150, "Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and Equity". SFAS No. 150 establishes standards for how an issuer classifies
        and measures certain financial instruments with characteristics of both
        liabilities and equity. It requires that an issuer classify a financial
        instrument that is within its scope as a liability (or an asset in some
        circumstances). The requirements of SFAS No. 150 apply to issuers' classification
        and measurement of freestanding financial instruments, including those
        that comprise more than one option or forward contract. SFAS No. 150 does
        not apply to features that are embedded in a financial instrument that
        is not a derivative in its entirety. SFAS No. 150 is effective for financial
        instruments entered into or modified after May 31, 2003, and otherwise
        is effective at the beginning of the first interim period beginning after
        June 15, 2003, except for mandatory redeemable financial instruments of
        non-public entities. It is to be implemented by reporting the cumulative
        effect of a change in an accounting principle for financial instruments
        created before the issuance date of SFAS No. 150 and still existing at
        the beginning of the interim period of adoption. Restatement is not permitted.
        The adoption of this standard is not expected to have a material effect
        on UltraGuard's results of operations or financial position.
|  
|   | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | UltraGuard has adopted the provisions of FASB's
        SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires that
        deferred taxes reflect the tax consequences on future years of differences
        between the tax bases of assets and liabilities and their financial reporting
        amounts. At the date of adoption of SFAS 109, there was no material effect
        on UltraGuard's financial statements. As of December 31, 2003 UltraGuard
        has accumulated net operating losses in Canada and the United States available
        to offset future taxable income as scheduled below                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|Losses    | Expiration
|--------- | ----------
|$         | Date      
|240,000   | 2011      
|202,000   | 2012      
|650,000   | 2013      
|152,000   | 2014      
|444,000   | 2015      
|517,000   | 2016      
|688,000   | 2017      
|479,000   | 2018      
|3,372,000 |           

| | Pursuant to SFAS 109 UltraGuard is required to compute
        tax asset benefits for net operating losses carried forward. If total
        losses were recognized, UltraGuard would receive a tax benefit of $1,146,000.
        The potential benefit of net operating losses has not been recognized
        in the financial statements because UltraGuard cannot be assured that
        it is more likely than not that it will utilize the net operating losses
        in future years, therefore, a valuation allowance of $1,146,000 has been
        recognized. The tax asset and valuation allowance was $163,000 in 2002
        (2001 - $234,000).
      Loss Contingencies
      UltraGuard estimates a loss from a loss contingency
        in accordance with Financial Accounting Standards ("SFAS" No. 5 "Accounting
        for Contingencies". UltraGuard accrues the loss by a charge to income
        when there is information available that it is probable that an asset
        has been impaired or a liability has been incurred and the amount of the
        loss can be reasonably estimated.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---

|2. | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Goodwill and Other Intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | In July 2001, the Financial Accounting Standards
        Board ("FASB") issued statement of Financial Accounting Standards No.
        142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is effective
        for fiscal years beginning after December 15, 2001. SFAS 142 prohibits
        the amortization of goodwill and intangible assets with indefinite useful
        lives but requires that these assets be reviewed for impairment at least
        annually or on an interim basis if an event occurs or circumstances change
        that could indicate that their value has diminished or been impaired.
        Other intangible assets will continue to be amortized over their estimated
        useful lives. In addition, the standard includes provisions for the reclassification
        of certain existing recognized intangibles as goodwill, reassessment of
        the useful lives of existing recognized intangibles, reclassification
        of certain intangibles out of previously reported goodwill and the identification
        of reporting units for purposes of assessing potential future impairments
        of goodwill.                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|3. | Operations of UltraGuard Prior to Reverse Acquisition
        with IFCT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | Up to February 2002 UltraGuard focused its activities
        on the manufacturing and marketing of its Ultra Guard® ultra violet
        based patented water treatment system through its wholly owned Canadian
        subsidiary, UV Systems Technology Inc. ("UVS"). These products and systems
        were sold primarily for municipal waste disinfection, treatment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | During the period from acquiring UVS in August 1996
        to February 2002, operating activities had not generated profitability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | On February 5, 2002, UltraGuard reached an agreement
        with the Clearwater Group ("Clearwater") to assume the UVS manufacturing
        responsibilities of any new Ultra Guard® water treatment systems to
        be supplied to UVS's strategic alliance partner, US Filter. Clearwater
        would also provide warranty services on any previously sold Ultra Guard®
        water treatment systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   | During fiscal 2002, UltraGuard commenced designing
        and developing the home use Point of Use and Point of Entry UV disinfection
        systems for drinking water. Point of Use systems are installed under a
        sink; Point of Entry units are installed at the water supply entry into
        the building. This UV product may include dual filtration cartridges in
        advance of the UV system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | At a special meeting held on November 15, 2002 UltraGuard
        reorganized. Its shares were consolidated on a 1:50 basis; the authorized
        capital increased to 100,000,000 shares and the name was changed to UltraGuard.
        In December 2002, UltraGuard divested itself of the UVS operations while
        retaining any royalty or other revenues that may be received from the
        sale or use of the UVS patented Ultra Guard® technology.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | The debt load being carried by UltraGuard as a result
        of the UVS operations were impairing UltraGuard's ability to obtain investment
        funds or make any other financing arrangements. On December 30, 2002,
        the Company disposed of its 100% owned asset, UVS. Under the terms of
        these agreements, UltraGuard sold 100% of the shares of UVS to 659999
        BC Ltd, a Canadian private company, in exchange for the transfer and assignment
        to UltraGuard of all outstanding and future royalties from Clearwater
        Technologies Inc ("Clearwater") and any other rights UVS may have under
        the License Agreement, which covered the UltraGuard® patents and technology.
        UVS entered into this Licence Agreement with Clearwater on February 5,
        2002. No value was placed on this agreement. Full details of these Agreements
        between UVS and 659999 BC Ltd were filed with the Securities and Exchange
        Commission on Form 8-K dated January 15, 2003. Clearwater has failed to
        pay funds due under the various agreements, which they signed and had
        refused to pay any of the required payments. A writ of summons was issued
        against Clearwater in July 2003 in specific amounts totalling C$774,366
        plus additional amounts for failure to perform, demand for return of leased
        equipment and cancellation of the Joint Venture Agreements. Clearwater
        has filed a defence against all claims. UltraGuard is continuing to pursue
        this action.
|  
|   | See Note 1 for UltraGuard's reverse acquisition
        with IFCT.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|4. | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | Property and equipment is stated at cost less accumulated
        depreciation and reflects the residual value as at December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                |       |              | December 31, | December 31,
| | ------------------------------ | ----- | ------------ | ------------ | ------------
| |                                |       |              | 2003         | 2002        
| |                                |       | Accumulated  | Net Book     | Net Book    
| |                                | Cost  | Depreciation | Value        | Value       
| |                                | $     | $            | $            | $           
| |                                |       |              |              |             
| | Office furniture and equipment | 5,533 | 5,329        | 204          | 286         

25

---

|5. | Loans Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|6. | Amounts Owing to Related Parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | These amounts, totalling $202,223, represent
        unpaid wages and consulting for two officer/directors in the amount of
        $68,074, which are due on demand, unsecured and non-interest bearing and
        include an amount of $130,712 plus accrued interest of $3,437 due to Ken
        Fielding as a result of actions taken discussed in Note 5. Imputed interest
        on previous non-interest bearing related party loans totalled $31,928
        which was recorded as donated capital, calculated at 10% per annum. In
        fiscal 2003, two officers/directors were issued 2,400,000 shares of common
        restricted stock of UltraGuard at $0.0338 per share totalling $81,120
        for partial payment of wages.
|  
|7. | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   | (a) Private Placement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | On September 25, 2003, pursuant to a private
        placement, UltraGuard issued 1,100,000 common shares at $.09091 per share
        for a $100,000 promissory note and interest. The note is non-interest
        bearing and due on December 29, 2003. If the note is not paid then the
        shares will be cancelled and returned to UltraGuard. Subsequent to December
        31, 2003, UltraGuard agreed to extend the note to September 29, 2004.                                                                                                                                                                                                                                                                                        
|  
|   | (b) Warrants outstanding as at December
        31, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | On October 3, 2000, 3,000,000 Class C
        warrants were issued pursuant to a Strategic Alliance and other agreements
        with US Filter's Wallace and Tiernan Products Group, a wholly owned subsidiary
        of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

26

---

|7. | Common Stock (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | U.S. Filter ("US Filter") to market and
        sell under license UltraGuard's UltraGuard® ultraviolet disinfection
        technology for water and wastewater applications. The value of the 3,000,000
        Class C Warrants issued totalled $656,700. In June 2001, UltraGuard entered
        into a funding agreement with US Filter/Wallace and Tiernan Products Group.
        As a term of the funding agreement, the warrant exercise price on the
        above                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   | 3,000,000 warrants was reduced to $0.24
        per share. The expiry date of these warrants was changed to October 3,
        2010. In addition, 5,105,000 Class C warrants were issued with an exercise
        price of $0.24 per share and an expiry date of October 3, 2010. These
        additional warrants were issued because of certain funding criteria being
        met. The value of the 5,105,000 Class C warrants issued totalled $478,000.
        An annual amount of $113,470 was being charged to operations prior to
        the reverse acquisition. As a result of the 1:50 Reverse Split, the total
        number of C warrants were reduced to 162,100 with an exercise price of
        $12.00 per share. As a result of the reverse acquisition and the 1:50
        Reverse Split, these warrants were considered to have no value to the
        reorganized operation given the increase in exercise price significantly
        above fair value of the common shares and the new direction of the Company.
        As a result, no amount was charged to operations during fiscal 2003. On
        August 27, 2003 US Filter terminated the Strategic Alliance Agreement
        for defaults under the terms of the Agreement including failure of Clearwater
        to enter into a transfer agreement.
|  
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |  |                   |              |                | Weighted      
| |  | ----------------- | ------------ | -------------- | --------------
| |  |                   |              |                | Average       
| |  |                   | Shares       | Weighted       | Remaining Life
| |  |                   | Under Option | Average Option | of Options    
| |  |                   | #            | Price $        | (Months)      
| |  | December 31, 2002 |             |               |              
| |  | Granted           | 125,000      | .13            |               
| |  | December 31, 2003 | 125,000      | .13            | 32            

| |  | The fair value of the employee's purchase rights under
        SFAS 123 was estimated using the Black-Scholes model with the following
        assumptions on the above granted options: risk free interest rate was
        5%, expected volatility of 100%, an expected life of 3 years and no expected
        dividends.
      These options were granted for services provided, or
        to be provided, to UltraGuard. Statement of Financial Accounting Standards
        No. 123 ("SFAS 123") requires that an enterprise recognize, or at its
        option, disclose the impact of the fair value of stock options and other
        forms of stock based compensation in the determination of income. UltraGuard
        has elected under SFAS 123 to continue to measure compensation cost on
        the intrinsic value basis set out in APB Opinion No. 25. As options are
        granted at exercise prices based on the market price of UltraGuard's shares
        at the date of grant, no compensation cost is recognized. However, under
        SFAS 123, the impact on net income and income
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

---

|7. | Common Stock (continued)
|-- | ------------------------
|  
|   |                         
|  
|   |                         
|  
|   |                         

| |  |                                                               | Year ended |   | Year ended  
| |  | ------------------------------------------------------------- | ---------- | - | ------------
| |  |                                                               | December   |   |             
| |  |                                                               | 31,        |   | December 31,
| |  |                                                               | 2003       |   | 2002        
| |  |                                                               | $          |   | $           
| |  |                                                               |            |   |             
| |  | Net loss                                                      |            |   |             
| |  | As reported                                                   | (840,573   | ) | 12,292      
| |  | Stock
      Based Compensation  as reported                  | 113,470    |   |            
| |  | Stock Based compensation
       determined under fair market |            |   |             
| |  | value                                                         | (115,500   | ) |            
| |  | Pro forma                                                     | (842,603   | ) | 12,292      
| |  |                                                               |            |   |             
| |  | Basic net loss per share                                      |            |   |             
| |  | As
      reported                                             | (.05       | ) |            
| |  | Pro forma                                                     | (.05       | ) |            



| | (e) | Independent Contractor/Consulting Agreement Plan                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     | On June 11, 2003 UltraGuard registered and issued
        1,500,000 shares on Form S-8 to three consultants for product marketing
        consulting expenses.                                                                                                                                                                                                                                                    
|
| | (f) | Long-Term Equity Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                   
|
| |     | UltraGuard has allotted 100,000 shares pursuant
        to a Long-Term Equity Incentive Plan.                                                                                                                                                                                                                                                                                                                     
|
| | (g) | Legal Services Plan                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     | On March 24, 2003 UltraGuard filed a Form S-8 POS
        with the SEC, which cancelled the Plan and all remaining shares.                                                                                                                                                                                                                                                                                        
|
| | (h) | Valuation of Common Stock Issued for Services                                                                                                                                                                                                                                                                                                                                                                     
|
| |     | The Company applies EITF 96-18 "Accounting for Equity
        Instruments that are Issued to Other Than Employers for Acquiring, or
        in Conjunction with Selling, Goods or Services", in accounting for shares
        issued to consultants. The value of these shares were based on calculating
        the fair market value of the stock determined by the stock price of the
        underlying stock.
|
| |     | During fiscal 2003 UltraGuard issued the following
        common shares for consulting and legal services.                                                                                                                                                                                                                                                                                                       

| |  |                                                                           |           |  | Weighted    |  |           
| |  | ------------------------------------------------------------------------- | --------- |  | ----------- |  | ----------
| |  |                                                                           |           |  | Average     |  |           
| |  |                                                                           |           |  | Fair Market |  |           
| |  |                                                                           | Shares    |  | Value       |  | Total     
| |  |                                                                           | Issued    |  | Per Share   |  | Fair Value
| |  |                                                                           | #         |  | $           |  | $         
| |  | Consulting for services to be provided                                    |           |  |             |  |           
| |  |                                                                           |           |  |             |  |           
| |  | Pursuant
      to the incentive plan (Note 7(c))                          | 1,050,000 |  | 0.10        |  | 105,000   
| |  |                                                                           |           |  |             |  |           
| |  | Pursuant
      to 2003 Employee Benefit plan (Note 7(d))                  | 1,800,000 |  | 0.13        |  | 239,400   
| |  |                                                                           |           |  |             |  |           
| |  | Pursuant
      to Independent Contractor/Consulting Agreement (Note 7(e)) | 1,500,000 |  | 0.13        |  | 195,000   

28

---

| |  | Not
      pursuant to any plan                           | 850,000   |  | 0.10 |  | 85,000 
| |  | -------------------------------------------------------- | --------- |  | ---- |  | -------
| |  |                                                          |           |  |      |  |        
| |  | Consulting for past services                             |           |  |      |  |        
| |  |                                                          |           |  |      |  |        
| |  | Pursuant
      to 2003 Employee Benefit plan (Note 7(d)) | 75,000    |  | 0.14 |  | 10,322 
| |  |                                                          |           |  |      |  |        
| |  | Not pursuant to any plan                                 | 300,000   |  | 0.03 |  | 10,140 
| |  |                                                          | 5,575,000 |  |      |  | 644,862
| |  | Legal                                                    |           |  |      |  |        
| |  |                                                          |           |  |      |  |        
| |  | Pursuant
      to the incentive plan (Note 7(c))         | 400,000   |  | 0.12 |  | 48,000 
| |  |                                                          |           |  |      |  |        
| |  | Pursuant to 2003 Employee Benefit
      plan (Note 7(d)) | 200,000   |  | 0.10 |  | 20,000 
| |  |                                                          |           |  |      |  |        
| |  |                                                          | 6,175,000 |  | 0.12 |  | 712,862



|   |                                                                                                                                                                                                                                                                                                                                                                   | The terms of some of the agreements for future services
        are in excess of one year and have various expiry dates. As a result $392,162
        has been charged to operations as consulting and legal expenses and the
        balance of $320,700 has been charged to shareholders' equity as deferred
        compensation.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|8. | Segmented Information                                                                                                                                                                                                                                                                                                                                            
|  
|   | The business of UltraGuard is carried
        on in one industry segment (see Note 1).                                                                                                                                                                                                                                                                           
|  
|   | UltraGuard and IFCT currently operate
        in two geographic segments. The United States operations only consist
        of costs associated with debt and equity financing and being a public
        company. As a result of the disposition of UVS, (see Note 3) UltraGuard
        and IFCT now operate in one business segment and one geographical area.

| |         | Year ended        |  |         
| | ------- | ----------------- |  | --------
| |         | December 31, 2003 |  |         
| |         |                   |  | United  
| |         | Canada            |  | States  
| |         | $                 |  | $       
| | Revenue |                  |  | 32,669  
| | Expense |                  |  | 832,285 
| | Loss    |                  |  | (799,616

| |                           | As of             |         | As of            
| | ------------------------- | ----------------- | ------- | -----------------
| |                           | December 31, 2003 |         | December 31, 2002
| |                           |                   | United  |                  
| |                           | Canada            | States  | Europe           
| |                           | $                 | $       | $                
| |                           |                   |         |                  
| | Identifiable assets       |                  | 68,622  |                 
| | Manufacturing  technology |                  | 79,561  |                 
| | Total assets              |                  | 148,183 |                 

|9. | Legal Proceedings/Contingency Accrual
|-- | -------------------------------------
|  
|   | (a)                                  

29

---

|9.  | Legal Proceedings/Contingency Accrual (continued)
|--- | -------------------------------------------------
|    |                                                  
|    | (b)                                              
|    |                                                  
|    | (c)                                              
|    |                                                  
|    | (d)                                              
|    |                                                  
|10. | Subsequent Events                                

|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | On February 25, 2004 775,000 common shares were
        issued to a consultant for marketing services for a fair market value
        of $77,500. The shares were based on the calculation of the fair market
        value of the shares determined by the price of the underlying stock.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | On February 12, 2004 $21,000 and on March 9, 2004
        $13,000 was received from Elco Bank & Trust Company. These loans bear
        interest at 10%, are unsecured and are due on December 31, 2004.                                                                                  
|   
|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Refer to Note 1 to an amendment of the License Agreement
        that occurred on February 2, 2004.                                                                                                                                                                                       
|   
|11. | Restatements
        It was determined that the acquisition of Innovative Fuel Cell Technologies,
          Inc. ("IFCT") was a reverse acquisition of UltraGuard instead of an
          acquisition of IFCT by UltraGuard as previously reported and the Class
          "C" warrants were considered to have no value and thus annual charges
          of $113,470 were terminated as at December 31, 2002. Certain disclosures
          and financial statement amounts have been restated as of December 31,
          2002 and 2003. The December 31, 2002 operating results are now those
          of IFCT from September 30, 2002 (Date of Inception) to December 31,
          2002. For the year ended December 31, 2002 net loss has been restated
          to decrease the loss from $657,617 to $12,292 and net loss per share
          has been restated to decrease the loss per share from $0.06 per share
          to nil. For the year ended December 31, 2003 net loss has been restated
          to decrease the loss from $840,573 to $727,102 and net loss per share
          remained unchanged at

30

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|11. | Restatements (continued)$0.05 per share. The
        balance sheets as at December 31, 2002 and 2003 were restated to remove
        $1,025,291 of capitalized manufacturing technology and the stockholders'
        equity section was revised to eliminate the stockholders' equity of UltraGuard.
        Previously reported stockholders' equity as at December 31, 2002 of $453,335
        has been reduced by $1,025,291 to a stockholders' deficit of $571,956
        and the previously reported stockholders' equity as at December 31, 2003
        of $407,878 has been reduced by $1,025,291 to a stockholders' deficit
        of $617,413. There was no change in stockholders' equity as a result of
        the reduced valuation of the warrants. The cash flow statement for the
        fiscal year ended December 31, 2002 was restated accordingly and only
        certain disclosures were made for the year ended December 31, 2003. Since
        IFCT was in the development stage these financial statements were revised
        to include certain required disclosures for Development Stage Enterprises
        pursuant to Statement of Financial Accounting Standard ("SFAS") No. 7
        including accumulated from inception disclosures for the statement of
        operations and cash flows and stockholders' equity. Notes 1, 3 and 4 have
        been significantly revised to reflect the reverse acquisition.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31

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ITEM 8.                CHANGES
  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

PART III

ITEM 9.                DIRECTORS,
  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The Executive Officers and Directors of the Company are as follows:

|Name                | Position                                                               
|------------------- | -----------------------------------------------------------------------
|                    |                                                                        
|Kenneth E. Fielding | Director, President, and President of UV Systems Technology,
      Inc.
|                    |                                                                        
|John R. Gaetz       | Director, Secretary-Treasurer and Vice-President of Finance
      (CFO)
|                    |                                                                        
|Edward A White      | Director                                                               
|                    |                                                                        
|Erin Strench        | Director                                                               

Kenneth E. Fielding has served as a Director and President of the Company
  since June 1995 and as president of UVS since December 1996. He is also, and
  has been since 1976, the president of Alliance Installations Electrical Contractors
  Ltd., an inactive industrial electrical construction contractor which until
  January 1996 provided electrical systems for schools, hospitals, institutions,
  warehouses, restaurants and commercial installations. Mr. Fielding is devoting
  his full time to management and operations of Service Systems. In addition to
  the administrative position with our company, Mr. Fielding has overall responsibility
  for UVS as president. Mr. Fielding holds an Electrical Contractor's license
  with the Province of British Columbia and a journeyman electrician designation
  form the BC Institute of Technology.

John R. Gaetz has served as a Director, Secretary-Treasurer and Chief Financial
  Officer since June 15, 1997, and as a Director, Vice president, and Secretary
  of UVS since August 1995, positions he held in UVS' predecessor, UV Waterguard
  Systems Ltd. since 1990.

Edward White Mr. White is a Chartered Accountant in public practice until
  2001 during which time he had extensive involvement with publicly traded companies.
  After sale of the accounting practice, Mr. White accepted a full time position
  as CFO, Treasurer and Director, with an OTC-BB public company

Erin Strench was appointed as a Director on June 9, 2003. Mr. Strench has
  worked as manager and owner of a number of successful electrical and electronic
  firm, currently manages a multi-branch electrical contacting firm.

The Board of Directors has no standing committees. The Board of Directors
  is responsible for nominating a proposed slate of Directors for each year to
  stand for election at the annual shareholders meeting. We have no provision
  for recommendation by shareholders of nominees for Director.

Members of the Board of Directors, by virtue of their position, owe a fiduciary
  duty to our company. However, in accordance with Nevada law, the Company has
  provided in Article XI of its Articles of Incorporation (i) that contracts and
  acts with another corporation are not affected by the fact that a Director has
  a pecuniary or other interest in or is a director or officer of the other corporation
  and (ii) that a Director may be a party to or interested in a contract or transaction
  with our company if the interest has been disclosed to the Board or the Board
  knows of the interest before a vote is taken on the contract or transaction.
  As of December 31, 2003 we had no such contracts or transactions with any Director
  or corporation in which a Director had an interest.

The Company or its subsidiary Innovative Fuel Cell Technologies Inc employ
  the Executive Officers of the Company full-time. See "Executive Compensation."

32

---

Based solely upon a review of Forms 3, 4 and 5 and their amendments, furnished
  under Rule 16a-3(a) of the Securities Exchange Act of 1934 during our most recent
  fiscal year and written representations from persons required to file those
  Forms, all Directors and Officers filed all reports required by Section 16(a)
  of the Act.

The following table sets forth an overview of compensation for the fiscal
  years ended December 31, 1999 and 2000 and for the transition period from August
  31, 2000 to December 31, 2000 to the Chief Executive Officer and each of the
  Company's other Executive Officers whose total compensation exceeded $100,000

|                         | SUMMARY COMPENSATION TABLE |            |           |              |            |           
|------------------------ | -------------------------- | ---------- | --------- | ------------ | ---------- | ----------
|(a)                      | (b)                        | (c)        | (d)       | (e)          | (f)        | (g)       
|Name and                 |                            |            |           | Other        | Restricted | Securities
|Principal                |                            |            |           | Annual       | Stock      | Underlying
|Position                 |                            |            |           | Compensation | Award(s)   | Options   
|                         | Year                       | Salary ($) | Bonus ($) | ($)          | ($)        | SARs)     
|                         |                            |            |           |              |            |           
|Ken Fielding, President, | 2001                       | $112,329*  | 0         | 0            | 0          | 0         
|CEO and President        | 2002                       | $36,927    | 0         | 0            | 0          | 0         
|                         | 2003                       | $75,618**  | 0         | 0            | $40,560    | 25,000shrs
|                         |                            |            |           |              |            |           
|John R Gaetz             | 2003                       | $50,851**  | 0         | 0            | $40,560    | 25,000shrs
|Secretary/Treasurer      |                            |            |           |              |            |           
|CFO                      |                            |            |           |              |            |           

*Accrued
  87,329 
             ** Including
  restricted stock award $40,560 
             Salaries accrued
  in fiscal 2001 & 2002 were forgiven in fiscal 2002 
  Twenty-five thousand (25,000) options were granted to the named executives officer
  during the 2003 fiscal year at an exercise price of $0.13 .

COMPENSATION OF DIRECTORS

We do not compensate Directors for their service as such, although we do reimburse
  reasonable expenses incurred by them in conducting the Company's directors meetings.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

We have no employment agreements with our Executive Officers, nor do we have
  agreements respecting termination of employment or change-in-control. We expect
  to enter into employment agreements with Executive Officers in the foreseeable
  future, but have not begun negotiation of those agreements. Mr. Fielding and
  Mr. Gaetz are the only Executive Officers receiving compensation.

ITEM 11.                SECURITY
  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
  ownership of common stock, as of December 31, 2003 and December 31, 2002 of
  (i) each person known to own beneficially more than 5% of our Common Stock,
  (ii) each Director of the Company, (iii) each of the Company's Executive Officers,
  and (iv) all Officers and Directors as a group. Except as otherwise noted, the
  Company believes that the persons listed below have sole investment and voting
  power with respect to the Common Stock owned by them.

33

---

|                                      | DECEMBER 31, 2003 |     | DECEMBER 31, 2002 | 
|------------------------------------- | ----------------- | --- | ----------------- | 
|                                      |                   |     |                   | 
|NAME AND ADDRESS                      | SHARES            |     | PERCENT           | 
|OF BENEFICIAL                         | BENEFICIALLY      |     | OF CLASS          | 
|                                      | OF CLASS          |     |                   | 
|                                      |                   |     |                   | 
|OWNER (1)                             | OWNED (2)         |     |                   | 
|                                      |                   |     |                   | 
|Kenneth E. Fielding                   | 2,753,104         | (1) | 11.7%             | 
|John R. Gaetz                         | 2,748,221         | (2) | 11.7%             | 
|Edward A White                        | 125,000           | (3) | .005%             | 
|Erin Strench                          | 125,000           | (4) | .005%             | 
|                                      |                   |     |                   | 
|All officers and directors as a group | 5,701,325         |     | 23.41%            | 
|                                      |                   |     |                   | 

The address for all shareholders is in care of the Company at 914 Sherwood
  Avenue Coquitlam, British Columbia, Canada V3K 1A6

A person is deemed to be the beneficial owner of securities that can be acquired
  by that person within 60 days from the date of this Annual Report upon exercise
  of options or warrants. Each beneficial owner's percentage ownership is determined
  by assuming that options or warrants that are held by that person and that are
  exercisable within 60 days from the date of this Annual Report have been exercised.

Post Reverse Split shares are presented in brackets

| | (1) | Includes, (140) shares of these shares owned by Mr.
        Fielding's minor daughter and 25,000 stock option shares Mr. Fielding
        has the right to acquire at a price of $0.13 under an immediately exercisable
        option. All warrants previously held were cancelled by agreement with
        Mr. Fielding in fiscal 2002.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | 25,000 stock option shares Mr. Gaetz has the right
        to acquire at a price of $0.13 under an immediately exercisable option.
        All preceding warrants were cancelled by agreement with Mr.                                                                                                                                    
|
| |     | Gaetz in fiscal 2002.                                                                                                                                                                                                                                                                                                                     
|
| | (3) | 25,000 stock option shares Mr. White has the right
        to acquire at a price of $0.13 under an immediately exercisable option                                                                                                                                                                                                         
|
| | (4) | 25,000 stock option shares Mr. Strench has the right
        to acquire at a price of $0.13 under an immediately exercisable option                                                                                                                                                                                                       

ITEM 12.                CERTAIN
  RELATIONSHIPS AND RELATED TRANSACTIONS

Since the acquisition of the Company by the investor group in 1995 until December
  31, 2001, the following Directors, Executive Officers, and greater than 5% shareholders,
  have made loans to us (including loan to UVS) for additional working capital;
  John R Gaetz, $266,618 and Ken Fielding $250,974. In Fiscal 2002, John R Gaetz
  and Ken Fielding agreed to transfer to UV Systems Technology Inc., all funds
  except $46,386.87 owed to them by the Company, prior to UV Systems Technology
  Inc.'s sale in December 2002. This transfer had the effect of forgiving these
  loans to the Company.

In July 1996, John Gaetz purchased for cash 20,000(400) shares of Common stock
  and 20,000(400) warrants for Common Stock in a private offering at a cost of
  $0.75( $37.50) per share. In April 1998, John Gaetz purchased for cash 341,037(6,821)
  shares of Common stock and 341,037(6,281) warrants for Common Stock in a private
  offering at a cost of $0.20( $10.00) per share, the market price on that date
  was $0.18( $9.00) . All warrants have now expired.

In connection with UltraGuard acquisition in 1996 of UVS in exchange for their
  UVS shares, our common stock was issued to: Kenneth Fielding (a Director and
  Executive Officer) 11,257(225) shares; John Gaetz (a Director and Executive
  Officer), 600,000(12,000) shares and 600,00(12,000) warrants for Common Stock;
  In addition, common stock was issued to adult relatives of Mr. Gaetz: his wife,
  C.A. Gaetz, 33,700(674) shares; his brother, F. Gaetz, 901(18) shares; his brother,
  Jim G. Gaetz, 4,503(90) shares; and his daughter, L.L. Alentejano, 5,629(113)
  shares. All warrants have now expired.

34

---

In April 1998, Ken Fielding purchased for cash 1,243,445(24,869) shares of
  Common stock and 1,243,445(24,869) warrants for Common Stock in a private offering
  at an exercise price of $0.20( $10.00) per share. The market price on that date
  was $0.18(9.00) . These warrants have now expired.

In April 1998, options for 150,100(2,102) shares of Common Stock were granted
  to each of Kenneth Fielding and John Gaetz, at an option price of $0.15( $7.50)
  . The market price on the date of grant was $0.18( $9.00) . These options have
  now expired

In December 2002, Ken Fielding and John Gaetz each purchased 1,500,000 shares
  of Common stock at $0.101 per share. The market price on that date was $0.30.

In June 2003, Ken Fielding and John Gaetz were granted 1,200,000 shares each
  of Common stock at $0.338 per share for partial payment salary and were provided
  options to purchase 25,000 shares each at an exercise price of $0.13 per share.
  The market price on that date was $0.13.

35

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ITEM 13.                EXHIBITS
  AND REPORTS ON FORM 8-K

(a) Exhibits (exhibit reference numbers refer to Item 601 of Regulation SB)

|Exhibit Number | Description                                                                                                                       | Method of Filing | 
|-------------- | --------------------------------------------------------------------------------------------------------------------------------- | ---------------- | 
|               |                                                                                                                                   |                  | 
|(3)(i)         | Articles of Incorporation                                                                                                         | (1)              | 
|               |                                                                                                                                   |                  | 
|(3)(ii)        | Bylaws, as amended                                                                                                                | (2)              | 
|               |                                                                                                                                   |                  | 
|(10)(iii)      | Agreement between Douglas Sommerville and Company
      dated 12/6/96                                                             | (3)              | 
|               |                                                                                                                                   |                  | 
|(10)(iv)       | Agreement between John Gaetz  and the Company
      dated 12/6/96                                                                 | (4)              | 
|               |                                                                                                                                   |                  | 
|(10)(v)        | Sample Agreement among minority  Shareholders
      of UV Systems  Technology, Inc. and the Company  each dated 2/28/97           | (5)              | 
|               |                                                                                                                                   |                  | 
|(10)(vi)       | Marketing Distribution Agreement  Between
      UV Systems Technology, Inc.  and the Company                                      | (2)              | 
|               |                                                                                                                                   |                  | 
|(10)(vii)      | Sales Representation Agreement between UV Systems
      Technology, Inc. and "The Representative"                                 | (2)              | 
|               |                                                                                                                                   |                  | 
|(10)(viii)     | Exclusive Distributorship Agreement Between UV
      Waterguard Systems, Inc. and Chiyoda Kohan Co., Ltd., and NIMAC Corporation. | (2)              | 
|               |                                                                                                                                   |                  | 
|(10)(ix)       | 1997 Stock Option Plan                                                                                                            | (4)              | 
|               |                                                                                                                                   |                  | 
|(10)(x)        | Interim Funding Agreement between UVS, MDS and
      WOF                                                                          | (5)              | 
|               |                                                                                                                                   |                  | 
|(10)(xi)       | Letter Agreement between the Company and Elco
      Bank and Trust Company Limited                                                | (5)              | 
|               |                                                                                                                                   |                  | 
|(10)(xii)      | Loan Agreement between the Company and TD Bank                                                                                    | (6)              | 
|               |                                                                                                                                   |                  | 
|(10)(xiii)     | The Company's 1999 Long-Term Equity Incentive
      Plan                                                                          | (7)              | 
|               |                                                                                                                                   |                  | 
|(10)(xiv)      | Letter Agreement between Service Systems, UVS,
      MDS and WOF dated Feb 13, 2000                                               | (7)              | 
|               |                                                                                                                                   |                  | 
|(10)(xv)       | Lease dated October 2000 between Service Systems,
      UV Systems and Slough Estates Canada Limited                              | (8)              | 
|               |                                                                                                                                   |                  | 
|(10)(xvi)      | Legal Services Plan between Rosenfeld, Goldman
      & Ware, Inc                                                                  | (9)              | 
|               |                                                                                                                                   |                  | 
|(10)(xvii)     | Post Effective Amendment to Legal Services Plan
      filed November 19, 2001                                                     | (10)             | 

36

---

|(10xviii) | 2003 Benefit Plan S-8 March 24, 2004                                                           | (11)                                | 
|--------- | ---------------------------------------------------------------------------------------------- | ----------------------------------- | 
|          |                                                                                                |                                     | 
|(10xix)   | Independent Contractor/Consulting Agreement                                                    | (12)                                | 
|          |                                                                                                |                                     | 
|(10(xx)   | The Incentive Plan of UltraGuard                                                               | (13)                                | 
|          |                                                                                                |                                     | 
|(31.1)    | Certification of Kenneth
      Fielding pursuant to Sec 302 of the Sarbanes-Oxley Act of 2002  | Filed
      Herewith Electronically | 
|          |                                                                                                |                                     | 
|(31.2)    | Certification of John
      R Gaetz pursuant to Sec 302 of the Sarbanes-Oxley Act of 2002      | Filed
      Herewith Electronically | 
|          |                                                                                                |                                     | 
|(32.1)    | Certification of Kenneth
      Fielding pursuant Section 906 of the Sarbanes-Oxley Act of 2002 | Filed
      Herewith Electronically | 
|          |                                                                                                |                                     | 
|(32.2)    | Certification of Kenneth
      Fielding pursuant Section 906 of the Sarbanes-Oxley Act of 2002 | Filed Herewith
      Electronically | 

Incorporated by reference to the Corporation's Form 10SB effective on January
  22, 1997

| | (2)  | Incorporated by reference to the Corporation's Form S-8 filed with the
      Commission on October 6, 1997.   
| | ---- | --------------------------------------------------------------------------------------------------------------
| | (3)  | Incorporation by reference to the Corporation's Form 10Q for the fiscal
      Year ended February 28, 1997.   
| | (4)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 1997.   
| | (5)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 1998.   
| | (6)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 1999.   
| | (7)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 2000.   
| | (8)  | Incorporation by reference to the Corporation's Form 10Q for the fiscal
      Quarter ended November 30, 2000.
| | (9)  | Incorporated by reference to the Corporation's Form S-8 filed with the
      Commission on November 19, 2003. 
| | (10) | Incorporated by reference to the Corporation's S-8 POS filed with the
      Commission on March 23, 2003.     
| | (11) | Incorporated by reference to the Corporation's Form S-8 filed with the
      Commission on March 28, 2003.    
| | (12) | Incorporated by reference to the Corporation's Form S-8 filed with the
      Commission on June 11, 2003.     
| | (13) | Incorporated by reference to the Corporation's Form S-8 filed with the
      Commission on December 2, 2003.  

| | (b) | Reports on Form 8-K                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     | The Company filed two reports on Form 8-K in 2003,                                                                                                                         
|
| |     | On January 14, 2003 reporting the acquisition by stock exchange agreement
      dated December 30, 2002, details of the purchase of Innovative Fuel Cell
      Technologies
|
| |     | On January 15, 2003 reporting the sale of UV Systems Technology Inc to
      659999 BC Ltd on Dec 31, 2002.                                                                

37

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
  the registrant caused this registration statement to be signed on its behalf
  by the undersigned, thereunto duly authorized.

ULTRAGUARD WATER SYSTEMS CORP

/s/ Kenneth R. Fielding
  Kenneth R. Fielding, President

|Date: October 27, 2004 | /s/
      Ken Fielding | 
|---------------------- | ---------------------- | 
|                       | Ken Fielding, Director | 
|                       |                        | 
|                       |                        | 
|                       |                        | 
|Date: October 27, 2004 | /s/
      John R Gaetz | 
|                       | John R Gaetz, Director | 

38

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