SECURITIES AND EXCHANGE COMMISSION 
  WASHINGTON, D.C. 20549

FORM 10-QSB

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

Quarterly report for the period ended March 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.
|                                       |                   
|2ndFLOOR, 5763  203 A STREET          |                   
|LANGLEY B.C., CANADA                   | V3A 1W7           
|Address of Principal Executive Offices | Zip code          

604-539-9398
  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

APPLICABLE ONLY TO CORPORATE ISSURER

The number of shares outstanding of the issuer's only class of Common Stock $.001 par value was 15,112565 on May 13, 2003.

1

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|INDEX                                                           
|----------------------------------------------------------------
|                                                                
|                                                                
|PART I            Financial
      Information                   
|                                                                
|Item 1. CONSOLIDATED FINANCIAL STATEMENTS.                      
|                                                                
|Consolidated Balance Sheets as of March 31, 2003 (unaudited)    
|and
      March 31, 2002 (unaudited)                            
|                                                                
|Consolidated Statements of Operations for the three months ended
|March
      31, 2003 and March 31, 2002 (unaudited)             
|                                                                
|Consolidated Statements of Cash Flows for the three months ended
|March
      31, 2003 and March 31, 2002 (unaudited)             
|                                                                
|Notes to the Financial Statements                               
|                                                                
|Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF      
|OPERATIONS
      AND FINANCIAL CONDITIONS                       
|                                                                
|Part II OTHER INFORMATION                                       
|                                                                
|1.
      LEGAL PROCEEDINGS                                      
|                                                                
|2.
      CHANGES IN SECURITIES                                  
|                                                                
|3.
      DEFAULT UPON SENIOR SECURITIES                         
|                                                                
|4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS    
|                                                                
|5.
      OTHER INFORMATION                                      
|                                                                
|6.
      EXHIBITS AND REPORTS ON FORM 8K                        
|                                                                
|Signatures                                                      

2

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UltraGuard Water Systems Corp.
  Consolidated Balance Sheets
  (Expressed in US dollars)

|                                                                    | March 31    |   | December 31, |  
|------------------------------------------------------------------- | ----------- | - | ------------ | -
|                                                                    | 2003        |   | 2002         |  
|                                                                    | (Unaudited) |   | (Audited)    |  
|                                                                    | $           |   | $            |  
|                                                                    |             |   |              |  
|ASSETS                                                              |             |   |              |  
|                                                                    |             |   |              |  
|Current Assets                                                      |             |   |              |  
|Cash
      and short-term investments                               | 8,647       |   | 40,206       |  
|Accounts
      receivable                                           | 4,810       |   | 946          |  
|Inventory
      and contract work in progress                       | 6,197       |   | 6,638        |  
|Prepaid
      expenses and deposits                                 | 1,127       |   | 14,039       |  
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|Total Current Assets                                                | 115,281     |   | 61,828       |  
|Property and Equipment (Note 5)                                     | 265         |   | 286          |  
|Other Assets                                                        |             |   |              |  
|Manufacturing
      Technology (Note 4)                             | 1,104,852   |   | 1,026,876    |  
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|Total Assets                                                        | 1,125,898   |   | 1,088,990    |  
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                |             |   |              |  
|                                                                    |             |   |              |  
|Current Liabilities                                                 |             |   |              |  
|Accounts
      payable                                              | 146,997     |   | 123,947      |  
|Accrued
      liabilities                                           | 36,672      |   | 40,157       |  
|Wages
      and vacation pay payable                                | 1,701       |   | 1,621        |  
|Customer
      deposits                                             | -           |   | 11,719       |  
|Loans
      payable (Note 6)                                        | 477,878     |   | 439,124      |  
|Amounts
      owing to related parties (Note 7)                     | 47,433      |   | 19,087       |  
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|Total Current Liabilities                                           | 710,681     |   | 635,655      |  
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|Stockholders Equity                                                |             |   |              |  
|                                                                    |             |   |              |  
|Common stock, (Note 8) $.001 par value,                             |             |   |              |  
|100,000,000 shares authorized,                                      |             |   |              |  
|11,852,565
      and 10,852,565 issued and outstanding respectively | 11,853      |   | 10,853       |  
|Additional
      paid-in capital                                    | 10,405,493  |   | 10,221,893   |  
|Donated
      capital (Note 7)                                      | 31,928      |   | 31,928       |  
|Stock
      based compensation                                      | 414,166     |   | 385,799      |  
|Deferred
      compensation                                         | (94,500     | ) | -            |  
|Deficit                                                             | (10,353,723 | ) | (10,197,138  | )
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|Total Stockholders Equity                                          | 415,217     |   | 453,335      |  
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|Total Liabilities and Stockholders Equity                          | 1,125,898   |   | 1,088,990    |  
|                                                                    |             |   |              |  
|                                                                    |             |   |              |  
|Contingencies (Notes 1 and 10)                                      |             |   |              |  
|Subsequent Events (Note 11)                                         |             |   |              |  

(See Accompanying Notes to the Financial Statements)

3

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UltraGuard Water Systems Corp. 
  Consolidated Statements of Operations and Deficit
  (Expressed in US dollars)
  (Unaudited)

|                                                                 | Three months |   | Three months |  
|---------------------------------------------------------------- | ------------ | - | ------------ | -
|                                                                 | ended        |   | ended        |  
|                                                                 | March 31,    |   | March 31,    |  
|                                                                 | 2003         |   | 2002         |  
|                                                                 | $            |   | $            |  
|Project Revenue                                                  | 23,438       |   | -            |  
|Project Costs                                                    | 18,812       |   | -            |  
|                                                                 |              |   |              |  
|Gross Profit                                                     | 4,626        |   | -            |  
|                                                                 |              |   |              |  
|Expenses                                                         |              |   |              |  
|Foreign
      exchange                                           | 112          |   | -            |  
|General
      and administrative                                 | 120,294      |   | 122,745      |  
|Interest                                                         | 12,437       |   | 25,314       |  
|Stock
      based compensation expense                           | 28,368       |   | -            |  
|                                                                 |              |   |              |  
|Total Expenses                                                   | 161,211      |   | 148,059      |  
|                                                                 |              |   |              |  
|Net Loss from Operations                                         | 156,585      |   | 324,979      |  
|                                                                 |              |   |              |  
|Other:                                                           |              |   |              |  
|Loss
      from discontinued operations (Note 3)                 | -            |   | 176,920      |  
|                                                                 |              |   |              |  
|Net Loss for the Period                                          | 156,585      |   | 324,979      |  
|                                                                 |              |   |              |  
|Net Loss per Share                                               | (0.01        | ) | (0.60        | )
|                                                                 |              |   |              |  
|Weighted Average Number of Shares Outstanding
      after giving |              |   |              |  
|retroactive effect to a 1:50 consolidation
      of shares       | 11,185,898   |   | 538,080      |  
|                                                                 |              |   |              |  

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





(See Accompanying Notes to the Financial Statements)

4

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UltraGuard Water Systems Corp.
  Consolidated Statements of Cash Flows
  (Expressed in US dollars)
  (Unaudited)

|                                                                        | Three months |   | Three months |  
|----------------------------------------------------------------------- | ------------ | - | ------------ | -
|                                                                        | ended        |   | ended        |  
|                                                                        | March 31     |   | March 31,    |  
|                                                                        | 2003         |   | 2002         |  
|                                                                        | $            |   | $            |  
|                                                                        |              |   |              |  
|Cash Flows to Operating Activities                                      |              |   |              |  
|Net Loss                                                                | (156,585     | ) | (324,979     | )
|Adjustments
      to reconcile net loss to cash                         |              |   |              |  
|Depreciation
      and amortization                                     | 21           |   | 14,547       |  
|Foreign
      exchange                                                  | 112          |   | 5,947        |  
|Common
      stock issued for expenses, net of cancellations            | 113,400      |   | 1,656        |  
|Accrual
      of interest                                               | 7,845        |   | 29,386       |  
|Stock
      based compensation                                          | 28,368       |   | 39,336       |  
|                                                                        |              |   |              |  
|Change in non-cash working capital items                                |              |   |              |  
|(Increase)
      decrease in accounts receivable                        | (3,865       | ) | 173,136      |  
|Decrease
      in inventory and contract work in progress               | 441          |   | 56,746       |  
|(Increase)
      decrease in prepaid expenses and deposits              | (81,588      | ) | 74,010       |  
|Increase
      (decrease) in accounts payable, accrued liabilities,     |              |   |              |  
|wages
      and vacation pay payable and customers deposits            | 7,773        |   | (163,047     | )
|                                                                        |              |   |              |  
|Net Cash Used in Operating Activities                                   | (84,078      | ) | (93,262      | )
|                                                                        |              |   |              |  
|                                                                        |              |   |              |  
|Cash Flows (to) from Investing Activities                               |              |   |              |  
|Reduction
      of short-term investment - restricted                   | -            |   | 218          |  
|Acquisition
      of manufacturing technology                           | (6,776       | ) | -            |  
|                                                                        |              |   |              |  
|Net Cash Used in Investing
      Activities                             | (6,776       | ) | 218          |  
|                                                                        |              |   |              |  
|                                                                        |              |   |              |  
|Cash Flows from (to) Financing Activities                               |              |   |              |  
|Increase
      in loans payable                                         | 30,949       |   | 39,023       |  
|Increase
      in amounts owing to related parties                      | 28,346       |   | 60,832       |  
|Decrease
      in shares subscriptions received                         | -            |   | (1,209       | )
|                                                                        |              |   |              |  
|Net Cash Provided by Financing Activities                               | 59,295       |   | 98,646       |  
|                                                                        |              |   |              |  
|                                                                        |              |   |              |  
|Increase (Decrease) in Cash                                             | (31,559      | ) | 5,602        |  
|Cash - Beginning of the Period                                          | 40,206       |   | (4,539       | )
|                                                                        |              |   |              |  
|Cash - End of the Period                                                | 8,647        |   | (1,063       | )
|                                                                        |              |   |              |  
|                                                                        |              |   |              |  
|                                                                        |              |   |              |  
|Non-Cash Financing Activities                                           |              |   |              |  
|400,000
      shares were issued for asset purchase at $0.178 per share | 71,200       |   | -            |  
|600,000
      shares were issued for expenses at $0.189 per share       | 113,400      |   | -            |  
|16,564
      shares were issued to settle debts at $0.10 per share      | -            |   | 1,656        |  
|                                                                        |              |   |              |  
|Supplementary Information                                               |              |   |              |  
|Cash paid
      for interest                                            | 4,592        |   | 324          |  
|Cash paid
      for income taxes                                        | -            |   | -            |  

(See Accompanying Notes to the Financial Statements)

5

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UltraGuard Water Systems Corp. 
  Notes to the Consolidated Financial Statements

|1. | Nature of Operations and Continuance of Business
      Up to February 2002 the Company focused its activities
        on the manufacturing and marketing of its Ultra GuardÚ ultra violet
        based patented water treatment system through its wholly owned Canadian
        subsidiary, UV Systems Technology Inc. (UVS). These products
        and systems are 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.
        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
        March 31, 2003, the Company has not recognized significant revenue, has
        a working capital deficit of $595,400, and has accumulated operating losses
        of $10,353,723 since its inception. The continuation of the Company is
        dependent upon the continuing financial support of creditors and stockholders
        and obtaining short-term and long-term financing, the completion of product
        development of its newly acquired technology and achieving profitability.
        These conditions raise substantial doubt about the Company's ability to
        continue as a going concern. These financial statements do not include
        any adjustments that might arise from this uncertainty. In February 2002,
        the Company reached an agreement with the Clearwater Group (Clearwater)
        to assume the UVS manufacturing responsibilities of any new Ultra GuardÚ
        water treatment systems to be supplied to UVSs strategic alliance
        partner, US Filter. Clearwater would also provide warranty services on
        any previously sold UltraGuardÚ water treatment systems. In anticipation
        of signing this agreement, the Company ceased manufacturing operations,
        reduced level of staff in production, engineering and support and moved
        its offices to Langley. On February 5, 2002 this Agreement was signed
        with Clearwater.
      At a special meeting held on November 15, 2002 the Company
        reorganized. Its shares were consolidated on a 1:50 basis, the authorized
        capital increased to 100,000,000 shares and the name of the Company was
        changed to UltraGuard Water Systems Corp. In December 2002, the Company
        divested itself of the UVS operations (see Note 3) while retaining any
        and all royalty or other revenues that may be received from the sale or
        use of the UVS patented Ultra GuardÚ technology.
      During fiscal 2002, the Company 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.
      In December, the Company purchased Innovative Fuel Cell
        Technologies Inc. (IFCT) (see Note 4), the holder of an option
        to purchase worldwide rights to manufacture and market a Magnesium Air
        Fuel Cell to power UV drinking water and ancillary systems. IFTC owns
        100% of the shares of an Austrian company, UltraGuard Water Systems GmbH
        (UG GmbH). UG GmbH will manufacture and market the UV and
        Fuel Cell products for the European and African market; 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.
      Funds were provided to the Company on February 19, 2003
        through an agreement entered into with a Germany resident. Under the agreement
        the German resident provided a US$50,000 loan bearing interest at 10%,
        payable within 6 months or convertible into the Companys common
        stock at $0.30 per share.
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|2. | Significant Accounting Policies
      Consolidated financial statements
      These financial statements include the accounts of the
        Company, its wholly owned Nevada based subsidiary, Innovative Fuel Cell
        Technologies Inc. and, its Austrian based UltraGuard Water Systems GmbH
        (UG GmbH). All significant intercompany transactions and balances have
        been eliminated.
      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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

6

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|2. | Significant Accounting Policies (continued)
      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.
        System and project revenue are recognized utilizing the percentage of
        completion method that recognizes project revenue and profit during construction
        based on expected total profit and estimated progress towards completion
        during the reporting period. All related costs are recognized in the period
        in which they occur.
      Estimates and assumptions
      The preparation of financial statements in conformity
        with generally accepted accounting principles 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
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| | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 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.                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Translation of foreign subsidiary balances:                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Monetary balance sheet items
        of IFCT and UG GmbH are translated into US dollars at the rate of exchange
        on the balance sheet date. Non-monetary balance sheet items are translated
        into US dollars at the rate of exchange prevailing on the transaction
        dates. The foreign subsidiarys operating results are translated
        into US dollars using the average exchange rate for the year with any
        translation gain or loss and are included separately in operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Basic and Diluted Net Income (Loss) Per
        Share
      The Company 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
      The Company 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.
        The Company 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. The Company 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.
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7

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|2. | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|   | Interim Financial Statements
      These interim unaudited financial statements have been
        prepared on the same basis as the annual financial statements and in the
        opinion of management, reflect all adjustments, which include only normal
        recurring adjustments, necessary to present fairly the Companys
        financial position, results of operations and cash flows for the periods
        shown. The results of operations for such periods are not necessarily
        indicative of the results expected for a full year or for any future period.
      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 March 31, 2003,
        the Company has no items that represent comprehensive loss and, therefore,
        has not included a schedule of comprehensive loss in the financial statements.
      Recent Accounting Pronouncements
      In June 2002, FASB issued SFAS No. 146, "Accounting
        for Costs Associated with Exit or Disposal Activities". The provisions
        of this Statement are effective for exit or disposal activities that are
        initiated after December 31, 2002, with early application encouraged.
        This Statement addresses financial accounting and reporting for costs
        associated with exit or disposal activities and nullifies Emerging Issues
        Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
        Termination Benefits and Other Costs to Exit an Activity (including Certain
        Costs Incurred in a Restructuring)". This Statement requires that a liability
        for a cost associated with an exit or disposal activity be recognized
        when the liability is incurred. The Company will adopt SFAS No. 146 on
        January 1, 2003. The effect of adoption of this standard on the Company's
        results of operations and financial position is not expected to have a
        material impact on its financial position or results of operations.
      FASB has also issued SFAS No. 149 but it will not have
        any relationship to the operations of the Company therefore a description
        and its impact on the Company's operations has not been disclosed.
      In December 2002, the FASB issued SFAS No. 148, "Accounting
        for Stock-Based Compensation  Transition and Disclosure," which
        amends SFAS No. 123 to provide alternative methods of transition for a
        voluntary change to the fair value based method of accounting for stock-based
        employee compensation. In addition, SFAS No. 148 expands the disclosure
        requirements of SFAS No. 123 to require more prominent disclosures in
        both annual and interim financial statements about the method of accounting
        for stock-based employee compensation and the effect of the method used
        on reported results. The transition provisions of SFAS No. 148 are effective
        for fiscal years ended after December 15, 2002. The disclosure provisions
        of SFAS No. 148 are effective for financial statements for interim periods
        beginning after December 15, 2002. The Company will adopt SFAS No. 148
        on January 1, 2003. The effect of adoption of this standard on the Companys
        results of operations and financial position is under review.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3. | Discontinued Operation
      At a meeting of the Board of Directors on October 1,
        2002 the Company set out a reorganization and restructuring plan, which
        included the disposal of UV Systems Technology Inc (UVS). The debt load
        being carried by the Company as a result of the UVS operations were impairing
        the Company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, the Company
        sold 100% of the shares of UVS to 659999 BC Ltd, a Canadian private company
        in exchange for the transfer and assignment to the Company 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

8

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|4. | Acquisition of License - Technology
        On December 31, 2002, the Company acquired 100% of the shares of Innovative
        Fuels Cell Technologies Inc (IFCT). The Company issued 5,000,000 common
        shares of the Companys common stock to the shareholders of IFCT
        to acquire IFCT and its wholly owned Austrian incorporated subsidiary
        Ultraguard Water Systems GmbH (UG GmbH). These shares were
        valued at $1,007,000. The Company also issued 1,000,000 common shares
        of the Company to UG GmbH as part of the transaction. These shares are
        considered treasury shares and are not outstanding. The value placed on
        these shares was $201,400 which amount has been recorded as a reduction
        of shareholders equity. IFCT is a Nevada corporation incorporated
        on September 30, 2002. IFCT is the holder of an option 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 the Companys Point of Use Ultraviolet Water Purification
        System and for ancillary uses. IFCT was assigned this option on October
        1, 2002 from a related party. IFCT had paid Cnd$2,500 as a down payment
        for the option with Cnd$97,500 payable and 400,000 shares of the Company
        were to be issued. On March 14, 2003, the 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 to be issued to 500,000. On March
        6, 2003, the company 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 to the vendors. 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 was made on May 1, 2003. The remaining balance is
        due Cnd$7,500 on the first of each month thereafter until MagPower delivers
        the technical drawings; 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 will be
        delivered (100,000 common shares from trust and 100,000 common shares
        from treasury). As a condition of the Option Agreement, the Company is
        required to sell a minimum quantity of 2000 Fuel Cell units in fiscal
        2003. 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 March 31, 2003 was $1,104,852 which includes the Cnd$2,500 down
        payment, the 2 payments of Cnd$5,000 each, the value of 5,000,000 common
        shares of the Company, $1,007,000, the value of 400,000 common shares,
        $71,200 and certain other organizational and acquisition costs of $18,292.
        This acquisition was treated as an acquisition of an asset and not a business
        combination. The asset as at December 31, 2002 is an option to acquire
        technology and has been recorded as a long-lived asset. Once the Option
        Agreement is exercised in full the value placed on the Option Agreement
        will transfer to the License Agreement. The License Agreement will be
        amortized over 10 years.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | Property and Equipment
        Property and equipment is stated at cost less accumulated depreciation
        and reflects the residual value as at March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|   |                                |       |  |              |  | March 31,   |  | December 31,
|-- | ------------------------------ | ----- |  | ------------ |  | ----------- |  | ------------
|   |                                |       |  |              |  | 2003        |  | 2002        
|   |                                |       |  | Accumulated  |  | Net Book    |  | Net Book    
|   |                                | Cost  |  | Depreciation |  | Value       |  | Value       
|   |                                | $     |  | $            |  | $           |  | $           
|   |                                |       |  |              |  | (Unaudited) |  | (Audited)   
|   |                                |       |  |              |  |             |  |             
|   | Office furniture and equipment | 5,533 |  | 5,268        |  | 265         |  | 286         
|   |                                |       |  |              |  |             |  |             
|   |                                |       |  |              |  |             |  |             
|6. | Loans Payable                 

| | a) | Loans payable
        of $200,000 plus accrued interest of $54,003 as at March 31, 2003, are
        unsecured and bear interest at 1% per month. The loans were due on May
        21, 2001 and are currently being renegotiated. At the option of the note
        holder, the principal portion of the loan can be converted into common
        shares at $25.00 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b) | A loan payable totalling $125,000
        plus accrued interest of $30,000 was renegotiated in December 2002 as
        a non-interest bearing loan amount set at $155,000. Payments are to be
        made totalling $80,000 commencing February 15, 2003 with final payment
        due June 2007, with the remaining $75,000 to be converted into common
        shares at a conversion price of 20% below the average bid price between
        December 7, 2002 and March 7, 2003, to be issued March 10, 2003. The payment
        due February 15, 2003 was not made. No payment was made on March 15, 2003
        or subsequently. 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 and on May 2, 2003, the Company was
        served with a writ of summons. The Company has entered an appearance and
        will file a defence against this claim and will attempt to negotiate a
        settlement.

9

---

|6. | Loans Payable (continued)
|-- | -------------------------
|   |                          
|   | c)                       
|   |                          
|   | d)                       

|7. | Amounts Owing to Related Parties
      These amounts, totalling $47,433, represent unpaid wages
        and consulting for two directors. These amounts are due on demand, unsecured
        and non-interest bearing. Imputed interest on previous non-interest bearing
        related party loans totalled $31,928 and recorded as donated capital,
        calculated at 10% per annum. In fiscal 2002, two officers and directors
        purchased with notes receivable and debt reduction, 3,000,000 shares of
        common stock of the Company at $0.0101 per share for a total consideration
        of $30,300.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|8. | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                                                                                     |            |   | Additional |   |            |  
| | ----------------------------------------------------------------------------------- | ---------- | - | ---------- | - | ---------- | -
| |                                                                                     | Issued     |   | Common     |   | Paid-in    |  
| |                                                                                     | Shares     |   | Stock      |   | Capital    |  
| |                                                                                     | #          |   | $          |   | $          |  
| |                                                                                     |            |   |            |   |            |  
| | Balance, December 31, 2001 (audited)                                                | 26,887,601 |   | 26,888     |   | 8,266,082  |  
| | Issuance
      of stock for expenses pursuant to                                    |            |   |            |   |            |  
| | the
      exercise of employee stock options                                        | 16,564     |   | 16         |   | 1,640      |  
| | Issuance
      of stock for expenses                                                | 100,000    |   | 100        |   | 1,900      |  
| | Issuance
      of stock for cash pursuant to                                        |            |   |            |   |            |  
| | private
      placements                                                            | 4,350,000  |   | 4,350      |   | 230,650    |  
| | Issuance
      of stock for debt settlement                                         | 13,800,000 |   | 13,800     |   | 124,200    |  
| | Issuance
      of stock for expenses                                                | 1,000,000  |   | 1,000      |   | 9,000      |  
| | Stock returned
      to treasury for cancellation                                   | (330,000   | ) | (330       | ) | (83,270    | )
| |                                                                                     |            |   |            |   |            |  
| |                                                                                     |            |   |            |   |            |  
| | Balance Pre-Reverse Split                                                           | 45,824,165 |   | 45,824     |   | 8,550,201  |  
| |                                                                                     |            |   |            |   |            |  
| |                                                                                     |            |   |            |   |            |  
| | Balance Post-Reverse Split 1:50 basis                                               | 916,488    |   | 917        |   | 8,595,109  |  
| | Issuance
      of shares for debt                                                   | 3,000,000  |   | 3,000      |   | 27,300     |  
| | Issuance
      of shares to debt settlement                                         | 593,077    |   | 593        |   | 592,484    |  
| | Issuance
      of shares for purchase of                                            |            |   |            |   |            |  
| | Innovative
      Fuel Cell Technologies Inc.                                        | 5,000,000  |   | 5,000      |   | 1,007,000  |  
| | Issuance
      of shares owned by subsidiary                                        | *1,000,000 |   | 1,000      |   | 201,400    |  
| | Less, Treasury
      Stock                                                          | -          |   | -          |   | (201,400   | )
| | Issuance of shares to private placement                                             |            |   |            |   |            |  
| | purchasers
      with non-dilutive provision                                        | 343,000    |   | 343        |   | -          |  
| |                                                                                     |            |   |            |   |            |  
| | Balance, December 31, 2002 (audited)                                                | 10,852,565 |   | 10,853     |   | 10,221,893 |  
| | Issuance
      of shares for MagPower License Agreement                             | 400,000    |   | 400        |   | 70,800     |  
| | Issuance
      of shares for consulting expenses                                    | 600,000    |   | 600        |   | 112,800    |  
| |                                                                                     |            |   |            |   |            |  
| | Balance, March 31, 2003 (unaudited)                                                 | 11,852,565 |   | 11,853     |   | 10,405,493 |  
| |                                                                                     |            |   |            |   |            |  
| |                                                                                     |            |   |            |   |            |  
| | *These shares are issued but owned by treasury therefore are
      not outstanding.

| |     |                                           
| | --- | ------------------------------------------
| | (a) | Warrants outstanding as at March 31, 2003:

| |  |                                                            |         | Exercise        |                                      
| |  | ---------------------------------------------------------- | ------- | --------------- | -------------------------------------
| |  | Class                                                      | #       | Price           | Expiry Date(s)                       
| |  |                                                            |         |                 |                                      
| |  | A- Post -Reverse Split -1:50                             | 22,018  | $20.00 - $50.00 | January 25, 2003  December 20, 2003 
| |  | 17,088 Class A warrants
      have expired subsequently.
| |  |                                                            |         |                 |                                      
| |  | C- Post -Reverse Split -1:50                             | 162,100 | $12.00          | September 23, 2005  October 3, 2010 
| |  |                                                            |         |                 |                                      
| |  | E- Post -Reverse Split -1:50                             | 1,000   | $30.00          | February 16, 2003  February 20, 2003

10

---

|8. | Common Stock (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | All Class E warrants have subsequently expired.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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 U.S. Filter (US Filter) to market and sell under
        license the Company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, the Company 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. These amounts totalling
        $1,134,700 are being amortized to operations as a financing expense at
        a rate of $47,800 per annum and a marketing expense at a rate of $65,670
        per annum.                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | As a result of the 1:50 Reverse
        Split, the total number of C warrant issued; 8,105,000, with an exercise
        price of $0.24 per share have been reduced to 162,100 Class C warrants
        with an exercise price of $12.00 per share.                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | (b) | Employee Stock Option Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | These options were granted
        for services provided, or to be provided, to the Company. 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. The Company 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 the Companys shares at the date of
        grant, no compensation cost is recognized. However, under SFAS 123, the
        impact on net income and income per share of the fair value of stock options
        must be measured and disclosed on a fair value based method on a pro forma
        basis.
      If compensation expense had been determined pursuant
        to SFAS 123, the Companys net loss and net loss per share would
        have been as follows:

| |                          | Three months |   | Twelve months |  
| | ------------------------ | ------------ | - | ------------- | -
| |                          | ended        |   | ended         |  
| |                          | March 31,    |   | December 31,  |  
| |                          | 2003         |   | 2002          |  
| |                          | $            |   | $             |  
| |                          |              |   |               |  
| | Net loss                 |              |   |               |  
| | As
      reported        | (156,584     | ) | (657,617      | )
| | Pro
      forma          | (156,584     | ) | (657,617      | )
| |                          |              |   |               |  
| | Basic net loss per share |              |   |               |  
| | As
      reported        | (.01         | ) | (.06          | )
| | Pro
      forma          | (.01         | ) | (.06          | )

11

---

|8. | Common Stock (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|9. | Segmented Information
      The business of the Company is carried on in one industry
        segment (See Note 1).
      The Company currently operates 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) the Company now operates in one business segment
        and one geographical area
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |         | Three months ended |  | Three months ended |  
| | ------- | ------------------ |  | ------------------ | -
| |         | March 31, 2003     |  | March 31, 2002     |  
| |         |                    |  | United             |  
| |         | Canada             |  | States             |  
| |         | $                  |  | $                  |  
| |         |                    |  |                    |  
| | Revenue |                   |  | 23,438             |  
| | Expense |                   |  | 151,489            |  
| |         |                    |  |                    |  
| | Loss    |                   |  | (128,051           | )
| |         |                    |  |                    |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | As of March 31, 2003 |  | As of March 31, 2002 | 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- |  | -------------------- | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                      |  | United               | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Canada               |  | States               | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $                    |  | $                    | 
|    | Identifiable assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                     |  | 105,700              | 
|    | Goodwill, patents,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                      |  |                      | 
|    | Manufacturing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                      |  |                      | 
|    | technology option                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                     |  | 1,010,352            | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                      |  |                      | 
|    | Total assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                     |  | 1,116,052            | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                      |  |                      | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                      |  |                      | 
|10. | Legal Proceedings
      On October 20, 1998 a suit was filed in the Supreme
        Court of British Columbia by Thomas OFlynn against the Company,
        Kenneth Fielding (the Company's 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 the 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 will continues to actively defend
        the suit. The suit has remained inactive since early 1999. There has been
        no loss provision set-up pursuant to this action against the Company.

12

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|11. | Subsequent Events
|--- | -----------------
|    |                  
|    | a)               
|    |                  
|    | b)               
|    |                  
|    | c)               
|    |                  
|    | d)               
|    |                  
|    | e)               

13

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ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS AND
  FINACIAL CONDITIONS

The following discussion and analysis should be
  read in conjunction with our Financial Statements and the Notes attached. Information
  discussed in this report may include forward-looking statements regarding events
  or our financial performance and are subject to a number of risks and other
  factors, which could cause the actual results to differ materially from those,
  contained in the forward-looking statements. Among such factors are, 1)general business and economic conditions, 2)customer acceptance
  and demand for our products, 3)our overall ability to
  design, test and introduce new products on a timely basis,4)the nature of the markets addressed by our products, and, 5)other risk factors listed from time to time in documents filed by our Company
  with the SEC.

BASIS OF PRESENTATION

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

MANAGEMENTS
  DISCUSSION

Our
  company was incorporated in Nevada in August 1990 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. Our 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.

In an effort to advance our marketing objective, 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 Ultraviolet disinfection system in eight Western
  states. In July 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 dated February 14, 2000 with the two principal shareholders Working
  Opportunity Fund and MDS Ventures Pacific, Inc., (49.39%) we acquired the remaining
  49.31% of common stock and all outstanding preferred stock of UVS.

During the year ended August 31, 1999, the Company entered
  into a development to reconfigure its UV system. In the quarter ended February
  29, 2000, the Company produced the prototype of a new UV product line, the Ultra-Flow
  SLR. This product, with a designed disinfection capacity of up to 1.0 million
  gallons per day per lamp, will incorporate the Companys patented flow
  reactor chamber, the proprietary low pressure, high intensity UV lamp and the
  patented flow balanced weir. It encompasses layout flexibility; infinite automatic
  flow control and monitoring, future expansion can be easily accomplished. The
  client can monitor system and component performance locally or remotely. Additional
  features include full password- protected, Internet-based, web-monitored, microprocessor
  control, which will permit monitoring of the Ultra-Flow SLR UV system from the
  Company s plant or from any location equipped with an Internet connection.

In September 1999 the formal order for a project in Toronto,
  Canada was secured for about C$ 685,000 (approximately $466,000). The project
  is now delivered and operating on demand. As this system is used only when high
  rainfall and storm runoff occurs, demand for it's operating is infrequent. Since
  installation, we are informed of two storm events, which required the UV system
  to be activated. This UV system delivered to Toronto is part of a C$50 million
  combined storm overflows (CSO) project (the world largest submersible CSO pumping
  station) and is used for disinfection of CSO before discharge into Lake Ontario.
  During this quarter, at the request of the customer Clearwater Industries (our
  product manufacturing licensee) replaced the computer operating system with
  a Programmable Logic Controller (PLC). This decision was taken to permit service
  of the UV system to be performed by a number of service companies versed in
  maintaining PLC control systems. This action provides the customer more flexibility
  and available service options and reflects the direction being taken by Clearwater
  on new system sales.

Clearwater Industries reports that the UV System remedial
  work is complete. Final testing will not be conducted until spring 2003 as this
  site operates only during summer storm events. Tests conducted during 2002 were
  not successful, as effluent delivered to the UV system did not meet the design
  standards.

14

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Refuse, solids and city street runoff solid waste included
  in the effluent was not removed prior to entering the UV System. During this
  first quarter of 2003, the Company was informed that testing is scheduled to
  start June I, 2003.

After successful PDU testing in September & October 1998
  at the City of Peterborough wastewater treatment plant, we received an order
  in March 1999 valued at over C$1,100,000 (approximately $748,000.). The UV system
  will disinfect effluent flow in excess of 36 million gallons per day. The UV
  system delivery was completed in January 2002 and installed during February
  and March for operation starting May 15, 2002. Problems were encountered with
  the field wiring which affected the operating software. As well, problems were
  encountered with the installation of some of the structural components. In the
  second quarter, four of the five channels (48 of the 60 lamps) had been operated
  for about 30 days using the non-flow paced computer system. Clearwater reported
  that during this period, performance requirements were being met. Negotiation
  of the work and guarantees required by the customer to complete the balance
  of the system was being conducted between the City of Peterborough, Clearwater,
  our product-manufacturing licensee and with USFilter and Clearwater. These negotiations
  have been unsuccessful. In November the Company received notification that the
  City of Peterborough was canceling the UV system contract. The Company advised
  the City that we do not accept this cancellation and will strenuously defend
  our rights under the contract purchased order. We have made the appropriate
  loss provisions in our financial statements for year ending 2002, to reflect
  this cancellation.

Purchase orders for two additional UV systems valued at approximately
  C$150,000 approximately were produced during the 2000-2001 period and delivered
  into the Province of Ontario. Additional orders for shipment to Louisiana and
  Virginia were received, with an aggregate value of about $258,000. These two
  systems were delivered in 2001.

On January 26, 2001 the Company entered into a Strategic Alliance
  Agreement, and related agreement with US Filters Wallace Tiernan Products
  Group, under which US Filter has the exclusive right to market the Companys
  Ultra Guard®UV system in North, South and Central America, and
  the Caribbean. Royalty Income. 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

Stock Purchase Warrants. Concurrently with the execution
  of the Strategic Alliance Agreement, granted three Stock Purchase Warrants to
  U.S. Filter/Wallace & Tiernan for an aggregate of 3,000,000 (60,000) shares
  of the Companys common stock, as follows. The numbers enclosed in brackets
  present the effect of post reverse split.



1,000,000 (20,000) shares at an exercise price equal to the lower of $0.97
    ($48.50) per share or the "Fair Market Value" of the common stock as of April
    25, 2001;
    1,000,000 (20,000) shares at an exercise price of $1.00 ($50.00) per share;
    and 
    1,000,000 (20,000) shares at an exercise price of $2.00 ($100.00) per share.


As
  a term of a subsequent Funding Agreement, the exercise prices on the 3,000,000
  (60,000) warrants was reduced to $0.24 ($12.00) per share. In addition, 5,105,000
  (102,100) Class A warrants (the Additional Warrants) were issued as a result
  of this Funding Agreement. All warrants issued to USFilter may be exercised
  until October 10, 2010. The total number of Class A warrants issued to USFilter
  is 8,105,000 (162,100) at a price of $0.24 ($12.00) per share. In summary as
  result of the 1:50 reverse split USFilter now holds 162,100 Class A warrant
  exercise price of $12.00.

If
  the Strategic Alliance Agreement is terminated for convenience, the warrants
  will expire on the second anniversary of the effective date of the termination
  for convenience. In addition, on January 25 of each year during the term of
  the Strategic Alliance Agreement, the Company will grant to U.S. Filter/Wallace
  & Tiernan additional warrants to purchase common stock, based upon the orders
  for Systems booked or significantly influenced by U.S. Filter/Wallace &
  Tiernan during the preceding 12 months. Provided at least US$1,000,000 of orders
  for Systems have been booked or influenced, U.S. Filter/Wallace & Tiernan
  would become entitled to purchase 50,000 shares and also 500 shares for each
  US$10,000 of orders for Systems booked or significantly influenced by U.S. Filter/Wallace
  & Tiernan in excess of US$1,000,000 during the preceding 12 months. Any
  warrants issued will be issued at the average of the 10 days preceding the date
  of determining the number of share due.

15

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Registration
  Rights Agreement. The Company and U.S. Filter/Wallace & Tiernan also
  entered into a Registration Rights Agreement. The Registration Rights Agreement
  entitles U.S. Filter/Wallace & Tiernan to demand registrations (two long
  form registrations and, if available, short form registrations at specified
  intervals) and piggyback registrations for the shares of the Company common
  stock issued upon exercise of the warrants.

Security
  Agreement. The Company and UV Systems have granted to U.S. Filter/Wallace
  & Tiernan a security interest in certain rights in and to their patents,
  trademarks, trade secrets, copyrights, soft ware and know how, and contracts
  related to the use or exploitation of these rights in connection with the sale,
  distribution, promotion, marketing or manufacture of Systems for installation
  within the Territory. The security interest secures an obligation to make a
  $100,000 payment under the Strategic Alliance Agreement upon a termination by
  convenience, or a termination, rejection, disclaiming or repudiation of the
  License Agreement in connection with insolvency proceedings.

In September 2001 we licensed the Korean company, VITROSYS,
  the exclusive rights to manufacture and sell our SLR Ultraviolet disinfection
  systems within the Republic of Korea and a non-exclusive right to manufacture
  for sale into other territories not currently represented by the Companys
  agents. VITROSYS will pay a royalty on each UV system sold. The royalty fee
  is variable, dependant on the selling price of the UV system. Under the License
  Agreement, the Company provided full manufacturing drawings, software technology
  and expertise, and a specified number of hours of training at the Companys
  facilities. As a requirement of the License Agreement, VITROSYS will be required
  to purchase from the Company, a key component for each SLR system. This key
  component is defined as the royalty verification component. Its purchase will
  trigger a sale and resultant royalty payment liability. The Korean market for
  UV is expected to increase as a result of legislation that will require all
  municipal and Industrial wastewater to be disinfected. To date Vitrosys have
  secured a number of projects for which they purchased 40 royalty verification
  components. The Company cannot confirm that this number of units has been sold
  and therefore cannot calculate the amount of royalty payments payable

During the first quarter of 2002 the Company took actions
  to reduce its overheads. Having completed the delivery of the UV systems that
  were produced during 2000 and up to January 26, 2002, we searched for a partner
  to work with for production of future UV systems orders. We found Clearwater
  Technologies Inc., based in Langley, B.C. Canada (Clearwater) to
  perform these and other activities. On February 5, 2002 we signed an agreement
  with Clearwater Technologies Inc wherein Clearwater agreed to assume the manufacturing
  of new UV projects and to supply these to our Strategic Alliance partner, USFilter.
  Clearwater is engaged in the water industry, targeting the treatment of potable
  water for smaller towns to which they provide complete packaged treatment plants.
  Clearwater agreed to assume the manufacturing of any new UV project sold to
  our Strategic Alliance partner, USFilter. Clearwater will also provide warranty
  services on the previously delivered UV products. The Company will be paid a
  royalty on sales, the percentage scaled upward as the total sale volume increases.
  This association with Clearwater as our manufacturing partner permitted the
  company to move from its factory and reduce staff level in production,
  engineering and support. A number of key production staff moved to the Clearwater
  facility to assist in setting up for this manufacturing responsibility. The
  remaining staff at the Company worked in a liaison and support role between
  USFilter and Clearwater.

This change of manufacturing strategy in the first quarter
  of 2002 significantly reduced our monthly operational costs. UVS became inactive
  with no further operations. Activities of UVS were limited to accounting functions,
  recording of accounts receivable collections and advising Clearwater on project
  completion activities.

Future revenue from UltraGuards wastewater technology
  will be royalties based and will be received from Clearwater as a result of
  sales made to USFilter, and sales of the systems, made to others. Two UV systems
  projects have been delivered in March 2003 by Clearwater, however payment is
  not due until the UV systems have been accepted by the purchaser.

On October 1, 2002 the directors mandated a debt and corporate
  restructuring of the Company. This mandate included the disposing of UVS and
  its associated debt, and the reduction of all other debt carried by the Company.
  Given the Companys inability 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 its focus
  on the point of entry (POE) and point of use (POU) ultraviolet systems.

16

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Recent US and world events as well as the worldwide requirement
  for a higher quality of water will accelerate the use of ultraviolet products
  for use in drinking water applications and air treatment, both for surface and
  ventilation. To capitalize on this market opportunity, our Company changed its
  market focus from the wastewater products, which were now fully marketed by
  others, to drinking water UV products. During the year 2002 we completed the
  development of a UV product to be used in drinking water applications. UV units
  for the drinking water market will target application such as POE and POU. POE
  UV systems will treat water at the entry point into residences, industry or
  any location requiring safe drinking water. POU systems will treat water at
  selected points within the home or establishment, using a system installed at
  the water faucet. Both POE and POU may be sold as stand-alone units or in combinations
  with various filters. Ultraviolet will not penetrate the envelope or the wrappings
  to disinfect the contents of the package but is applicable to external surface
  disinfection. Independent testing of the POU UV System, including CSA and UL
  approval is yet to accomplished. Test are to be conducted over the following
  months subject to availability of adequate resources.

On December 20, 2002 the Company negotiated the repayment
  of debt in the amount of $593,077 owed to the Elco Bank Clients in exchange
  for 593,077 share of the Companys common stock $1.00.

On December 31, 2002 the Company entered into various agreements
  to complete the disposition of UVS and to remove of the excessive UVS liabilities
  carried on the Companys financial statements. The reader should refer
  to the Companys financial statements attached hereto for a complete understanding.
  Manufacturing and marketing of the UVS technology had been discontinued by the
  Company and was licensed to Clearwater Industries in early 2002. The purchasers
  of UVS were 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 30, 2002 the Company acquired 100 % of Innovative
  Fuel Cell Technologies Inc, 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. The purchase price in the option
  agreement was C$100,000,and 400,000 shares of the Companys common stock,
  increased respectively in March 2003 to C$102,500 and 500,000 shares of the
  Companys common stock. The increase in the price and the number of shares
  of common stock was as a result of negotiations to extend the use right to include
  ancillary uses among other things lighting and radio in areas where a UV disinfection
  systems has been installed. The Fuel Cell will provide the necessary power to
  operate ultraviolet disinfection systems, lighting and radio in areas of the
  world where no other forms of electrical power is unavailable. 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 Innovative Fuel Cell Technologies Inc (Innovative)
  for 100% of Innovative. Included in the Innovative assets was the Austrian Company,
  UltraGuard Water Systems GmbH (GmbH). The incorporation of GmbH was made
  by Innovative in contemplation of its sale of Innovative to the Company. GmbH
  is 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.

During this quarter GmbH completed the manufacturing of its
  first prototype POU unit and will complete five unit for testing. GmbH is working
  with three Austrian firms, which supply design engineering and perform the manufacturing
  and assembly. The Austrian Government, through on of its support divisions,
  the TMG, has provided financial support to the three Austrian firms to offset
  a portion of the design and manufacturing cost. The POU unit has been designed
  to the applicable ultraviolet disinfection equipment codes of Germany and Austria.

17

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About Magnesium Fuel Cells

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 storage. 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 or 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.

Grant of License

On March 14, 2003 the Companys wholly owned subsidiary,
  Innovative Fuel Cell Technology Inc entered into a Licensing Agreement (Agreement)
  with MagPower Systems Inc (MagPower) for certain rights to a Magnesium-Air Fuel
  Cells (Fuel Cell) for use as a power source for The Companys UV products.
  On March 21, 2003 Innovative Fuel Cell Technology Inc assigned the Agreement
  to the Company. Under the Agreement, MagPower granted to the Company an exclusive
  right to a worldwide territory (Territory) to use the Fuel Cell in the manufacture,
  use and sale, exclusively with its products within the Territory. In addition
  the Company, with the consent of MagPower is at liberty to sub-license others
  to manufacture the rights to sell and install the Fuel Cell for use with the
  Companys products so long as any such sub-licensee has executed an industry
  standard non-disclosure agreement. MagPower granted to the Company the further
  right to sell and use the Fuel Cell for purposes other than in combination with
  the Companys products, (i.e. for powering lights and radios) in communities,
  towns or villages where the Company has installed its products so long as prior
  to any such initial sale there is not another licensee of the MagPowers
  Product for that community, town or village.

Term of the License Agreement

Subject to the provisions for early termination as set out
  in the License Agreement, the License Agreement will remain in full force and
  effect for a period of five (5) years from the date set forth above with an
  option to renew by the Company without further license fee payable, for a further
  term of five (5) years. Provided further the Company shall have the right to
  renew this License Agreement for two further five year terms, subject to the
  MagPower and the Company, agreeing on a further licensing fee, royalty fee and
  revised annual production requirements for each of the second and third renewal
  periods.

Initial Payments: The Company will pay MagPower the amount
  of one hundred and two thousand five hundred (C$102,500.00) dollars under the
  following terms and conditions:
  A) The sum of C$2,500.00 already paid for the option. 
  B) With the signing of the Agreement, the Company paid to MagPower five thousand
  (C$5,000.00) dollars
  C) On or March 21st, 2003 the Company paid to MagPower the amount
  of five thousand (C$5,000.000) dollars. 
  D) Commencing May 1st, 2003 and on the first day of each and every
  applicable month the Company shall pay an amount of seven thousand five hundred
  (C$7,500.00) dollars to MagPower. Applicable month shall include and mean each
  and every month up to and including the month that MagPower provides the technical
  drawing for the Product to the Company. Upon receipt of the Technical Drawings,
  the Company is required to pay MagPower on the first day of every month thereafter
  the amount of fifteen thousand (C$15,000.00) dollars until MagPower has received
  the accumulative total purchase amount.

(2) Royalties: As consideration for the license granted under
  the Technology, the Company agrees to pay MagPower during the term of this License
  Agreement an ongoing royalty of twenty five (C25.00 CDN) dollars for each Product
  manufactured. Such Royalties shall be payable on a quarterly basis with a minimum
  number of units per annum of Two Thousand (2,000), with said minimum commencing
  in the second year of the term of this Licensing Agreement.

18

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(3) With the signing of this Agreement the Company issued
  to the MagPower free and clear of any liens and/or encumbrances except as required
  under SEC Security Regulatory requirements, two hundred thousand (200,000) common
  shares of the Company. On May 1st, 2003 the Company issued to MagPower
  free and clear of any liens and/or encumbrances except as required under SEC
  Security Regulatory requirements one hundred thousand (100,000) common shares
  of the Company. Upon receipt of the technical drawings, Licensee shall issue
  to the MagPower free and clear of any liens and/or encumbrances except as required
  under SEC Security Regulatory requirements, two hundred thousand (200,000) common
  shares of the Company.

(4) Interest on Late Payments: Interest on all late initial
  payments, royalties and any other sums due to the MagPower shall be charged
  at the rate of 3% per month until payment is received.

(5) No Deductions for Tax: Always respecting the tax payments
  requirements within the domicile country of the Licensee and the MagPower and
  all requirement as and if they apply to paying taxes on payments to be made
  by Licensee to MagPower, all payments to the MagPower shall be made without
  any deduction of any kind on the payments under this License Agreement. The
  Company undertakes to take all reasonable steps to assist the MagPower to obtain
  the benefit of any double taxation, which may apply to any of the payments under
  this License Agreement and to minimize the impact of any taxation in respect
  of such payments. A full copy of the License Agreement is referenced in ITEM
  6  EXHIBITS and attached.

All payments that have accrued have been made with the exception
  of the May 1, 2003 payment, which is overdue. The common shares due on signing;
  200,000 and those due on May 1, 2003 have been delivered to MagPower.

In February 2003, the Company completed a redesign of its
  website. This website includes details of the fuel cell technology, the point
  of use UV systems and the wastewater systems. Go to www.ultraguard.comto view these products.

RESULTS
  OF OPERATIONS FOR THE THREE MONTHS ENDED March 31, 2003.

Three
  months ended March 31, 2003 compared to the three months ended March 31, 2002.
  As a result of the disposition of UV Systems Technology Inc. in 2002, the income
  statement reflects the line-byline operations of UltraGuard Water Systems Corp.,
  excluding UV Systems Technology Inc. (See Note 3 of the Financial Statements
  for additional information).

Revenues.
  During the first quarter of fiscal 2003, we reported revenues of $23,438 compared
  to nil revenue being reported in the first quarter of fiscal 2002, an increase
  of 100%. The increase was primarily from the sales of UV system components.

Direct
  Project Costs. Project costs recorded during the first quarter of fiscal 2003
  amounted to $18,812 compared to nil during the first quarter of fiscal 2002,
  an increase of 100%. The increase was mainly due to the costs of UV system components
  sold.

Gross
  Profit before adjustment. Gross profit increased by $4,626 during the first
  quarter of fiscal 2003, compared to nil recorded during the first quarter of
  fiscal 2002. The increase was mainly from the sales of UV system components.

Foreign
  Exchange Translation Loss. For the first quarter of fiscal 2003, we reported
  a foreign exchange translation loss of $112, an increase of 100% compared to
  nil reported in the comparable prior fiscal period.

General
  and Administrative Expense. For the first quarter of fiscal 2003, we reported
  general and administrative expense of $120,294, a decrease of $2,451, or 2%
  from $122,745 reported in the comparable period of the prior year. This decrease
  resulted primarily to the decreased consulting fees, investor relations and
  legal fees.

Interest,
  Net of Interest Income. For the first quarter of fiscal 2003, we reported interest,
  net of interest income, of $12,437, a decrease of $12,877, or 51%, from $25,314
  reported in the comparable prior fiscal period. The decrease was the result
  of the reduction of loans at the end of 2002.

Stock
  Based Compensation Expense. For the first quarter of fiscal 2003, we reported
  stock compensation expense of $28,368 resulting from the Strategic Alliance
  signed with USFilter/WT. The equivalent expense for the prior fiscal period
  is included in the loss of discontinued operations. (See Note 3 of the Financial
  Statements for additional information).

19

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Loss
  on Discontinued Operations. For the first quarter of fiscal 2003, we reported
  nil loss on discontinued operations compared to $176,920 for the prior fiscal
  period, a 100% decrease. (See Note 3 of the Financial Statements for additional
  information).

Net
  Loss for the Period. For the first quarter of fiscal 2003, we reported a net
  loss for the period of $156,585, a decrease of $168,394, or 52% over $324,979
  in the comparable period of fiscal 2002. The decrease in net loss was primarily
  due to the loss of discontinued operations in fiscal 2002 due to the disposal
  of investment in UV Systems Technology Inc. In addition, decreases were also
  the result of increased revenue, decreased consulting fees, decreased investor
  relations expenses, and decreased interest for the fiscal period 2003.

Net
  Loss per Share. For the first quarter of fiscal 2003, we reported a net loss
  per share for the period of $0.01, a decrease of $0.59, or 98%, from $0.60 in
  the comparable period of the prior fiscal period. The net loss per share decreased
  as a result of the decrease in the net loss being allocated over an increased
  number of shares outstanding and share equivalents in fiscal 2003 and also due
  to the decrease in net loss in fiscal 2003.

LIQUIDITY

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

During 2002 we financed our operations in part, from proceeds
  of sales of restricted common stock and loans from related parties and minority
  shareholders of UVS.

We expect that, during fiscal 2003, 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.

PART II Other Information

Item 1. Legal Proceedings

On
  October 20, 1998 a suit was filed in the Supreme Court of British Columbia by
  Thomas O' Flynn against the Company, Kenneth Fielding (the Company's 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
  the 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.

20

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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 has entered an Appearance in Court will file a defense
  against this claim and attempt to negotiate a settlement.

Item 2. Changes in Securities

During
  this quarter the Company issued the following shares for purchase of a Licensing
  Agreement

|Date      | Shares  | Residency   | Consideration    | Exemption
|--------- | ------- | ----------- | ---------------- | ---------
|          |         | Citizenship |                  |          
|          |         |             |                  |          
|Mar14/03  | 400,000 | CAN         | License Purchase | 144      
|          |         | CAN         | MagPower Systems |          
|          |         |             |                  |          
|          |         |             |                  |          
|Mar 28/03 | 600,000 | Swiss       | Annual Services  | S-8*     
|          |         | CAN         |                  |          

*Registered on S-8 on Mar 28, 2003

ITEM 3. Default upon Senior Securities

None

ITEM 4. Submissions of Matters to a vote of Security Holders

None

ITEM 5. Other Information

None

ITEM 6 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 (3)        |                 
|               |                                          |                 
|(10)(v)        | Sample Agreement among minority          |                 
|               | Shareholders of UV Systems               |                 
|               | Technology, Inc. and the Company         |                 
|               | each dated 2/28/97 (3)                   |                 
|               |                                          |                 
|(10)(vi)       | Marketing Distribution Agreement         |                 
|               | Between UV Systems Technology, Inc.      |                 
|               | and the Company (2)                      |                 
|               |                                          |                 
|(10)(vii)      | Sales Representation Agreement           |                 

21

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|            | 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 (6)                                      |               
|            |                                                          |               
|(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 filed on November                    |               
|            | 19, 2001(9)                                              |               
|            |                                                          |               
|(10)(xvii)  | Stock Exchange Agreement with Innovative                 |               
|            | Fuel Cell Technologies, Inc date Jan 14, 2003
      (10) |               
|            |                                                          |               
|(10)(xviii) | Sale of UV Systems Technology Inc to                     |               
|            | 65999 BC Ltd agreements dated Jan 15, 2003
      (11)    |               
|            |                                                          |               
|(10)(xx)    | Purchase of License Agreement between                    | Filed Herewith
|            | Innovative Fuel Cell Technologies, Inc                   | Electronically
|            | and MagPower Systems Inc on                              |               
|            | March 14, 2003 (12)                                      |               
|            |                                                          |               
|(10)(xxi)   | 2003 Benefit Plan of                                     |               
|            | UltraGuard Water Systems Corp (13)                       |               
|            |                                                          |               
|(11)        | Statement Regarding Computation                          | Filed Herewith
|            | of Per Share Earnings                                    | Electronically
|            |                                                          |               
|(21)        | Subsidiaries of the Corporation:                         |               
|            | UV Systems Technology, Inc.,                             |               
|            | incorporated in B.C.Canada                               |               
|            |                                                          |               
|(99.1)      | Certification of Ken Fielding, President and             |               
|            | Chief Executive Officer Pursuant to 18 U.S.C.            | Filed Herewith
|            | Section 1350, Section 906 of the                         | Electronically
|            | Sarbanes-Oxley Act of 2002.                              |               
|            |                                                          |               
|(99.2)      | Certification of John R Gaetz Vice President and         |               

22

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| |                                               |               
| | --------------------------------------------- | --------------
| |                                               |               
| | Chief Financial Officer Pursuant to 18 U.S.C. | Filed Herewith
| | Section 1350, Section 906 of the              | Electronically
| | Sarbanes-Oxley Act of 2002.                   |               

|(1  | ) | 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 Nov 19, 2001                                                     
|(10 | ) | Incorporated by reference to the Corporation's
      Form S-8 filed with the   
|    |   | Commission on Jan 14, 2003                                                     
|(11 | ) | Incorporated by reference to the Corporation's
      Form S-8 filed with the   
|    |   | Commission on Jan 15, 2003                                                     
|(12 | ) | Incorporated by reference to the Corporation's Form S-8 filed
      on         
|    |   | March 24, 2003                                                                 
|    |   |                                                                                

|(b) | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Company filed three reports on Form 8-K,
      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
        65999 BC Ltd on Dec 31, 2002. 
        On March 24, 2003 reporting the filing of the 2003 Benefit Plan of UltraGuard
        Water Systems Corp

23

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EXHIBIT 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
  PURSUANT 
  TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of UltraGuard Water
  Systems Corp on Form 10-QSB for the period ended March 31, 2003 as filed with
  the Securities and Exchange Commission, Ken Fielding, President and Chief Executive
  Officer, and John R Gaetz. Vice-President and Chief Financial Officer of UltraGuard
  Water Systems Corp, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted
  pursuant to Section 906 of the Sarban-Oxley Act of 2002, to our knowledge

|(1) | the quarterly report of
        UltraGuard Water Systems Corp for the period ended March 31, 2003, fully
        complies with the requirements of section 13(a) or 15 (d) of the Securities
        Exchange Act of 1934; and                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                           
|(2) | the information contained
        in such quarterly report of UltraGuard Water Systems Corp for the period
        ended March 31, 2003, fairly represents, in all material respects, the
        financial conditions and results of operations of UltraGuard Water Systems
        Corp.

| | /s/ Ken Fielding                          
| | ------------------------------------------
| | Ken Fielding                              
| | President and Chief Executive Officer     
| |                                           
| |                                           
| | /s/ John R Gaetz                          
| | John R Gaetz                              
| | Vice-President and Chief Financial Officer



24

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EXHIBIT 99.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
  PURSUANT 
  TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of UltraGuard Water
  Systems Corp on Form 10-QSB for the period ended March 31, 2003 as filed with
  the Securities and Exchange Commission, Ken Fielding, President and Chief Executive
  Officer, and John R Gaetz. Vice-President and Chief Financial Officer of UltraGuard
  Water Systems Corp, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted
  pursuant to Section 906 of the Sarban-Oxley Act of 2002, to our knowledge

|(1) | the quarterly report of
        UltraGuard Water Systems Corp for the period ended March 31, 2003, fully
        complies with the requirements of section 13(a) or 15 (d) of the Securities
        Exchange Act of 1934; and                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                           
|(2) | the information contained
        in such quarterly report of UltraGuard Water Systems Corp for the period
        ended March 31, 2003, fairly represents, in all material respects, the
        financial conditions and results of operations of UltraGuard Water Systems
        Corp.

| | /s/ Ken Fielding                          
| | ------------------------------------------
| | Ken Fielding                              
| | President and Chief Executive Officer     
| |                                           
| |                                           
| | /s/ John R Gaetz                          
| | John R Gaetz                              
| | Vice-President and Chief Financial Officer



25

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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: May 14, 2003 |  |                       
|------------------ |  | ----------------------
|                   |  | Ken Fielding, Director
|                   |  |                       
|                   |  |                       
|Date: May 14, 2003 |  |                       
|                   |  | John R Gaetz, Director



26

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CERTIFICATION PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE
  ACT OF1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-
  OXLEY ACT OF 2002

I, Ken Fielding, president and of UltraGuard Water Systems Corp
  certify that:

1.  I have reviewed this quarterly report on Form 10-KSB
  of UltraGuard Water Systems Corp.

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

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

4.  I am responsible for establishing and maintaining
  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
  and 15d-14) for the registrant and have:

a) Designed such disclosure controls and procedures to ensure
  that material information relating to the registrant, including its consolidated
  subsidiaries, is made known to me by others within those entities, particularly
  during the period in which this quarterly report is being prepared;) Evaluated
  the effectiveness of the registrant's disclosure controls and procedures as
  of a date within 90 days prior to the filing date of this quarterly report (the
  "Evaluation Date"); and c) Presented in this quarterly report our conclusions
  about the effectiveness of the disclosure controls and procedures based on my
  evaluation as of the Evaluation Date;

5.    I have disclosed, based on my most recent
  evaluation, to the registrant's auditors and the audit committee of registrant's
  board of directors (or persons performing the equivalent functions): a) All
  significant deficiencies in the design or operation of internal controls which
  could adversely affect the registrant's ability to record, process, summarize
  and report financial data and have identified for the registrant's auditors
  any material weaknesses in internal controls; and b) Any fraud, whether or not
  material, that involves management or other employees who have a significant
  role in the registrant's internal controls; and

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

Date: May 14, 2003

/s/ Ken Fielding
  Ken Fielding, President

27

---

CERTIFICATION PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE
  ACT OF1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-
  OXLEY ACT OF 2002

I, John R Gaetz, vice-president and chief financial officer of
  UltraGuard Water Systems Corp certify that:

1.  I have reviewed this quarterly report on Form 10-KSB
  of UltraGuard Water Systems Corp.

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

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

4.  I am responsible for establishing and maintaining
  disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
  and 15d-14) for the registrant and have:

a) Designed such disclosure controls and procedures to ensure
  that material information relating to the registrant, including its consolidated
  subsidiaries, is made known to me by others within those entities, particularly
  during the period in which this quarterly report is being prepared;) Evaluated
  the effectiveness of the registrant's disclosure controls and procedures as
  of a date within 90 days prior to the filing date of this quarterly report (the
  "Evaluation Date"); and c) Presented in this quarterly report our conclusions
  about the effectiveness of the disclosure controls and procedures based on my
  evaluation as of the Evaluation Date;

5.    I have disclosed, based on my most recent
  evaluation, to the registrant's auditors and the audit committee of registrant's
  board of directors (or persons performing the equivalent functions): a) All
  significant deficiencies in the design or operation of internal controls which
  could adversely affect the registrant's ability to record, process, summarize
  and report financial data and have identified for the registrant's auditors
  any material weaknesses in internal controls; and b) Any fraud, whether or not
  material, that involves management or other employees who have a significant
  role in the registrant's internal controls; and

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

Date: May 14, 2003

/s/ John R Gaetz
  John R Gaetz, Vice-President and Chief Financial Officer

28

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EXHIBIT 10(xx)

L I C E N S E   A G R E E M E N T

This LICENSE AGREEMENT made as of the 14thday of March
  2003 between INNOVATIVE FUEL CELL TECHNOLOGIES a corporation incorporated under
  the laws of the State of Nevada, United States of America with business offices
  located at 2ndFloor, 5763  203A Street Langley, British Columbia
  V3A 1W7 (hereinafter referred to as the Licensee).

and,

MAGPOWER SYSTEMS INC. a corporation incorporated under the laws
  of the Province of British Columbia, Canada with business offices located at
  340  6165 Highway 17, Delta, British Columbia V4K 5B8 (hereinafter referred
  to as the Grantor).

WHEREAS:

1.   The Grantor is the owner of certain technological
  knowledge with respect to the magnesium-air fuel cell as hereinafter defined;
  and

2.   The Licensee intends to manufacture or have
  manufactured the Product in the Territory hereinafter specified and desires
  a license from the Grantor under the Technology as hereinafter defined to be
  used exclusively with the Licensees ultra violet light water purification systems
  and for use in all ancillary applications to such water purification including,
  but not limited to the pumping of water, the filtering of water, the cleaning
  of water and all applications of a like nature used as part of any system that
  uses Ultra Violet light as part of the purification system.
  (hereinafter called the Licensees Technology)

IN CONSIDERATION of the mutual promises and covenants contained
  in this License Agreement, and other good and valuable consideration, the receipt
  and sufficiency of which is acknowledged, the parties agree as follows:

**1.  Definitions**In this License Agreement:

(a)  Product shall mean the 12-volt portable
  magnesium-air fuel cell Product (capable of producing 5 amps) or variations
  thereof as agreed between the Parties which agreement shall not be unreasonable
  withheld, to be manufactured by the Licensee or capable of being manufactured
  by the Licensee with the Grantors Technology for the exclusive use with
  the Licensees Technology.

(b)  Technology includes all technical information,
  intellectual property, patents, patents that are pending procedures, trademarks,
  trademark pending applications, copyrights, copyright pending applications,
  processes, trade secrets, methods, practices, techniques, information, bills
  of parts, diagrams, drawings, specifications, blue prints, lists of materials,
  labor and general costs, production manuals and data relating to the design,
  manufacture, production, inspection and testing of the Product.

(d)   Territory includes that Territory
  as outlined and described as follows:

Territory shall
  include the world wide rights and license to use the Product as a power source
  for Licensees Technology.
  The Licensee is hereby granted the right to request from the Grantor licensing
  rights for

29

---

the Product, other products and Technology designed for other applications
  other than for use with the Licensees Technology and will be confined
  to locations only where the Licensee has its Licensee Technology in operation.
  The terms and conditions and granting of any further licensing rights will be
  included as an amendment to this License Agreement.

**2.   Grant of License**

(1)   The Grantor grants to the Licensee the exclusive license in
  the Territory to use the Technology in the manufacture, use and sale of the
  Product exclusively with the Licensees Technology within the Territory.
  In addition Licensee shall, with the consent of the Grantor (not to be unreasonably
  withheld) be at liberty to sub-license others to manufacture and sell and install
  the Product for use with the Licensees Technology so long as any such
  sub-licensee has executed an industry standard non-disclosure agreement.

(2)  The Licensee acknowledges that some or all of the Technology
  has been disclosed and delivered to the Licensee in confidence prior to and
  in contemplation of the execution of this Licensee Agreement.

(3)  The obligation to furnish the Technology shall extend to Technology
  existing at the date of this License Agreement and as updated and modified from
  time to time.

(4)   The Grantor warrants that there are no other existing
  licenses under the Technology in the Territory as it relates to Licensees
  Technology and covenants that no further disclosure to third parties will be
  made by it of the Technology in the Territory while this License Agreement is
  in force.

(6)  The Grantor warrants that the Technology will be sufficient
  and suitable for the manufacture of the Product provided that the Licensee at
  all times conforms strictly with the Technology.

(7)  No further or different rights or licenses are granted or implied.

3.   Term of Agreement

Subject to the provisions for early termination as set out in this License
  Agreement, this License Agreement shall remain in full force and effect for
  a period of five (5) years from the date set forth above with an option to renew
  by Licensee without further license fee payable, for a further term of five
  (5) years. Provided further Licensee shall have the right to renew this License
  Agreement for two further five year terms, subject only to the Grantor and the
  Licensee, both acting reasonably, agreeing on a further licensing fee, royalty
  fee and revised annual production requirements for each of the second and third
  renewal periods.

4.   Improvements

(1)   Disclosure: Each party agrees to promptly disclose to
  the other any and all technical data and information relating to any and all
  developments or improvements of the Product (whether or not patentable) and
  of the Technology that it may develop or acquire during the term of this License
  Agreement to the extent that such disclosure is not restricted or prohibited
  by law, by any undertaking given to, or any condition, restriction or restraint
  imposed by third parties, or by considerations relating to the validity of any
  patent in respect of which application is about to be made.

(2) Grant Under Improvements: The Grantor shall grant to the Licensee
  an exclusive license to manufacture or have manufactured and sell the Product
  in the Territory under all improvements and developments to be furnished to
  the Licensee, together with an ancillary grant of the right to use any associated
  Technology, provided that in the case of any such improvement or development
  the disclosure of which by the Grantor is subject to any restrictions, legal
  prohibitions, undertakings given to or conditions, restrictions or restraints
  imposed by third parties or considerations relating to the validity of any patent
  in respect of which application is about to be made, any grant by the Grantor
  to the Licensee under this provision shall be limited accordingly.

30

---

(3)  Feed-back License: Under all developments or improvements of
  the Product to be furnished by the Licensee to the Grantor, the following additional
  terms shall apply:

(a) Outside the Territory, the Grantor shall have the exclusive royalty-free
  license (including the right to grant sublicenses) on any such improvements
  on the Product now owned, hereafter made, or acquired by the Licensee during
  the life of this License Agreement. The Licensee further covenants and agrees
  to notify the Grantor of any improvement and to execute promptly and without
  compensation any and all papers and documents and to perform whatever lawful
  acts may be reasonably deemed necessary by the Grantor in connection with the
  filing of any application for letters patent or that may be necessary or desirable
  to effect and maintain the Grantors licensed rights or the rights of any
  of the Grantors sub-licensees in said improvements and said applications
  for letters patent and in all letters patent issuing from said applications
  for letters patent.

(b)  Inside the Territory, the Licensee shall have the exclusive
  royalty-free license to manufacture and sell the Product incorporating or constituting
  such developments or improvements. Provided that in the case of any such improvement
  or development the disclosure of which by the Licensee is subject to any restriction,
  legal prohibitions, undertakings given to or conditions, restrictions or restraints
  imposed by third parties, or considerations relating to the validity of any
  patent in respect of which application is about to be made. Any grant by the
  Licensee to the Grantor shall be limited accordingly.

5.   Obligations of the Grantor

(1) Technical Assistance: Upon the written request of the Licensee, the
  Grantor shall render all Technology, training and technical assistance necessary
  to be provided by the Grantor under this Agreement at times and places mutually
  agreed upon and subject to the availability of the Grantors personnel
  and facilities. The Grantor does not warrant or agree that any of its personnel
  to be furnished or to be made available to the Licensee under this Agreement
  will speak any language other than English. The Licensee shall obtain all necessary
  visas, work permits, residence permits or other permits or approvals necessary
  for the entry into and working in the Territory of all technical personnel who
  are to be provided by the Grantor under the terms of this Agreement. The Licensee
  shall reimburse the Grantor for the costs with respect to any employees sent
  to and maintained in the Territory under this paragraph. Such reimbursement
  shall be made by the Licensee in Canadian currency and shall be in the amount
  of the total of the following:

(a)  the expenses of the personnel in traveling to, in and around
  and from Territory; and

(b)  the ordinary living expenses of the personnel while in the Territory.

The Licensee further agrees to reimburse the Grantor for the aforementioned
  costs and expenses within thirty days following receipt of the Grantors
  invoice.

(2) Verification Testing: The Grantor shall perform a verification test
  on the Product manufactured in accordance with the Technology. If the verification
  test indicates that the manufacture of the Product is in conformity with the
  technical specifications of the Technology, the verification test shall be considered
  to have been successfully completed. In the event that the verification is not
  successfully completed, the Grantor shall analyze the causes and take the necessary
  measures to eliminate the defects.

(3) Grantor agrees to sell to Licensee, at Grantors distribution price,
  for each product manufactured, the hydrogen inhibitor which is the exclusive
  technology retained by Grantor.

(4) To deliver the Technology to the Licensee

6.  Compliance with Local Laws

The Licensee shall ensure that any registration or notification required by
  the laws of the Territory shall have been carried out. The Licensee shall comply
  with all laws and regulations as

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may apply with the Territory, as applicable to this License Agreement and all
  transactions and activities contemplated or to be performed under this License
  Agreement, and shall procure and maintain all approvals, licenses, permissions
  and permits necessary to the performance of its business and conduct its business
  in a manner so as to not bring discredit upon the reputation of the Product
  or the Grantor. The Licensee shall keep the Grantor informed of any laws or
  regulations of the Territory which may affect the promotion, sales, services
  or maintenance of the Product in order that the Grantor will not breach any
  such laws or regulations through lack of awareness thereof.

7.  Licensees Prohibitions

(1)        Advertising: The Licensee shall
  not advertise the Product except in relation to its use with the Licensees
  Technology.

**8.** Consideration

(1)  Initial Payments: The Licensee agrees to pay the Grantor the
  amount of One Hundred Thousand ($100,000.00 CDN) Dollars CDN under the following
  terms and conditions:

|A) | Contemporaneously with the signing of this Agreement, the
      Licensee shall pay to Grantor the amount of Five Thousand ($5,000.00 CDN)
      Dollars CDN; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|B) | On or before April 1st, 2003 Licensee shall pay
      to Grantor the amount of Five Thousand ($5,000.000) Dollars CDN; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|C) | Commencing May 1st, 2003 Licensee shall pay to
      Grantor on the first day of each and every applicable month the amount of
      Seven Thousand Five Hundred ($7,500.00) Dollars CDN. Applicable month shall
      include and mean each and every month up to and including the month that
      Grantor provides the technical drawing (hereinafter referred to as the Technical
      Drawings) for the Product to the Licensee. Upon receipt of the Technical
      Drawings, Licensee shall then pay to Grantor on the first day of every month
      thereafter the amount of Fifteen Thousand ($15,000.00) Dollars CDN until
      the accumulative total Initial Payment has been received by Grantor.

Said payments are payable in Canadian dollars to the bank branch and account designated by the Grantor.

(2) Royalties: As consideration for the license granted under the Technology, the Licensee agrees to pay Grantor during the term of this License Agreement an ongoing royalty of Twenty Five ($25.00 CDN) Dollars CDN for each Product manufactured. Such
Royalties shall be payable on a quarterly basis with a minimum number of units per annum of Two Thousand (2,000), with said minimum commencing in the second year of the term of this Licensing Agreement.

(3) Contemporaneously with the signing of this Agreement the Licensee shall issue to the Grantor free and clear of any liens and/or encumbrances except as required under SEC Security Regulatory Requirements, Two Hundred Thousand (200,000) common
shares of UltraGuard Water Systems Corp. On May 1st, 2003 Licensee shall issue to the Grantor free and clear of any liens and/or encumbrances except as required under SEC Security Regulatory Requirements One Hundred Thousand (100,000)
common shares of UltraGuard Water Systems Corp. Upon receipt of the technical drawings, Licensee shall issue to the Grantor free and clear of any liens and/or encumbrances except as required under SEC Security Regulatory Requirements One Hundred
Thousand (100,000) common shares of UltraGuard Water Systems Corp.

(4) Interest on Late Payments: Interest on all late initial payments, royalties and any other sums due to the Grantor shall be charged at the rate of 3% per month until payment is received. (5) No Deductions for Tax: Always respecting the tax
payments requirements within the domicile country of the Licensee and the Grantor and all requirement as and if they apply to paying taxes on payments to be made by Licensee to Grantor, all payments to the Grantor shall be made without any deduction
of any kind on the payments under this License Agreement. The

32

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Licensee undertakes to take all reasonable steps to assist the Grantor to obtain
  the benefit of any double taxation, which may apply to any of the payments under
  this License Agreement and to minimize the impact of any taxation in respect
  of such payments.

**9.** Currency of Payment

(1)  Where Convertible or Not: Except as otherwise specified in this
  License Agreement, all payments required to be made by or on behalf of the Licensee
  under this License Agreement shall be converted to and paid in Canadian dollars,
  based on the prevailing buying foreign exchange rate for Canadian
  dollars at the Bank of Montreal on the date any such payment is due, and shall
  be paid to the Grantor or to such account or accounts at such bank or banks
  as the Grantor may in its sole discretion designate from time to time and the
  Grantor shall give the Licensee thirty days written notice of any such
  change in place of payment. In the event that the Licensee is late in making
  any payment due pursuant to this License Agreement, then, in addition to any
  interest charges that may accrue thereon in accordance with this License Agreement,
  the exchange rate to be applied to any such late payment shall be the Grantors
  most favorable buying foreign exchange rate at the Bank Of Montreal
  at any time during the period commencing on the date that the payment was due
  and the date such payment was actually made.

(2)  Restrictive Currency Laws: If any law or regulation is imposed
  in the Territory restricting or limiting the right of the Licensee to make payment
  to the Grantor as provided in this License Agreement, the Licensee shall immediately
  notify the Grantor of any such restrictions or limitations and shall use its
  best efforts to register or qualify this License Agreement under any such law
  or regulation in order to allow the Licensee to make full payment to the Grantor
  as provided in this License Agreement. The Licensee agrees to modify any terms
  or conditions of this License Agreement, which would not unreasonably interfere
  with its utilization of the rights granted under this License Agreement, if
  such modifications are necessary in order to allow the Licensee to make full
  payment to the Grantor. If the License Agreement cannot be modified to the satisfaction
  of both parties so as to allow the Licensee to obtain sufficient exchange to
  make its required payments, then in that event the Grantor shall have the option
  of accepting payment in any other authorized currency acceptable to the Grantor
  and designated by the Grantor to the Licensee in writing or the Grantor may
  terminate this License Agreement upon Sixty (60) days notice thereof to
  the Licensee.

10.   Grantors Warranty and Indemnity re: Technology

(1)   Power to Grant Rights: The Grantor warrants that it has
  the right to grant the rights granted in this License Agreement and that it
  has granted no other rights or licenses other than as outlined and contained
  herein, which would derogate from the rights granted in this License Agreement.

(2)  Modified Products: The Grantor shall have no obligation to defend
  the Licensee or to pay costs, damages or legal fees for any claim based on any
  modifications made to the Product by the Licensee.

**11.  Licensees Indemnity of Grantor**

The Licensee agrees to indemnify and hold the Grantor harmless against any
  liability, damage or expense (including costs and attorneys fees and expenses)
  by reason, or arising out of or relating to any acts, duties or obligations
  or omissions of the Licensee or of any personnel employed or otherwise engaged
  by the Licensee to perform the Licensees obligations and duties under
  this License Agreement, and the Licensee shall, at the request of the Grantor
  assume the defense of any demand, claim, action, suit or proceeding brought
  against the Grantor by reason thereof and pay any and all damages assessed against
  or that are pay able by the Grantor as the result of the disposition of any
  such demand, claim, action, suit or proceeding.

Notwithstanding the foregoing, the Grantor may be represented in any such action,
  suit or proceeding at its own expense and by its own counsel.

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**12.** Confidentiality

(1)  Confidential Information: All information, including the Technology,
  other than information generally known in industry or information made known
  by a third party to the Licensee other than a consequence of the Licensees
  relationship with the Grantor (Confidential Information) supplied
  by or on behalf of the Grantor pursuant to this License Agreement shall be treated
  as confidential by the Licensee and shall be used solely to enable the Licensee
  to manufacture, use, sell and develop a market for the Products in accordance
  with this License Agreement, and all documents containing or disclosing such
  Confidential Information shall at all times be and remain the property of the
  Grantor; provided, how ever, that the Grantor shall not during the continuance
  of this License Agreement demand the delivery of such documents from the Licensee.

(2)   Duty Not to Disclose: The Licensee covenants and agrees
  that no Confidential Information given to it by or on behalf of the Grantor
  in the manner described or otherwise shall be disclosed to anyone outside the
  organization of the Licensee without the prior written consent of the Grantor.

(3)  Reasonable Efforts: The Licensee agrees to use all reasonable
  efforts to take such action as may be appropriate to prevent the unauthorized
  use and disclosure of, and to keep confidential all such Confidential Information,
  including:

(a)  ensuring that such Confidential Information is disclosed only
  to responsible employees of the Licensee who have first been properly instructed
  to maintain such Confidential Information in confidence;

(b)   not disclosing to any third party the terms and conditions
  of this License Agreement;

(c)  not disclosing methods of manufacture or sale of the Products
  including production and marketing plans; and

(d)  safeguarding all documents against theft, damage or access by
  unauthorized persons.

**13.   Books and Records**

(1) Duty to Keep Books: The Licensee shall keep at its principal place
  of business, clear and proper books of account showing manufacturing of Product
  subject to royalties under this License Agreement and agrees that within thirty
  (30) days following the last day of March, June, September and December, it
  will submit a written statement giving the total manufacturing of the Product
  for the quarter being reported.

(2)   Right of Access to Books: The Grantor shall have access
  to the books and records of the Licensee at all reasonable times to check all
  relevant figures and information affecting or relating to the Licensees
  operations under this License Agreement, including the amount of manufacturing
  of the Product made under this License Agreement by the Licensee and the amount
  of royalties payable under this License Agreement; provided, however, that if
  both the Grantor and the Licensee agree upon an independent agency such as a
  firm of chartered accountants to represent them, either the Grantor or the Licensee
  may at its election substitute for the Grantors examination a certificate
  of the mutually agreed-upon firm of accountants as to the amount of said Product
  manufactured and the amount of royalties payable hereunder and as to any other
  information and figures that determine or relate to the operations of the Licensee
  under this License Agreement. The Licensee shall supply the Grantor with a statement
  of its regular auditors at the time of its regular yearly audit, certifying
  the number of Product manufactured and the amount of royalties payable under
  this License Agreement.

(3)   Right to Access after Termination: Notwithstanding termination
  of this Agreement, the Licensee shall permit such examinations to continue to
  take place until all outstanding claims have been settled to the satisfaction
  of the Grantor.

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14.   Excusable Delay

Neither party shall be responsible for the failure or delay in performing
  any of its obligations due, directly or indirectly, by act of God, act of public
  enemy, act of terrorism, acts of governmental bodies or agencies foreign or
  domestic (including inability to procure materials or to manufacture or ship
  ordered goods because of governmental priority orders or allocations or restrictions
  upon the use of materials or manpower), port congestion, nuclear incidents,
  sabotage, riot, fire, floods, typhoons or unusually severe weather, earthquakes,
  explosions or other catastrophes, epidemics or quarantine restrictions, strikes,
  labor unrest or labor shortages, accident, freight embargoes, delays occasioned
  by carriers or delays of a supplier of materials, components, facilities, energy,
  fuel, transportation, governmental authorizations or instructions, material
  or information required from the one of the parties to the other, or because
  of any other causes beyond either partys control, in whole or in part.

15.   Licensees Status

(1)    Buyer and Seller Only: The relationship between
  the Licensee and the Grantor is intended to be and shall be that of buyer and
  seller, and the Licensee and its employees, agents and representatives shall
  under no circumstances be considered agents, partners, joint venturers or representatives
  of the Grantor. The Licensee shall not act or attempt to act, or represent itself,
  directly or by implication, as agent, joint venturer, partner or representative
  of the Grantor or in any manner assume or attempt to assume or create any obligation
  or liability of any kind, nature or sort, express or implied, on behalf of or
  in the name of the Grantor.

(2)   No Franchise: The relationship created by this License
  Agreement does not constitute the granting of a franchise to the Licensee by
  the Grantor and no federal or provincial franchise statute, law, regulation
  or rule is intended to or has been applied by the parties, nor shall any such
  franchise, statute, law, regulation or rule be deemed or construed to apply
  to the formation, operation, administration or termination of this License Agreement.

(3)   This License Agreement shall remain in full force and
  effect if either of the following should occur:

a) If there is
  an ownership change of the Grantor; or

b) If the Grantor
  files for bankruptcy or insolvency proceedings are instituted by or against
  the Grantor.

16.   Term and Termination

(1)   Either party may terminate this Agreement without notice or
  other act if:

(a)   the other party is in default in any material respect
  in the performance of any of its obligations under this License Agreement or
  otherwise commits any material breach of this License Agreement, and such default
  continues after thirty (30) days written notice from the non-defaulting party
  to the defaulting party stating the particulars of such default (for the purposes
  in this License Agreement, any failure to make any payment due shall be a material
  default);

(b)  bankruptcy or insolvency proceedings are instituted by or against
  the Licensee, which the Licensee does not defend or which it is not successful
  in defending, or the Licensee is adjudicated a bankrupt, becomes insolvent,
  makes an assignment for the benefit of creditors or proposes or makes any arrangements
  for the liquidation of its debts or a receiver or receiver and manager is appointed
  with respect to all or any part of the assets of the other party;

(c)  any sovereign entities or political subdivisions in the Territory
  enacts legislation relating to the relationship created by this License Agreement
  which grants rights to the Licensee which are not granted by this License Agreement,
  this License Agreement shall terminate automatically one (1) day prior
  to the date such legislation becomes effective; or

(d)    in the event an excusable delay fails to permit
  either party to fulfill its obligations after a delay of six (6) months after
  the date the obligation would have been required to have been fulfilled but
  for the occurrence of the excusable delay.

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(2) The Grantor may terminate this License Agreement without notice or
  other act if:

(a)   the Licensee assigns or purports to assign this License
  Agreement with out the prior written consent of the Grantor (which consent shall
  not be unreasonably withheld).

17.  Events upon Termination

(1)   Upon termination of this License Agreement for any cause whatsoever:

(a) all Royalties, including Royalties on the Product then on hand or
  in the course of manufacture, shall immediately become due and payable;

(b)  the Licensee shall forthwith, and not later than thirty (30)
  days thereafter, return free of any charge to the Grantor, all written information
  of whatever kind, including graphic and electronically or magnetically recorded
  documents furnished by the Grantor or created by the Licensee in relation to
  the Product including, without limitation, notes, memoranda, diaries, records,
  drawings, prints, sketches, plans, specifications and other technical information
  made by the Licensee or its agents, affiliates or employees and copies of any
  kind made thereof by anybody, and derived from the Technology, the Product or
  the manufacture thereof; further, the Licensee agrees that it will forthwith
  discontinue the use of and refrain from using, disclosing or exploiting the
  Technology and any technical data and information pertaining thereto or any
  improvement or development in respect thereof disclosed to it under this License
  Agreement by the Grantor and from manufacturing or selling the Product; and

(c)  the Licensee shall cease trading in the Product and shall notify
  all dealers and other interested parties of the termination. The Licensee shall
  further cease to make any representations to the public that it is an authorized
  manufacturer of the Product.

(2)   Notwithstanding any such termination:

(a) all warranties set out in this License Agreement and all obligations
  of indemnification shall survive and continue to bind the parties for two (2)
  years after the date of termination of this License Agreement;

(b) the Licensee shall honour any remaining payment obligations set out
  in this License Agreement; and

(c) the Licensee shall be permitted to sell all Product manufactured prior
  to the termination, provided such sales are completed by delivery of goods and
  receipt of payment therefore within four (4) months of the date of such termination
  and are subject to the payment obligations as set out in this License Agreement.

18.  Conformity with Local Laws

(1)  Modifications on Non-conformance: The rights and obligations
  of the parties under this License Agreement shall be subject to all applicable
  laws, orders, regulations, directions, restrictions and limitations of the governments
  having jurisdiction of the parties. In the event, however, that any law, order,
  regulation, direction, restriction or limitation, expropriation, seizure or
  interpretation thereof shall in the judgment of either party substantially alter
  the relationship between the parties under this License Agreement or the advantages
  derived from such relationship, either party may request the other party to
  modify this License Agreement, and if, within fifteen (15) days subsequent to
  making such request the parties are unable to agree on a mutually satisfactory
  modification of this License Agreement, then the adversely affected party may
  terminate this License Agreement on fifteen (15) days notice given to the other
  party, not later than thirty (30) days following the end of such thirty (30)
  day period.

(2)  Recording of Licensing Agreement: The parties shall each at
  its own expense in its own countries, take such steps as may be required to
  satisfy the laws and requirements of the respective countries with respect to
  declaring, recording or otherwise rendering this License Agreement valid.

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19. Disclosure

This License Agreement may be filed with any governmental agency or official as determined to be appropriate by either party.

20. Dispute Resolution

One or more arbitrators appointed in accordance with the said Rules shall finally settle all disputes arising in connection with this License Agreement or any modifications thereof under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce.

21. Assignment

This License Agreement shall not be assigned, transferred or conveyed by the Licensee. The Licensee acknowledges that the Grantor may assign this License Agreement to an affiliate or subsidiary and Grantor shall notify Licensee upon completion of
said assignment.

22. Language

Upon execution, this License Agreement may be translated into any language of the Territory provided, however, that in the event of any diversion between the English version and any other version, the English version shall prevail.

23. Extended Meanings

Words importing the singular number include the plural and vice versa and words importing gender include all genders.

24. Interpretation not Affected by Headings

The division of this License Agreement into paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this License Agreement.

25. Applicable Law

This License Agreement is made, executed, and delivered in Vancouver, Canada, and any controversy arising hereunder or in relation to this License Agreement shall be governed by and construed in accordance with the domestic laws of the Province of
British Columbia, Canada. The parties hereto hereby agree that the application of the United Nations Convention on Contracts for the International Sale of Goods to this License Agreement does not apply and is strictly excluded.

26. Entire License Agreement

This License Agreement constitutes the entire License Agreement of all the parties with respect to the subject-matter hereof and, except as stated in this License Agreement and in the instruments and documents to be executed and delivered pursuant
to this License Agreement, contains all of the representations, undertakings and agreements of all parties respecting the subject matter hereof. There are no representations, undertakings or agreements of any kind between all the parties respecting
the subject matter hereof except those contained in this License Agreement.

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28.   Severability

The invalidity or unenforceability of any provision of this License Agreement
  shall not affect the validity or enforceability of any other provision.

29.   Currency

Unless otherwise specifically provided in this License Agreement, all references
  to dollar amounts herein or other money amount are expressed in terms of lawful
  money of Canada.

30.   Notices

(1)  Any notice or other documents required or permitted to be given
  under this License Agreement shall be in writing and shall be delivered, mailed
  by pre-paid registered mail, return receipt requested or sent by facsimile transmission
  addressed to the party or parties to whom it is to be given at the address shown
  below or at such other address or addresses as the party or parties to whom
  such writing or document is to be given shall have last notified all other parties
  in accordance with the provisions of this paragraph:

|(a) if to the Licensee at:             
|---------------------------------------
|                                       
|2ndFloor                               
|                                       
|5763
       203A Street,              
|                                       
|Langley,
      British Columbia V3A 1W7
|                                       
|Canada                                 
|                                       
|                                       
|                                       
|(b) if to the Grantor at:              
|                                       
|6165
      Highway 17,                 
|                                       
|Suite
      340,                       
|                                       
|Delta,
      British Columbia V4K 5B8  
|                                       
|Canada                                 

(2)  Any such notice or other document shall:

(a) if delivered, be deemed to have been given and received at the place
  of receipt on the date of delivery, provided that if such date is a day other
  than a business day in the place of receipt, such notice or document shall be
  deemed to have been given and received at the place of receipt on the first
  business day thereafter;

(b) if transmitted by facsimile transmission, be deemed to have been given
  and received at the place of receipt on the next business day in the country
  of receipt, following the day of sending, provided that the sender has received
  telephone confirmation from the recipient of receipt of same on or before the
  date transmission is deemed to have been received as above, and

(c)    if mailed, be deemed to have been given and received
  at the place of receipt on the date of actual receipt.

(3)  In the event of postal disruption, such notices or documents
  must either be delivered personally or sent by facsimile transmission.

31. Amendment of License Agreement

None of the terms, conditions or provisions of this License Agreement shall
  be held to have been

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changed, waived, varied, modified or altered by any act or knowledge of either party, their respective agents, servants or employees unless done so in writing signed by both parties.

32. Waiver of Breach

No waiver on behalf of any part of any breach of the provisions of this License Agreement shall be effective or binding on such party unless the same shall be expressed in writing and any waiver so expressed shall not limit or affect such
partys rights with respect to any future breach of any of the provisions of this License Agreement.

33. Further Assurances

Each of the parties covenants and agrees that he, his heirs, executors, administrators, successors and permitted assigns will execute such further documents and do and perform or cause to be done and performed such further and other acts as may be
necessary or desirable from time to time in order to give full effect to the provisions of this License Agreement.

34. Successors and Assigns

This License Agreement shall be binding on and enure to the benefit of the successors and assigns of both parties and all persons or corporations succeeding to or acquiring the business now carried on by the Grantor or the Licensee.

35. Time

When calculating the period of time within which or following which any act is to he done or step taken the date, which is the reference day in calculating such period, shall be excluded.

36. Time of the Essence

Time shall be of the essence of this License Agreement.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.

|MagPower Systems Inc    |  | Innovative Fuel Cell Technologies
|----------------------- |  | ---------------------------------
|                        |  |                                  
|                        |  |                                  
|                        |  |                                  
|                        |  |                                  
|Shawn A. McGroarty, CEO |  |                                  

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|EXHIBIT 11                     
|-------------------------------
|                               
|                               
|                               
|                               
|UltraGuard water Systems Corp. 
|Computation of Per-Share Income
|Treasury Stock Method          
|As Modified for 20% Test       

|                                                                                                                                                                                                                                                                                                                      |   | Period Ended   |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | -
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   | March 31, 2003 |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|Weighted average number of shares outstanding                                                                                                                                                                                                                                                                         |   | 11,852,565     |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|Total common and common equivalent shares                                                                                                                                                                                                                                                                             |   | 11,852,565     |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|Net income (loss) for the period                                                                                                                                                                                                                                                                                      | $ | (156,585       | )
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|Loss per common and common equivalent shares                                                                                                                                                                                                                                                                          | $ | (0.01          | )
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|                                                                                                                                                                                                                                                                                                                      |   |                |  
|Earnings per share:
      The earnings per share are computed by dividing the net income (loss)
        for the period by the weighted average number of common shares outstanding
        for the period. Common stock equivalents are excluded from the computation
        if their effect would be anti-dilutive. |   |                |  



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