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

FORM 10-QSB

x  Quarterly Report
    Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 For the quarterly period ended June 30, 2005  ̈ Transition
    Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 For the transition period ________ to ________ Commission file number **000-21753** CREATIVE EATERIES CORPORATION
    Name of Small Business Issuer in Its CharterFormerly
    ULTRAGUARD WATER SYSTEMS CORP.


|**NEVADA**                             | **88-0263701**    
|-------------------------------------- | ------------------
|State of Incorporation                 | I.R.S. Employer   
|                                       | Identification No.
|                                       |                   
|**7400 E. McDONALD, SUITE 121**        |                   
|**SCOTTSDALE, AZ**                     | **85250**         
|Address of Principal Executive Offices | Zip code          

**480-355-8149**Issuer's Telephone Number

Securities registered under Section 12(b) of the Act:

NONE

Securities registered under Section 12(g) of the Act:

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

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

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

The number of shares outstanding of the issuer's only class of Common Stock $0.001 par value was 35,031,285 on August 16, 2005

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INDEX

|PART I | Financial Information
|------ | ---------------------

|Item 1. CONSOLIDATED
      FINANCIAL STATEMENTS                                                                      |                                                          
|-------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------
|                                                                                                                     |                                                          
|Consolidated
      Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004 (audited)                    | 3                                                        
|                                                                                                                     |                                                          
|Consolidated
      Statements of Operations for the six-month periods ended June 30, 2005 and
      2004 (unaudited) | 4                                                        
|                                                                                                                     |                                                          
|Consolidated
      Statements of Cash Flows for the six-month periods ended June 30, 2005 and
      2004 (unaudited) | 5                                                        
|                                                                                                                     |                                                          
|Notes to the
      Consolidated Financial Statements                                                                 | 6 to 16                                                  
|                                                                                                                     |                                                          
|Item 2. MANAGEMENTS
      DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS                 | 17 to 21                                                 
|                                                                                                                     |                                                          
|Item 3. CONTROL
      AND PROCEDURES                                                                                 | 22                                                       
|                                                                                                                     |                                                          
|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                                                                                                           | 26                                                       

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Item 1. Consolidated Financial Statements

Index to Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

3

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|Creative Eateries Corporation           
|----------------------------------------
|(formerly Ultraguard Water Systems Corp)
|(A Development Stage Company)           
|Consolidated Balance Sheets             
|(Expressed in US dollars)               

|                                                |  | June 30,    |  |  | December 31, | 
|----------------------------------------------- |  | ----------- |  |  | ------------ | 
|                                                |  | 2005        |  |  | 2004         | 
|                                                |  | $           |  |  | $            | 
|                                                |  | (unaudited) |  |  | (audited)    | 
|ASSETS                                          |  |             |  |  |              | 
|Current Assets                                  |  |             |  |  |              | 
|Cash                                            |  | 5,678       |  |  | 1,877        | 
|Accounts receivable                             |  | 7,207       |  |  | 4,645        | 
|Prepaid
      expenses and deposits             |  | 4,768       |  |  | 1,268        | 
|                                                |  |             |  |  |              | 
|Total Current Assets                            |  | 17,653      |  |  | 7,790        | 
|                                                |  |             |  |  |              | 
|Property and Equipment (Note 4)                 |  | 609         |  |  | 140          | 
|                                                |  |             |  |  |              | 
|Assets Held for Sale
      (Note 1)             |  | 83,161      |  |  | 83,161       | 
|Total Assets                                    |  | 101,423     |  |  | 91,091       | 
|                                                |  |             |  |  |              | 
|LIABILITIES AND STOCKHOLDERS DEFICIT           |  |             |  |  |              | 
|Current Liabilities                             |  |             |  |  |              | 
|Accounts payable                                |  | 187,816     |  |  | 208,937      | 
|Accrued liabilities                             |  | 57,795      |  |  | 60,793       | 
|Loans payable (Note 5)                          |  | 189,910     |  |  | 389,265      | 
|Amounts
      owing to related parties (Note 6) |  | 445,541     |  |  | 347,265      | 
|Total Current Liabilities                       |  | 881,062     |  |  | 1,006,260    | 

|Contingencies (Notes 1 and 9)                                   |  |             |  |  |             | 
|--------------------------------------------------------------- |  | ----------- |  |  | ----------- | 
|Subsequent Events (Note 10)                                     |  |             |  |  |             | 
|                                                                |  |             |  |  |             | 
|Stockholders Deficit                                           |  |             |  |  |             | 
|                                                                |  |             |  |  |             | 
|Common stock, (Note 7)                                          |  |             |  |  |             | 
|100,000,000 shares authorized, with a par
      value of $0.001 |  |             |  |  |             | 
|608,918 and 333,586 issued and outstanding,
      respectively  |  | 609         |  |  | 334         | 
|                                                                |  |             |  |  |             | 
|Additional paid-in capital                                      |  | 904,011     |  |  | 673,603     | 
|                                                                |  |             |  |  |             | 
|Deferred compensation                                           |  | (12,688)    |  |  | (55,917)    | 
|                                                                |  |             |  |  |             | 
|Deficit                                                         |  | (1,671,571) |  |  | (1,533,189) | 
|Total Stockholders
      Deficit                               |  | (779,639)   |  |  | (915,169)   | 
|Total Liabilities
      and Stockholders Deficit               |  | 101,423     |  |  | 91,091      | 

(The accompanying notes are an integral part of these consolidated
  financial statements)

4

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|Creative Eateries Corporation           
|----------------------------------------
|(formerly Ultraguard Water Systems Corp)
|(A Development Stage Company)           
|Consolidated Statements of Operations   
|(Expressed in US dollars)               
|(unaudited)                             

|                                                    |  | Accumulated from    |   |  |              |   |  |              |   |  |            |   |  |            |  
|--------------------------------------------------- |  | ------------------- | - |  | ------------ | - |  | ------------ | - |  | ---------- | - |  | ---------- | -
|                                                    |  | September 30, 2002  |   |  | Three Months |   |  | Three Months |   |  | Six Months |   |  | Six Months |  
|                                                    |  | (Date of Inception) |   |  | Ended        |   |  | Ended        |   |  | Ended      |   |  | Ended      |  
|                                                    |  | to June 30,         |   |  | June 30,     |   |  | June 30      |   |  | June 30,   |   |  | June 30,   |  
|                                                    |  | 2005                |   |  | 2005         |   |  | 2004         |   |  | 2005       |   |  | 2004       |  
|                                                    |  | $                   |   |  | $            |   |  | $            |   |  | $          |   |  | $          |  
|Project Revenue                                     |  | 52,839              |   |  | 5,135        |   |  | 100          |   |  | 5,135      |   |  | 14,519     |  
|                                                    |  |                     |   |  |              |   |  |              |   |  |            |   |  |            |  
|Project Costs                                       |  | 34,696              |   |  |             |   |  |             |   |  |           |   |  | 728        |  
|Total Gross Profit                                  |  | 18,143              |   |  | 5,135        |   |  | 100          |   |  | 5,135      |   |  | 13,791     |  
|                                                    |  |                     |   |  |              |   |  |              |   |  |            |   |  |            |  
|Expenses                                            |  |                     |   |  |              |   |  |              |   |  |            |   |  |            |  
|Foreign exchange loss                               |  | 29,020              |   |  |             |   |  |             |   |  |           |   |  |           |  
|General and administrative                          |  | 1,566,825           |   |  | 102,540      |   |  | 207,635      |   |  | 219,260    |   |  | 401,003    |  
|Interest                                            |  | 124,709             |   |  | 10,366       |   |  | 8,306        |   |  | 23,054     |   |  | 16,051     |  
|Provision for lawsuit (Note 9(d))                   |  | 27,000              |   |  |             |   |  |             |   |  |           |   |  |           |  
|Stock-based
      compensation                      |  |                    |   |  |             |   |  | 28,368       |   |  |           |   |  | 56,735     |  
|Total Expenses                                      |  | 1,747,554           |   |  | 112,906      |   |  | 244,309      |   |  | 242,314    |   |  | 473,789    |  
|                                                    |  |                     |   |  |              |   |  |              |   |  |            |   |  |            |  
|Net Loss from Operations                            |  | (1,729,411          | ) |  | (107,771     | ) |  | (249,209     | ) |  | (237,179   | ) |  | (459,998   | )
|                                                    |  |                     |   |  |              |   |  |              |   |  |            |   |  |            |  
|Gain on Debt Settlement                             |  | 98,797              |   |  |             |   |  |             |   |  | 98,797     |   |  |           |  
|Net Loss Before Discontinued Operations             |  | (1,630,614          | ) |  | (107,771     | ) |  | (249,209     | ) |  | (138,382   | ) |  | (459,998   | )
|                                                    |  |                     |   |  |              |   |  |              |   |  |            |   |  |            |  
|Loss from Discontinued
      Operations (Note 1)    |  | (40,957             | ) |  |             |   |  |             |   |  |           |   |  |           |  
|Net Loss for the Period                             |  | (1,671,571          | ) |  | (107,771     | ) |  | (249,209     | ) |  | (138,382   | ) |  | (459,998   | )
|Net Loss Per Share
       Basic and Diluted        |  |                     |   |  | (0.18        | ) |  | (1.02        | ) |  | (0.29      | ) |  | (1.96      | )
|Weighted Average Number
      of Shares Outstanding |  |                     |   |  | 596,638      |   |  | 244,620      |   |  | 469,739    |   |  | 234,350    |  

(The accompanying notes are an integral part of these consolidated
  financial statements)

5

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|Creative Eateries Corporation           
|----------------------------------------
|(formerly Ultraguard Water Systems Corp)
|(A Development Stage Company)           
|Consolidated Statements of Cash Flows   
|(Expressed in US dollars)               
|(Unaudited)                             

|                                                                                               |  | Six Months     |   |  | Six Months     |  
|---------------------------------------------------------------------------------------------- |  | -------------- | - |  | -------------- | -
|                                                                                               |  | Ended June 30, |   |  | Ended June 30, |  
|                                                                                               |  | 2005           |   |  | 2004           |  
|                                                                                               |  | $              |   |  | $              |  
|Cash Flows Used In Operating Activities                                                        |  |                |   |  |                |  
|                                                                                               |  |                |   |  |                |  
|Net loss                                                                                       |  | (138,382       | ) |  | (459,998       | )
|                                                                                               |  |                |   |  |                |  
|Adjustments to reconcile net loss to net
      cash provided by (used in) operating activities |  |                |   |  |                |  
|Gain on debt settlement                                                                        |  | (98,797        | ) |  |               |  
|Depreciation and amortization                                                                  |  | 44             |   |  | 27             |  
|Shares issued to settle
      debt and expenses                                                |  | 230,683        |   |  | 277,367        |  
|Loan interest accrued                                                                          |  |               |   |  | 8,531          |  
|Amortization of deferred
      compensation and other stock-based                              |  |                |   |  |                |  
|compensation                                                                                   |  | 43,229         |   |  | 56,735         |  
|                                                                                               |  |                |   |  |                |  
|Changes in operating assets and liabilities                                                    |  |                |   |  |                |  
|(Increase) in accounts
      receivable                                                        |  | (2,562         | ) |  | (105           | )
|(Increase) decrease
      in prepaid expenses and deposits                                     |  | (3,500         | ) |  | 27,967         |  
|Decrease in accounts payable and accrued liabilities                                           |  | (24,119        | ) |  | (529           | )
|Net Cash Provided
      by (Used in) Operating Activities                                      |  | 6,596          |   |  | (90,005        | )
|                                                                                               |  |                |   |  |                |  
|Cash Flows Used in Investing Activities                                                        |  |                |   |  |                |  
|Acquisition
      of property and equipment                                                    |  | (513           | ) |  |               |  
|Net Cash Used in Investing
      Activities                                                    |  | (513           | ) |  |               |  
|                                                                                               |  |                |   |  |                |  
|Cash Flows From Financing Activities                                                           |  |                |   |  |                |  
|Increase (decrease) in loans from unrelated
      parties                                      |  | (100,558       | ) |  | 47,000         |  
|Increase
      in advances from related parties                                                |  | 98,276         |   |  | 49,784         |  
|Net Cash Provided
      by (Used in) Financing Activities                                      |  | (2,282         | ) |  | 96,784         |  
|                                                                                               |  |                |   |  |                |  
|Increase in Cash                                                                               |  | 3,801          |   |  | 6,779          |  
|Cash - Beginning of
      the Period                                                           |  | 1,877          |   |  | 1,834          |  
|                                                                                               |  |                |   |  |                |  
|Cash - End of the
      Period                                                                 |  | 5,678          |   |  | 8,613          |  
|                                                                                               |  |                |   |  |                |  
|Non-cash Investing and Financing Activities:                                                   |  |                |   |  |                |  
|Shares issued for manufacturing technology                                                     |  |               |   |  | 3,600          |  
|Shares issued for legal and consultants
      fees                                            |  | 48,998         |   |  |               |  
|Shares issued to settle debts and expenses                                                     |  | 178,685        |   |  | 151,500        |  
|Shares
      issued for director fee                                                           |  | 3,000          |   |  |               |  

(The accompanying notes are an integral part of these consolidated
  financial statements)

6

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|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|1. | Reverse Acquisition, Nature of Operations and Continuance
        of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | On December 31, 2002 (the acquisition date),
        UltraGuard Water Systems Corp. (UltraGuard) acquired all of
        the outstanding stock of Innovative Fuels Cell Technologies Inc (IFCT).
        UltraGuard issued 50,000 common shares to the shareholders of IFCT to
        acquire IFCT and its wholly-owned Austrian incorporated subsidiary UltraGuard
        Water Systems GmbH (UG GmbH). UltraGuard also issued 10,000
        common shares to UG GmbH as part of the transaction. These shares are
        considered treasury shares and are not outstanding. For accounting purposes
        the acquisition was treated as the acquisition of UltraGuard by IFCT with
        IFCT as the accounting acquirer (reverse acquisition). As a result, the
        historical financial statements prior to the acquisition date are those
        of IFCT from September 30, 2002 (date of inception of IFCT). See Note
        3 for Operations of UltraGuard prior to the reverse acquisition. UltraGuard
        and IFCT, as at December 31, 2002, reverted back to being a development
        stage Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | IFCT is a Nevada corporation incorporated on September
        30, 2002. IFCT is the holder of an option (the Option Agreement)
        to purchase worldwide manufacturing and marketing rights to a 12-volt
        Magnesium-Air Semi Fuel Cell (Fuel Cell) from MagPower Systems Inc. (MagPower)
        for use with UltraGuards Point of Use Ultraviolet Water Purification
        System and for ancillary uses. IFCT was assigned the Option Agreement
        on October 1, 2002 from a related party. The only cost incurred by the
        related party was a Cnd$2,500 down payment for the Option Agreement.
        A balance owing of Cnd$97,500 is payable and 4,000 shares of UltraGuard
        is to be issued to complete the Option Agreement. On March 14, 2003, a
        License Agreement was executed between MagPower and IFCT. The terms of
        the License Agreement included additional rights to use the Fuel Cell
        for ancillary services to power items such as lighting and radio. As consideration
        for the additional rights, IFCT increased the option payments to be made
        to Cnd$100,000 and increased the number of common shares of UltraGuard
        to be issued to 5,000. On March 6, 2003, UltraGuard issued 4,000 shares
        into trust subject to certain criteria. On signing of the License Agreement
        IFCT paid Cnd$5,000 and delivered 2,000 common shares of UltraGuard
        to the vendors of MagPower. An additional Cnd$5,000 was paid on March
        21, 2003 for the payment due on April 1, 2003. Commencing on May 1, 2003,
        Cnd$7,500 was due and unpaid, however delivery of additional 1,000
        common shares of UltraGuard was made on May 1, 2003. The remaining balance
        is due on the first of each month thereafter until MagPower delivers the
        technical drawings at a rate of Cnd$7,500 per month; and Cnd$15,000
        per month thereafter until the full amount has been paid. Concurrent with
        the receipt of the technical drawings from the vendor, the remaining 2,000
        common shares of UltraGuard will be delivered 1,000 common shares from
        trust and 1,000 common shares from treasury). The payments due from May
        1, 2003 monthly through September 30, 2003 amounting to Cnd$25,000
        were not paid as at December 31, 2003. On February 2, 2004, UltraGuard
        and MagPower amended the agreement to sublicense to MagPower, in certain
        countries in the world, UltraGuards ultraviolet products for sale
        and use by MagPower (or its sublicenses) with MagPowers magnesium
        fuel cell. As well, the February 2, 2004 agreement provided for issuance
        and delivery of the remaining 2,000 common shares 1,000 common shares
        from trust and 1,000 common shares from treasury), and cancellation by
        MagPower of the remaining Cnd$88,800 owing by UltraGuard and IFCT
        as a condition of the License Agreement.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | As a condition of the Option Agreement, IFCT was required
        to sell a minimum quantity of 2000 Fuel Cell units in fiscal 2003. The
        drawings and technical information due from MagPower is still incomplete,
        therefore marketing efforts have not concentrated on product sale but
        on product awareness. The license will be amortized on a straight-line
        basis over five years once the option agreement has been completed. Royalties
        of Cnd$25 per cell will be paid to MagPower based on number of units
        sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The total consideration paid for the License Agreement,
        as at December 31, 2004 was $83,161, which includes the value of 5,000
        common shares being $74,800.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During fiscal 2003, due to lack of finances, UltraGuard
        and IFCT discontinued its operation in Europe and closed UG GmbH and will
        concentrate its efforts on the North American market where its UV products
        and fuel cell products will be manufactured through subcontractors and
        marketed through the Internet, wholesalers and sales representatives.
        A loss from discontinued operations of $40,957 was charged to operations
        during the period ended December 31, 2003. Included in this loss is a
        write off of an intercompany loan between UltraGuard and UG GmbH of $11,230.
        No other assets or liabilities were included in the loss from discontinued
        operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

7

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|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|1. | Reverse Acquisition, Nature of Operations and Continuance
        of Business (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On February 2, 2004, the Company and MagPower amended
        the License Agreement. MagPower now has sublicense rights in certain countries
        to the Companys ultraviolet products for sale and use by MagPower
        (or its sublicenses) with MagPowers magnesium fuel cell. In addition,
        the amended License Agreement provided for issuance and delivery of the
        remaining 2,000 common shares (1,000 common shares from trust and 1,000
        common shares from treasury), and cancellation by MagPower any remaining
        amount owing by the Company as a condition of the original License Agreement.                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | 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 June 30, 2005, the Company has not recognized
        significant revenue, has a working capital deficit of $863,409, and
        has accumulated operating losses of $1,671,571 since 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 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.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On April 21, 2005 the Companys Board of Directors
        voted to reorganize UltraGuard. The Company changed its business focus
        from water filtration and disinfection to restaurant franchising. On May
        4, 2005 the Company filed a form PRE 14A with the SEC, calling a Special
        Meeting of the shareholders to be held on June 13, 2005. At the meeting,
        the shareholders approved by an 88.65% majority vote, a proposal to change
        the Companys name to Creative Eateries Corporation (Creative)
        and by an 88.58% majority vote, to consolidate the outstanding shares
        on a 1 for 100 basis. All per share amounts have been retroactively adjusted
        to reflect the reverse stock split.                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | As part of the reorganization, on June 30, 2005, the
        Board of Directors finalized details of the sale of the Companys
        filtration and disinfection technologies and intellectual property to
        Innovative Fuel Cell Technologies Inc (IFCT). All shares of IFCT owned
        by the Company will be distributed as a dividend in kind to Company shareholders
        of record on June 12, 2005. The number of IFCT shares received by each
        Company shareholder will be pro-rata to the number of Company shares owned
        by the shareholder.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On July 11, 2005, the Companys Board of Directors
        approved a share exchange agreement between shareholders of Creative and
        Restaurant Companies International, Inc (RCI), a Nevada corporation.
        RCI is a franchise development company organized to capitalize on the
        growing demand for fast casual dining in North America. On July 11, 2005,
        the Company acquired, by way of reverse acquisition, 100% of the issued
        and outstanding capital stock of RCI in exchange for the issuance of 30,802,367
        shares of the Companys common shares. Pursuant to the Agreement
        the Companys officers resigned. As a result there was a change in
        control of the Company to the former shareholders of RCI.                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Consolidated financial statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These financial statements include the accounts of
        UltraGuard and IFCT (a Nevada Corporation). The operations of IFCTs
        Austrian were discontinued during fiscal 2003. All significant intercompany
        transactions and balances have been eliminated and costs of the closing
        of UG GmbH have been recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On December 31, 2002 (the acquisition date),
        UltraGuard Water Systems Corp. (UltraGuard) acquired all of
        the outstanding stock of Innovative Fuels Cell Technologies Inc (IFCT).
        For accounting purposes the acquisition was treated as the acquisition
        of UltraGuard by IFCT with IFCT as the accounting acquirer (reverse acquisition).
        As a result, the historical financial statements prior to the acquisition
        date are those of IFCT from September 30, 2002 (date of inception of IFCT).
        See Note 3 for Operations of UltraGuard prior to the reverse acquisition.                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Cash and cash equivalents include cash on hand, in
        banks and all highly liquid investments with maturity of three months
        of less when purchased.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

8

---

|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|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 by customers. System and project revenue are recognized
        utilizing the percentage of completion method based upon materials installed
        and labour costs incurred. All related costs including any contract revisions
        or changes are recognized in the period in which they occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company recognizes revenue in accordance
        with Securities and Exchange Commission Staff Accounting Bulletin No.
        104, Revenue Recognition. Revenue will be recognized only
        when the price is fixed or determinable, persuasive evidence of an arrangement
        exists, the service is performed, and collectibility is reasonably assured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Estimates and assumptions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The preparation of financial statements
        in conformity with generally accepted accounting principles used in the
        United States requires management to make estimates and assumptions that
        affect the reported amounts of assets and liabilities in the financial
        statements and accompanying notes. Actual results could differ from these
        estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | 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.

9

---

|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|2. | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Accounting for Stock-Based Compensation(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | No stock options were granted to employees in fiscal
        2004 and 2005, therefore no pro-forma disclosures have been presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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 June 30, 2005 and
        2004, the Company has no items that represent comprehensive loss and,
        therefore, has not included a schedule of comprehensive loss in the financial
        statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | SFAS No. 144, Accounting for the Impairment
        or Disposal of Long-Lived Assets establishes a single accounting
        model for long-lived assets to be disposed of by sale including discontinued
        operations. SFAS 144 requires that these long-lived assets be measured
        at the lower of the carrying amount or fair value less cost to sell, whether
        reported in continuing operations or discontinued operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The fair value of cash, accounts receivable, accounts
        payable, accrued liabilities and amounts owing to related parties approximates
        their carrying value due to the immediate or short-term maturity of these
        financial instruments. The Company is not exposed to significant interest,
        currency or credit risks arising from these financial instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Concentration of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial instruments that potentially subject the
        Company to credit risk consist principally of cash. Cash was deposited
        with a high credit quality institution.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In December 2004, the Financial Accounting Standards
        Board (FASB) issued Statement of Financial Accounting Standard (SFAS)
        No. 123R, Share Based Payment. SFAS 123R is a revision
        of SFAS No. 123 Accounting for Stock-Based Compensation,
        and supersedes APB Opinion No. 25, Accounting for Stock Issued
        to Employees and its related implementation guidance. SFAS 123R
        establishes standards for the accounting for transactions in which an
        entity exchanges its equity instruments for goods or services. It also
        addresses transactions in which an entity incurs liabilities in exchange
        for goods or services that are based on the fair value of the entitys
        equity instruments or that may be settled by the issuance of those equity
        instruments. SFAS 123R focuses primarily on accounting for transactions
        in which an entity obtains employee services in share-based payment transactions.
        SFAS 123R does not change the accounting guidance for share-based payment
        transactions with parties other than employees provided in SFAS 123 as
        originally issued and Emerging Issues Task Force Issue No. 96-18, Accounting
        for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
        or in Conjunction with Selling, Goods or Services. SFAS 123R
        does not address the accounting for employee share ownership plans, which
        are subject to AICPA Statement of Position 93-6, Employers
        Accounting for Employee Stock Ownership Plans. SFAS 123R requires
        a public entity to measure the cost of employee services received in exchange
        for an award of equity instruments based on the grant-date fair value
        of the award (with limited exceptions). That cost will be recognized over
        the period during which an employee is required to provide service in
        exchange for the award  the requisite service period (usually the
        vesting period). SFAS 123R requires that the compensation cost relating
        to share-based payment transactions be recognized in financial statements.
        That cost will be measured based on the fair value of the equity or liability
        instruments issued. The scope of SFAS 123R includes a wide range of share-based
        compensation arrangements including share options, restricted share plans,
        performance-based awards, share appreciation rights, and employee share
        purchase plans. Public entities that file as small business issuers will
        be required to apply SFAS 123R in the first interim or annual reporting
        period that begins after December 15, 2005. The adoption of this standard
        is not expected to have a material effect on the Companys results
        of operations or financial position.

10

---

|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|2. | Significant Accounting Policies (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Recent Accounting Pronouncements(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In December 2004, FASB issued SFAS No. 153, Exchanges
        of Nonmonetary Assets - An Amendment of APB Opinion No. 29.
        The guidance in APB Opinion No. 29, Accounting for Nonmonetary
        Transactions, is based on the principle that exchanges of nonmonetary
        assets should be measured based on the fair value of the assets exchanged.
        The guidance in that Opinion, however, included certain exceptions to
        that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception
        for nonmonetary exchanges of similar productive assets and replaces it
        with a general exception for exchanges of nonmonetary assets that do not
        have commercial substance. A nonmonetary exchange has commercial substance
        if the future cash flows of the entity are expected to change significantly
        as a result of the exchange. The provisions of SFAS No. 153 are effective
        for nonmonetary asset exchanges occurring in fiscal periods beginning
        after June 15, 2005. Early application is permitted and companies must
        apply the standard prospectively. The adoption of this standard is not
        expected to have a material effect on the Companys results of operations
        or financial position.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In March 2005, the SEC staff issued Staff Accounting
        Bulletin No. 107 (SAB 107) to give guidance on the implementation
        of SFAS No. 123R. The Company will consider SAB 107 during the implementation
        of SFAS NO. 123R.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Loss Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company estimates a loss contingency in accordance
        with Statement of Financial Accounting Standards (SFAS No.
        5 Accounting for Contingencies. The Company accrues the loss
        by a charge to income when there is information available that it is probable
        that an asset has been impaired or a liability has been incurred and the
        amount of the loss can be reasonably estimated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Goodwill and Other Intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In July 2001, the Financial Accounting Standards Board
        ("FASB") issued statement of Financial Accounting Standards No. 142 ("SFAS
        142"), "Goodwill and Other Intangible Assets," which is effective for
        fiscal years beginning after December 15, 2001. SFAS 142 prohibits the
        amortization of goodwill and intangible assets with indefinite useful
        lives but requires that these assets be reviewed for impairment at least
        annually or on an interim basis if an event occurs or circumstances change
        that could indicate that their value has diminished or been impaired.
        Other intangible assets will continue to be amortized over their estimated
        useful lives. In addition, the standard includes provisions for the reclassification
        of certain existing recognized intangibles as goodwill, reassessment of
        the useful lives of existing recognized intangibles, reclassification
        of certain intangibles out of previously reported goodwill and the identification
        of reporting units for purposes of assessing potential future impairments
        of goodwill.                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Potential benefits of income tax losses are not recognized
        in the accounts until realization is more likely than not. The Company
        has adopted SFAS No. 109 Accounting for Income Taxes as of
        its inception. Pursuant to SFAS No. 109 the Company is required to compute
        tax asset benefits for net operating losses carried forward. Potential
        benefit of net operating losses have not been recognized in these financial
        statements because the Company cannot be assured it is more likely than
        not it will utilize the net operating losses carried forward in future
        years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Certain reclassifications have been made to the prior
        periods financial statements to conform to the current periods
        presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

11

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|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|3. | Operations of UltraGuard Prior to Reverse Acquisition
        with IFCT                                                                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Up to February 2002, UltraGuard focused its activities
        on the manufacturing and marketing of its Ultra Guard® ultra violet
        based patented water treatment system through its wholly owned Canadian
        subsidiary, UV Systems Technology Inc. (UVS). These products
        and systems were sold primarily for municipal waste disinfection, treatment.                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | During the period from acquiring UVS in August 1996
        to February 2002, operating activities had not generated profitability.                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On February 5, 2002, UltraGuard reached an agreement
        with the Clearwater Group (Clearwater) to assume the UVS manufacturing
        responsibilities of any new Ultra Guard® water treatment systems
        to be supplied to UVSs strategic alliance partner, US Filter. Clearwater
        would also provide warranty services on any previously sold Ultra Guard®
        water treatment systems.                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | During fiscal 2002, UltraGuard commenced designing and
        developing the home use Point of Use and Point of Entry UV disinfection
        systems for drinking water. Point of Use systems are installed under a
        sink; Point of Entry units are installed at the water supply entry into
        the building. This UV product may include dual filtration cartridges in
        advance of the UV system.                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | At a special meeting held on November 15, 2002, UltraGuard
        reorganized. Its shares were consolidated on a 1:50 basis; the authorized
        capital increased to 100,000,000 shares and the name was changed to UltraGuard.
        In December 2002, UltraGuard divested itself of the UVS operations while
        retaining any royalty or other revenues that may be received from the
        sale or use of the UVS patented Ultra Guard® technology.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | See Note 1 for IFCTs reverse acquisition of UltraGuard.                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4. | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Property and equipment is stated at cost less accumulated
        depreciation.                                                                                                                                                                                                                                                                                                                                                                                     

| |                              |  |       |  |  |              |  |  | June 30,    |  |  | December 31, | 
| | ---------------------------- |  | ----- |  |  | ------------ |  |  | ----------- |  |  | ------------ | 
| |                              |  |       |  |  |              |  |  | 2005        |  |  | 2004         | 
| |                              |  |       |  |  | Accumulated  |  |  | Net Book    |  |  | Net Book     | 
| |                              |  | Cost  |  |  | Depreciation |  |  | Value       |  |  | Value        | 
| |                              |  | $     |  |  | $            |  |  | $           |  |  | $            | 
| |                              |  |       |  |  |              |  |  | (unaudited) |  |  | (audited)    | 
| |                              |  |       |  |  |              |  |  |             |  |  |              | 
| | Property
      and equipment |  | 6,046 |  |  | 5,
      437 |  |  | 609         |  |  | 140          | 

|5. | Loans Payable
|-- | -------------
|   |              
|   | a)           
|   |              
|   | b)           

12

---

|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|5. | Loans Payable (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|6. | Amounts Owing to Related Parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Unpaid wages, consulting and loans amounting
        to $445,541 owing to two former officers and current directors are
        due on demand, unsecured and will bear interest calculated at 10% effective
        April 1, 2005. Included in this amount of $445,541 are amounts owing
        to the President of the Company a result of actions discussed in Note
        5(a), loans, management fees and expenses amounting to $34,648 advanced
        during the period ending June 30, 2005. In fiscal 2003, two officer directors
        were issued 24,000 shares of common restricted stock of the Company at
        $3.38 per share totalling $81,120 for partial payment of wages.
        During this fiscal period, on June 8, 2005 officers and directors were
        issued 18,420 shares from the 2004 Incentive Plan of Creative at $1.00,
        the current market price on the date of issue was charged against the
        amounts payable to these officers and directors. On April 29, 2005, 25,872
        of Rule 144 restricted stock was issued at $0.70 to settle $18,110
        debt owing to a company managed by two officers and directors.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|7. | Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

13

---

|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|7. | Common Stock (continued)
|-- | ------------------------
|   |                         
|   | c)                      
|   |                         
|   |                         
|   |                         
|   | d)                      
|   |                         
|   |                         
|   |                         
|   | e)                      

| |                                                                                                                                                                                                                                                                                                                                                      |  |         |  |  | Fair Market |  |  |            | 
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- |  |  | ----------- |  |  | ---------- | 
| |                                                                                                                                                                                                                                                                                                                                                      |  | Shares  |  |  | Value       |  |  | Total      | 
| |                                                                                                                                                                                                                                                                                                                                                      |  | Issued  |  |  | Per Share   |  |  | Fair Value | 
| |                                                                                                                                                                                                                                                                                                                                                      |  | #       |  |  | $           |  |  | $          | 
| | Consulting for services provided or to be provided pursuant
      to the                                                                                                                                                                                                                                                                             |  |         |  |  |             |  |  |            | 
| | incentive plan (Note 7(b))                                                                                                                                                                                                                                                                                                                           |  | 27,380  |  |  | 1.75        |  |  | 47,915     | 
| | For legal fees pursuant to the incentive plan (Note 7(b))                                                                                                                                                                                                                                                                                            |  | 2,000   |  |  | 1.75        |  |  | 3,500      | 
| | Officers and directors debt settlement pursuant to the incentive
      plan                                                                                                                                                                                                                                                                          |  |         |  |  |             |  |  |            | 
| | (Note 7(b))                                                                                                                                                                                                                                                                                                                                          |  | 18,420  |  |  | 1.00        |  |  | 18,420     | 
| | Consulting services provided acceptance of previously stopped
      shares                                                                                                                                                                                                                                                                         |  | 1,500   |  |  | 1.75        |  |  | 2,625      | 
| | Conversion of loans payable 144 restricted shares (Note 5(f))                                                                                                                                                                                                                                                                                        |  | 25,313  |  |  | 0.70        |  |  | 17,719     | 
| | Conversion of loans payable 144 restricted shares (Note 6)                                                                                                                                                                                                                                                                                           |  | 25,872  |  |  | 0.70        |  |  | 18,110     | 
| | Conversion of loans
      payable 144 restricted shares (Note 5(d))                                                                                                                                                                                                                                                                                  |  | 174,847 |  |  | 0.70        |  |  | 122,393    | 
| |                                                                                                                                                                                                                                                                                                                                                      |  | 275,332 |  |  |             |  |  | 230,683    | 
| |                                                                                                                                                                                                                                                                                                                                                      |  |         |  |  |             |  |  |            | 
| | The terms of some of the agreements
        for future services are in excess of one year and have various expiry
        dates. As a result, during the period ending June 30, 2005, $36,025 has
        been charged to operations as consulting and legal expenses and the balance
        of $12,686 has been recorded as deferred compensation.

|8. | Segmented Information                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                       
|   | As a result of the disposition of UVS, (see Note 3)
        UltraGuard and IFCT now operate in one business segment and one geographical
        area. All of the Companys identifiable assets are located in Canada.

14

---

|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

|9. | Legal Proceedings/Contingency Accrual
|-- | -------------------------------------
|   |                                      
|   | a)                                   
|   |                                      
|   |                                      
|   |                                      
|   | b)                                   
|   |                                      
|   | c)                                   
|   |                                      
|   |                                      
|   |                                      
|   | d)                                   

15

---

|Creative Eateries Corporation                 
|----------------------------------------------
|(formerly UltraGuard Water Systems Corp.)     
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|(Expressed in US dollars)                     
|(unaudited)                                   

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

16

---

|Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
      AND FINANCIAL CONDITIONS
|------- | --------------------------------------------------------------------------------------------

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Forward-looking statements deal with our current plans, intentions, beliefs and expectations and
are statements of future economic performance. Statements containing terms like "believes", "does not believe", "plans", "expects", "intends", "estimates", "anticipates", and other phrases of similar meaning are considered to imply uncertainty and
are forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from what is currently anticipated. We make cautionary statements throughout this report and the
documents we have incorporated by reference, including those stated under the heading "Risk Factors". You should read these cautionary statements as being applicable to all related forward-looking statements wherever they appear in this report, the
materials referred to in this report, and the materials incorporated by reference into this report.

We cannot guarantee our future results, levels of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any
of the forward-looking statements after the date of this report.

Where we say "we", "us", "our", or "the Company", we mean UltraGuard Water Systems Corp and its subsidiaries.

MANAGEMENT DISCUSSION-OVERVIEW

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

The Company was incorporated in Nevada in August 1990 under the name Service Systems International Ltd and was inactive until eight Canadian and European individuals acquired it in July 1995.

Our offices are located at 914 Sherwood Avenue, Coquitlam British Columbia, Canada, V3K 1A6, our telephone number is (604) 540-8282 and our Internet website address is www.ultraguard.com. References in this
document to we, us, our, and the company include Innovative Fuel Cell Technologies Inc unless the context otherwise requires. ULTRA GUARDR and "WAVY LINES & DESIGNS" logo are our registered trademarks. Any other trademarks or trade
names referred to in this document are the property of their respective owners.

For the period up to February 2002 we were the designer, manufacturer and marketer of state of the art ultraviolet disinfection systems for wastewater disinfection with additional application possibilities in potable water. During fiscal 2002 the
Companys changed its business focus away from only providing ultraviolet equipment for wastewater disinfection to the treatment of water for drinking and other uses, coupled with ultraviolet and filtration.

In fiscal 2002 our Company discontinued manufacturing of the wastewater products and entered into various agreements to change it business focus. The wastewater business was licensed to Clearwater Industries Ltd.

The emphasis of our business remained in ultraviolet disinfection, however we now target drinking water with systems developed for low-flow drinking water application. The products currently developed and under development are used to disinfect and
filter water. The systems identified are, Point of Entry (POE) purification system, which is installed where the water enters the home, and Point of Use (POU) purification system, which is located at the faucet

During 2002, the Company was unable to raise the additional funds necessary to continue the operations of UVS and with UVS liabilities exceeding assets by a significant amount, the board of directors and investors determined that by selling UVS the
Company could continue viable operations pursuing a new product focus

17

---

(see Our Products). On December 31, 2002 the Company entered into various agreements for the disposition of UVS and the removal of the UVS debt and receivable carried on the Companys financial statements. Manufacturing and marketing of the UVS
technology had been discontinued by the Company and was licensed to Clearwater Industries in February 2002. The purchaser of UVS was 659999 BC Ltd. 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. Full details of these agreements are available on Form 8K filed with the SEC on January 15, 2003.

In December 2002 we added an additional business focus; the manufacturing and marketing of a primary, alternative and emergency power generating Magnesium-Air power cell. Through a reverse acquisition concluded on December 31, 2002 UltraGuard Water
Systems Corp. (UltraGuard) acquired all of the outstanding stock of Innovative Fuels Cell Technologies Inc (IFCT). IFCT is the holder of an option to purchase worldwide manufacturing and marketing rights to a 12-volt
Magnesium-Air Semi Fuel Cell from MagPower Systems Inc. for use with UltraGuards Point of Use and Point of Entry Ultraviolet Water Purification System, and for ancillary uses such as lighting, radio and other low energy electrical needs.

On March 14, 2003 IFCT exercised the license for the Fuel Cell.

On April 21, 2005, the Companys directors voted to change its business focus and move UltraGuard into restaurant franchising by signing an agreement with the American Restaurant Development Company to identify opportunities in restaurant
franchising. The directors also voted to reorganize the Company and bring to a special meeting of shareholders, which subject to filing the required forms with the Securities and Exchange Commission, will be held on June 13, 2005. This meeting will
request shareholder approval of a name change to Creative Eateries Corporation and a reverse split of the Companies common stock of 1:100.

On May 3, 2005 the directors approved the sale of all of Creatives filtration and disinfection technologies and intellectual property to Innovative Fuel Cell Technologies Inc. On June 30, 2005 the sale was completed. As a condition of the
sale, all the shares of Innovative Fuel Cell Technologies Inc will be distributed on a prorate basis to the Creatives shareholders of record June 13, 2005.

OUR PRODUCTS

Point of Use and Point of Entry

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

Wastewater Systems

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

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

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

18

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In August 2003 USFilter terminated the Alliance Agreement (and associated agreements).

Magnesium-Air Fuel Cells

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

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

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

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. In the third quarter of 2003 the Company closed its GmbH operation and wrote off its investment due to the inability
to raise sufficient capital to continue funding the GmbH operations.

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.

During 2004, MagPower has signed licensing rights in Australia and China for the Fuel Cell, has completed its prototype development and has leased manufacturing facilities in British Columbia, Canada for the manufacturing of the Fuel Cell.
Production units are scheduled to be available in 2005. MagPower's progress will be closely monitored. As soon as product is availability the Company can seriously market its point of use UV system with the Fuel cell.

As a result of the reverse takeover of Innovative Fuel Cell Technologies Inc on December 31, 2003, the Companys status changed to that of a development stage company.As a development stage company, we have generated total revenue to June 30,
2005 of $52,839. This amount was received for royalty and UV component sales, unrelated to the fuel cell acquisition.

Drinking Water Dispensers

During the quarter ended June 30, 2004, the Company commenced business in the bottled water industry sector. Working with The Water Clinic, a 20 year old company located in Winnipeg, Manitoba, Canada, the Company has purchased and installed its
first bottled water-dispensing unit, the AquaPure system. The AquaPure system dispenses pure and safe drinking water, treated by reverse osmosis and disinfected by ultraviolet. The unit is coin operated and configured to refill 4.9 -gallon water
bottles. The AquaPure system will be leased to and placed in convenience stores, gas bars, car washes, and other location, which offer ready access for the public. Revenues from the sales are split between the Company and the Leasor; 70% for the
Company, 30% to the Leasor. During the quarter-ended September 30, 2004 we continued to test market at the first installation site. Using direct mailing marketing and local newspaper advertising, we contacted households in the immediate area of the
installation, providing discounted pricing and free refills. To date results have been running at about 50% of expected sales. The Company has no plans to install any further dispensing units.

19

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EBay Marketing

In June 2004, the Company instituted a marketing program for its filtration products including point of use reverse osmosis units and various other water treatment systems and components. Using eBay Canada (eBay) as the marketing venue, sales have
occurred and are slowly increasing. eBay was chosen as the marketing means to provide wide exposure of the Company's products for the general consumer and to provide an opportunity to the Company's shareholder base, to have direct access to these
products. After reviewing the results of the past months, we have determined that this venue better suits a company without facilities, working from a home base with low overhead expenses, and in November, discontinued this method of marketing.

PLAN OF OPERATION

On May 5, 2005 the Company filed an 8-K with the Securities
  and Exchange Commission announcing that the Companys business would change
  from its current water related activities focus, moving to restaurant franchising.
  On April 21, 2005 the Companys board of directors approved a consulting
  agreement with the American Restaurant Development Corporation (ARDC) to introduce
  UltraGuard to restaurant concepts, which the Company plans to develop into a
  nationwide restaurant franchise business. The restaurant concepts will vary
  from fast casual to casual dining and each concept will feature a specific ethic
  fare such as Asian, Mexican or Italian, as well as burgers, noodles, and barbeque
  to name a few. Most restaurants will be sold as franchises, although there will
  be a limited number corporate owned stores to be used for training and sales
  purposes. ARDC has over ten years experience in franchising and has been instrumental
  in the opening and selling of over 1,000 restaurants generating over $400
  million in cumulative sales as stated by ADRC. UltraGuard will draw on the experience
  of ARDC and industry contacts to develop a viable restaurant franchise business

To meet the financial needs moving forward the Company plans to raise money through the sales of the Companys restricted common stock via a public offering document and sale of debt financing instruments. In addition the Company will generate
revenue through the sales of the franchise concepts introduced by ARDC. As ARDC will receive their compensation through the sales of franchises, expenses related to restaurant franchising over the next twelve months are expected to be less than
$200,000.

As a result of these changes in business direction, the Company held a special meeting June 13, 2005 where the Company asked for shareholder approval for a corporate name change to Creative Eateries Corporation and to approve a 1:100 reverse split.
At the meeting the shareholders approved the change of the Companys name to Creative Eateries Corporation by a vote of 52,357,878 in favour, 232,618 against and 10,060 abstaining. The 1:100 reverse split was approved by a vote of 52,607,893 in
favour, 292,563 against and 100 abstaining. The reverse split became effective at 5:00 PM on June 13, 2005

As Creatives current technology and intellectual property do not fit the new business model, the Board had approved the transfer of this technology and intellectual property into the Companys wholly owned subsidiary; Innovative Fuel Cell
Technologies Inc. This transfer was completed on June 30, 2005. As well, the Board approved the transfer of 100% of the shares of Innovative Fuel Cell Technologies Inc to be distributed as a dividend-in-kind on a prorata basis, pre reverse split, to
Creatives shareholders of record June 13, 2005.

During this period of reorganization and restructuring, we will likely continue to incur significant additional operating losses. Operating losses may fluctuate from quarter to quarter as a result of differences in the timing of expenses incurred
and when revenue is recognized.

BASIS OF PRESENTATION

The financial statements include accounts of Creative and its 100% owned subsidiary, Innovative Fuel Cell Technologies Inc.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005

Six months ended June 30, 2005 compared to the six months ended June 30, 2004

Revenues. During the six months ended June 30, 2005, we reported revenues of $5,135 compared to revenue of $14,519, a decrease of $9,384 or 65% compared to the results being reported in the six months of fiscal 2004.

Direct Project Costs. Project costs recorded during the six months ended June 30, 2005 amounted to nil

20

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compared to $728 recorded during the six months of fiscal 2004. No costs of sale were were incurred on the sales reported in the fiscal 2005 period.

Gross Profit. Gross profit decreased by $8,156 from $5,135 during the six months ended June 30, 2005, compared to $13,791 recorded during the comparable period ended June 30, 2004. The decrease was as a result of lower sales recorded
during the current period.

General and Administrative Expenses. For the six months ended June 30, 2005, we reported general and administrative expense of $219,260, a decrease of $181,742 or 45% from $401,002 reported in the comparable period of the prior year.
This decrease resulted primarily from reduced legal and consulting fees paid during the current period

Interest. For the six months ended June 30, 2005, we reported interest of $23,054, an increase of $7,003 or 44% from $16,051 reported in the comparable prior fiscal period. The increase was as a result of an increase in the loans payable
amount outstanding compared to the amount outstanding for the comparable six months of fiscal 2004.

Net Loss for the Period. For the six months ended June 30, 2005, we reported a net loss for the period of $138,382, a decrease of $321,615 or 70% over $473,788 in the six months of fiscal 2004. The decrease in net loss was primarily due
to a decrease in consulting fees and a gain amounting to $98,797 received in the settlement of lawsuits with a shareholder group.

Net Loss per Share. For the six months ended June 30, 2005, we reported a net loss per share for the period of $0.29 compared to $1.96 reported during the comparable period of the prior year. The decrease in loss per shares is primarily as a
result of the reduced loss during the current period and the weighted average number of shares outstanding at June 30, 2005 over which the loss was shared

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005

Three months ended June 30, 2005 compared to the three months ended June 30, 2004

Revenues. During the three months ended June, 2005, we reported revenues of $5,135 compared to revenue of $100, an increase of $5,035 compared to the results being reported in the three months of fiscal 2004.

Direct Project Costs. Project costs recorded during the three months ended June, 2005 and the three months of fiscal 2004 were nil. No costs of sales were incurred.

Gross Profit. Gross profit increased by $5,035 from $5,135 during the three months ended June 30, 2005, compared to $100 recorded during the comparable period ended June 30, 2004. The increase was as a result of increased sales recorded
during the current period

General and Administrative Expenses. For the three months ended June 30, 2005, we reported general and administrative expense of $102,540, an decrease of $105,095 or 51% from $207,635 reported in the comparable period of the prior year.
This increase resulted primarily from decreased consulting and legal fees paid during the current period.

Interest. For the three months ended June 30, 2005, we reported interest of $10,366, an increase of $2,060 or 25% from $8,306 reported in the comparable prior fiscal period. The increase was as a result of an increase in the loans
payable amount outstanding compared to the amount outstanding for the comparable three months of 2004.

Net Loss for the Period. For the three months ended June 30, 2005, we reported a net loss for the period of $107,771, a decrease of $141,438 or 57% over $249,209 in the comparable period of fiscal 2004. The decrease in net loss was
primarily due to a decrease in consulting and legal fees.

Net Loss per Share. For the three months ended June 30, 2005, we reported a net loss per share for the period of $0.18 compared to $1.02 reported during the comparable period of the prior year. The decrease in loss per shares is primarily as
a result of the reduced loss and the weighted average number of shares outstanding at June 30, 2005 over which the loss was shared

21

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|Item 3. | CONTROL AND PROCEDURES
|------- | ----------------------

Evaluation of disclosure controls and procedures

As at the end of the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure. Based on the evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that, as at the end of the period covered by this report, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms and to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding disclosure

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

On April 25, 2003, Chelverton Fund Limited filed a suit in the Supreme Court of British Columbia against the Company for non-payment of debt in the amount of $155,000. The Company entered an appearance and filed a defence against this claim and
attempted to negotiate a settlement. Chelverton filed additional information that supported their claim and the Company responded with a no defines position and judgment was issued in the amount of $193,944 (Cnd$234,642)
including interest and legal costs On April 5, 2004 the Company appeared in Supreme Court to provide to Chelverton and the court, specific information pertaining to the Companys assets and its ability to pay the judgment including interest.
The Company was required to and has, provided additional detailed financial information. No further activity has occurred.

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

22

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requested and received an extension to August 26, 2004 to
settle this matter or file the pre-trial order, which upon approval, the Court
will set down for trial. On October 28, 2004 we jointly filed a pre-trial notice
and on November 15, 2004 in a conference call with the sitting Judge a trial
date was set for February 22, 2005. During this fiscal period, one of the
Plaintiffs withdrew from the action. On October 28, 2004 the Company jointly
filed a pre-trial notice and on November 15, 2004 in a conference call with the
sitting Judge a trial date was set for February 22, 2005. Prior to the trial
date the parties reached a settlement on all matters. Under the terms of the
settlement, the Plaintiffs agreed to and have dismissed all of the lawsuits and
have cancelled all debts owed by the Company to the Plaintiff amounting to about
$98,797.

|Item 2. | CHANGES IN SECURITIES
|------- | ---------------------

During the six months ended June 30, 2005 the Company issued
the following shares for the listed consideration

|Date                            |  | Shares  |  |  | Residency/  |  | Consideration   |         |  | Exemption |        
|------------------------------- |  | ------- |  |  | ----------- |  | --------------- | ------- |  | --------- | -------
|                                |  |         |  |  | Citizenship |  | Valued
      at |         |  |           |        
|Feb 14/05                       |  | 10,000  |  |  | Germany     |  | $               | 17,500  |  |           | S-8*   
|Feb 14/05                       |  | 2,880   |  |  | Canada      |  | $               | 5,040   |  |           | S-8*   
|Mar 7/05                        |  | 2,000   |  |  | Canada      |  | $               | 3,500   |  |           | S-8*   
|Apr 16/05                       |  | 14,500  |  |  | USA         |  | $               | 25,375  |  |           | S-8*   
|Apr 29/05                       |  | 174,847 |  |  | Bahamas     |  | $               | 122,393 |  |           | Reg 144
|Apr 29/05                       |  | 51,185  |  |  | Canada      |  | $               | 35,830  |  |           | Reg 144
|Jun 8/05                        |  | 18,420  |  |  | Canada      |  | $               | 10,710  |  |           | S-8*   
|Jun 30/05                       |  | 1,500   |  |  | Canada      |  | $               | 1,600   |  |           | S-8*   
|*Registered S-8 on Dec 21, 2004 |  |         |  |  |             |  |                 |         |  |          

At a special meeting of the shareholder held June 13, 2005, the
shareholders approved a 1 for 100 reverse split of the Company stock which has
been accounted for retroactively.

|Item 3. | DEFAULT UPON SENIOR SECURITIES                     
|------- | ---------------------------------------------------
|        |                                                    
|        | None                                               
|        |                                                    
|Item 4. | SUBMISSION 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                                                           | (4)             
|               |                                                                                                                      |                 
|(10)(v)        | Sample Agreement among minority Shareholders of UV Systems
      Technology, Inc. and the Company each dated 2/28/97 | (5)             

23

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|(10)(vi)   | Marketing Distribution Agreement Between UV Systems Technology,
      Inc. and the Company                                        | (2)           
|---------- | --------------------------------------------------------------------------------------------------------------------------------- | --------------
|           |                                                                                                                                   |               
|(10)(vii)  | Sales Representation Agreement between UV Systems Technology,
      Inc. and "The Representative"                                 | (2)           
|           |                                                                                                                                   |               
|(10)(viii) | Exclusive Distributorship Agreement Between UV Waterguard
      Systems, Inc. and Chiyoda Kohan Co., Ltd., and NIMAC Corporation. | (2)           
|           |                                                                                                                                   |               
|(10)(ix)   | 1997 Stock Option Plan                                                                                                            | (4)           
|           |                                                                                                                                   |               
|(10)(x)    | Interim Funding Agreement between UVS, MDS and WOF                                                                                | (5)           
|           |                                                                                                                                   |               
|(10)(xi)   | Letter Agreement between the Company and Elco Bank and Trust
      Company Limited                                                | (5)           
|           |                                                                                                                                   |               
|(10)(xii)  | Loan Agreement between the Company and TD Bank                                                                                    | (6)           
|           |                                                                                                                                   |               
|(10)(xiii) | The Companys 1999 Long-Term Equity Incentive Plan                                                                                | (7)           
|           |                                                                                                                                   |               
|(10)(xiv)  | Letter Agreement between Service Systems, UVS, MDS and WOF
      dated Feb 13, 2000                                               | (7)           
|           |                                                                                                                                   |               
|(10)(xv)   | Lease dated October 2000 between Service Systems, UV Systems
      and Slough Estates Canada Limited                              | (8)           
|           |                                                                                                                                   |               
|(10)(xvi)  | Legal Services Plan between Rosenfeld, Goldman & Ware,
      Inc                                                                  | (9)           
|           |                                                                                                                                   |               
|(10)(xvii) | Post Effective Amendment to Legal Services Plan filed November
      19, 2001                                                     | (10)          
|           |                                                                                                                                   |               
|(10xviii)  | 2003 Benefit Plan S-8                                                                                                             | (11)          
|           |                                                                                                                                   |               
|(10xix)    | Independent Contractor/Consulting Agreement                                                                                       | (12)          
|           |                                                                                                                                   |               
|(10xx)     | The Incentive Plan of UltraGuard                                                                                                  | (13)          
|           |                                                                                                                                   |               
|(10xxi     | 2004 Incentive Plan of UltraGuard                                                                                                 | (14)          
|           |                                                                                                                                   |               
|(31.1)     | Certification of Kenneth Fielding
      pursuant                                                                                  | Filed herewith
|           | to Sec 302 of the Sarbanes-Oxley
      Act of 2002                                                                                | Electronically
|           |                                                                                                                                   |               
|(31.2)     | Certification of John R Gaetz pursuant                                                                                            | Filed herewith
|           | to Sec 302 of the Sarbanes-Oxley
      Act of 2002                                                                                | Electronically
|           |                                                                                                                                   |               
|(32.1)     | Certification of Kenneth Fielding
      pursuant                                                                                  | Filed Herewith
|           | Section 906 of the Sarbanes-Oxley
      Act of 2002                                                                               | Electronically
|           |                                                                                                                                   |               
|(32.2)     | Certification of Kenneth Fielding
      pursuant                                                                                  | Filed Herewith
|           | Section 906 of the Sarbanes-Oxley
      Act of 2002                                                                               | Electronically

24

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

|(2)  | Incorporated by reference to the Corporation's Form S-8 filed with the Commission on October 6, 1997.   
|---- | --------------------------------------------------------------------------------------------------------
|     |                                                                                                         
|(3)  | Incorporation by reference to the Corporation's Form 10Q for the fiscal Year ended February 28, 1997.   
|     |                                                                                                         
|(4)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal Year ended August 31, 1997.   
|     |                                                                                                         
|(5)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal Year ended August 31, 1998.   
|     |                                                                                                         
|(6)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal Year ended August 31, 1999.   
|     |                                                                                                         
|(7)  | Incorporation by reference to the Corporation's Form 10KSB for the fiscal Year ended August 31, 2000.   
|     |                                                                                                         
|(8)  | Incorporation by reference to the Corporation's Form 10Q for the fiscal Quarter ended November 30, 2000.
|     |                                                                                                         
|(9)  | Incorporated by reference to the Corporation's Form S-8 filed with the Commission on November 19, 2003. 
|     |                                                                                                         
|(10) | Incorporated by reference to the Corporation's S-8 POS filed with the Commission on March 23, 2003.     
|     |                                                                                                         
|(11) | Incorporated by reference to the Corporation's Form S-8 filed with the Commission on March 28, 2003.    
|     |                                                                                                         
|(12) | Incorporated by reference to the Corporation's Form S-8 filed with the Commission on June 11, 2003.     
|     |                                                                                                         
|(13) | Incorporated by reference to the Corporation's Form S-8 filed with the Commission on December 2, 2003.  
|     |                                                                                                         
|(14) | Incorporated by reference to the Corporation's Form S-8 filed with the Commission on December 21, 2004. 

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

| | The Company filed two reports on Form 8-K in 2005,
      On May 2, 2005 reporting the Companys new business
        model
        On June 15, 2005 reporting the results of the special meeting held on
        June 13, 2005
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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**
|---------------------- | ---------------------------------
|                       |                                  
|Date:  August 22, 2005 | By:                              
|                       |                                  
|                       | Title:                           
|                       |                                  
|                       |                                  
|                       |                                  
|Date:  August 22, 2005 | By:                              
|                       |                                  
|                       | Title:                           

26

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