International Hi Tech Industries (IHITF) 6-K Notice of Annual Meeting

INTERNATIONAL HI-TECH INDUSTRIES INC.

1096 West 10th Avenue
Vancouver, BC V6H 1H8
Telephone No.: (604) 733-5400 - Fax No.: (604) 734-8300

MANAGEMENT PROXY CIRCULAR
as at May 15, 2006

This Management Proxy Circular is furnished in connection with the solicitation of proxies by the management of International Hi-Tech Industries Inc. (the "Corporation") for use at the annual meeting (the "Meeting") of its shareholders to be held on June 30, 2006 at the time and place and for the purposes set forth in the accompanying notice of the Meeting.

In this Management Proxy Circular, references to "the Corporation", "we" and "our" refer to International Hi-Tech Industries Inc. "Shares" means common shares in the capital of the Corporation. "Beneficial Shareholders" means shareholders who do not hold Shares in their own name and "intermediaries" refers to brokers, investment firms, clearing houses and similar entities that own securities on behalf of Beneficial Shareholders.

GENERAL PROXY INFORMATION

Solicitation of Proxies

The solicitation of proxies will be primarily by mail, but proxies may be solicited personally or by telephone by directors, officers and regular employees of the Corporation. The Corporation will bear all costs of this solicitation. We have arranged for intermediaries to forward the meeting materials to beneficial owners of the Shares held of record by those intermediaries and we may reimburse the intermediaries for their reasonable fees and disbursements in that regard.

Appointment of Proxyholders

The individuals named in the accompanying form of proxy (the "Proxy") are officers and/or directors of the Corporation.If you are a shareholder entitled to vote at the Meeting, you have the right to appoint a person or company other than either of the persons designated in the Proxy, who need not be a shareholder, to attend and act for you on your behalf at the Meeting. You may do so either by inserting the name of that other person in the blank space provided in the Proxy or by completing and delivering another suitable form of proxy.

The only methods by which you may appoint a person as proxy are submitting a proxy by mail, hand delivery or fax.

Voting by Proxyholder

The persons named in the Proxy will vote or withhold from voting the Shares represented thereby in accordance with your instructions on any ballot that may be called for. If you specify a choice with respect to any matter to be acted upon, your Shares will be voted accordingly. The Proxy confers discretionary authority on persons named therein with respect to:

(a) each matter or group of matters identified therein for which a choice is not specified, other than the appointment of an auditor and the election of directors,

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(b) any amendment to or variation of any matter identified therein, and

(c) any other matter that properly comes before the Meeting.

In respect of a matter for which a choice is not specified in the Proxy, the persons named in the Proxy will vote the Shares represented by the Proxy for the approval of such matter.

Registered Shareholders

If you are a registered shareholder, you may wish to vote by proxy whether or not you attend the Meeting in person. If you submit a Proxy, you must complete, date and sign the Proxy and return it to the Corporation's transfer agent, Computershare Investor Services Inc., by fax within North America at 1-866-249-7775, outside North America at 416-263-9524, or by mail or by hand at 9th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1 not less than 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting or the adjournment thereof at which the proxy is to be used.

Beneficial Shareholders

The following information is of significant importance to many shareholders who do not hold Shares in their own name. Beneficial Shareholders should note that the only proxies that can be recognized and acted upon at the Meeting are those deposited by registered shareholders (those whose names appear on the records of the Corporation as the registered holders of Shares).

If Shares are listed in an account statement provided to a shareholder by a broker, then in almost all cases those Shares will not be registered in the shareholder's name on the records of the Corporation. Such Shares will more likely be registered under the names of the shareholder's broker or an agent of that broker. In the United States, the vast majority of such Shares are registered under the name of Cede & Co. as nominee for The Depository Trust Company (which acts as depositary for many U.S. brokerage firms and custodian banks), and in Canada, under the name of CDS & Co. (the registration name for The Canadian Depository for Securities Limited, which acts as nominee for many Canadian brokerage firms).

Intermediaries are required to seek voting instructions from Beneficial Shareholders in advance of shareholders' meetings. Every intermediary has its own mailing procedures and provides its own return instructions to clients.

If you are a Beneficial Shareholder:

You should carefully follow the instructions of your broker or intermediary in order to ensure that your Shares are voted at the Meeting.

The form of proxy supplied to you by your broker will be similar to the Proxy provided to registered shareholders by the Corporation. However, its purpose is limited to instructing the intermediaries on how to vote on your behalf. Most brokers now delegate responsibility for obtaining instructions from clients to ADP Investor Communication Services ("ADP") in the United States and in Canada. ADP mails a voting instruction form in lieu of a Proxy provided by the Corporation. The voting instruction form will name the same persons as the Corporation's Proxy to represent you at the Meeting. You have the right to appoint a person (who need not be a Beneficial Shareholder of the Corporation), other than the persons designated in the voting instruction form, to represent you at the Meeting. To exercise this right, you should insert the name of the desired representative in the blank space provided in the voting instruction form. The completed voting instruction form must then be returned to ADP by mail or facsimile or given to ADP by phone or over the internet, in accordance with ADP's instructions. ADP then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Shares to be represented at the Meeting.If you receive a voting instruction form from ADP, you cannot use it to vote Shares directly at the Meeting - the voting instruction form must be completed and returned to ADP, in accordance with its instructions, well in advance of the Meeting in order to have the Shares voted.

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Although, as a Beneficial Shareholder, you may not be recognized directly at the Meeting for the purposes of voting Shares registered in the name of your broker, you, or a person designated by you, may attend at the Meeting as proxyholder for your broker and vote your Shares in that capacity. If you wish to attend at the Meeting and indirectly vote your Shares as proxyholder for your broker, or have a person designated by you do so, you should enter your own name, or the name of the person you wish to designate, in the blank space on your voting instruction form provided to you and return the same to your broker in accordance with the instructions provided by such broker (or agent), well in advance of the Meeting.

Alternatively, you can request in writing that your broker send you a legal proxy which would enable you, or a person designated by you, to attend at the Meeting and vote your Shares.

Revocation of Proxies

In addition to revocation in any other manner permitted by law, a registered shareholder who has given a proxy may revoke it by:

(a) executing a proxy bearing a later date or by executing a valid notice of revocation, either of the foregoing to be executed by the registered shareholder or the registered shareholder's authorized attorney in writing, or, if the registered shareholder is a corporation, under its corporate seal by an officer or attorney duly authorized, and by delivering the proxy bearing a later date to Computershare Investor Services Inc. or at the address of the registered office of the Corporation at 1500 - 1055 West Georgia Street, P.O. Box 11117, Vancouver, British Columbia, V6E 4N7, at any time up to and including the last business day that precedes the day of the Meeting or, if the Meeting is adjourned, the last business day that precedes any reconvening thereof, or to the chairman of the Meeting on the day of the Meeting or any reconvening thereof, or in any other manner provided by law, or

(b) personally attending the Meeting and voting the registered shareholder's Shares.

A revocation of a proxy will not affect a matter on which a vote is taken before the revocation.

INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON

No director or executive officer of the Corporation, nor any person who has held such a position since the beginning of the last completed financial year end of the Corporation, nor any proposed nominee for election as a director of the Corporation, nor any associate or affiliate of the foregoing persons, has any substantial or material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted on at the Meeting other than the election of directors, the appointment of the auditor and as set out herein.

VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES

The Board of Directors of the Corporation has fixed May 26, 2006 as the record date (the "Record Date") for determination of persons entitled to receive notice of the Meeting. Only shareholders of record at the close of business on the Record Date who either attend the Meeting personally or complete, sign and deliver a form of proxy in the manner and subject to the provisions described above will be entitled to vote or to have their Shares voted at the Meeting

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As of May 15, 2006, there were 129,175,065 Shares without par value issued and outstanding, each carrying the right to one vote. No group of shareholders has the right to elect a specified number of directors, nor are there cumulative or similar voting rights attached to the Shares. The Corporation is also authorized to issue an unlimited number of Class A Preferred shares without par value. There are no Class A Preferred shares issued and outstanding as at May 15, 2006.

To the knowledge of the directors and executive officers of the Corporation, there are no persons or corporations that beneficially owned, directly or indirectly, or exercised control or direction over, Common Shares carrying more than 10% of the voting rights attached to all outstanding Common Shares of the Corporation as at May 15, 2006.

FINANCIAL STATEMENTS

The audited financial statements of the Corporation for the year ended December 31, 2005 and the report of the auditor thereof will be placed before the Meeting. The Annual Report containing audited financial statements, the report of the auditor, together with related management's discussion and analysis was mailed to shareholders with the Notice of Meeting and this Management Proxy Circular. Additional copies may be obtained from the Secretary of the Corporation upon request and will be available at the Meeting.

VOTES NECESSARY TO PASS RESOLUTIONS

A simple majority of affirmative votes cast at the Meeting is required to pass the resolutions described herein. If there are more nominees for election as directors or appointment of the Corporation's auditor than there are vacancies to fill, those nominees receiving the greatest number of votes will be elected or appointed, as the case may be, until all such vacancies have been filled. If the number of nominees for election or appointment is equal to the number of vacancies to be filled all such nominees will be declared elected or appointed by acclamation.

ELECTION OF DIRECTORS

The Articles of the Corporation provide that the number of directors of the Corporation will be a minimum of three and a maximum of eight. The term of office of each of the current directors will end at the conclusion of the Meeting. Unless the director's office is earlier vacated in accordance with the provisions of theCanada Business Corporations Act("CBCA"), each director elected will hold office until the conclusion of the next annual meeting of the Corporation, or if no director is then elected, until a successor is elected

Management intends to appoint eight directors at the Meeting. The following table sets out the names of management's nominees for election as directors, all major offices and positions with the Corporation and any of its significant affiliates each now holds, each nominee's principal occupation, business or employment (for the five preceding years for new director nominees), the period of time during which each has been a director of the Corporation and the number of Shares of the Corporation beneficially owned by each, directly or indirectly, or over which each exercised control or direction, as at May 15, 2006.

Nominee Position with the Corporation and Province/State and Country of Residence(1)(6)	Occupation, Business or Employment(1)	Period as a Director of the Corporation(1)	Shares Beneficially Owned or Controlled(1)
Dr. Rene Abi-Rached Chief Operating Officer & Director British Columbia, Canada	Chief Operating Officer of the Corporation.	June 29, 2001 to present	20,000
Omar Take Chief Project Officer & Director British Columbia, Canada	Chief Project Officer of the Corporation since December 2000.	June 29, 2001 to present	230,000(2)
Dr. Owen A. Anderson Chief Financial Officer & Director British Columbia, Canada	Managing Director of Hawthorne Consulting Corp. Inc., a Canadian consulting company.	June 29, 2001 to present	93,304(3)
Larry P. Coston Director Alberta, Canada	President and Chief Operating Officer of Total Energy Services Ltd., a Canadian energy services company.	June 28, 2002 to present	1,668,898(4)
Thomas Po Director British Columbia, Canada	Manager of R & D Hi-Tech Facility.	May 18, 1998 to present	97,000
Ferdinand Rauer Director Meerbusch, Germany	Executive Consultant of Thyssen Rheinstahl Tecknik, (a German conglomerate of Dusseldorf, Germany).	June 27, 1997 to present	50,000
Evelyne Schmeler Director Luxembourg, Luxembourg	Director of Veda Consult S.A., a Luxembourg based financial advisory company.	April 8, 1997 to present	52,500
Lawry Trevor-Deutsch Director Ontario, Canada	President of Strathmere Associates International Ltd., a Canadian consulting company.	May 28, 1999 to present	286,855(5)

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Notes:

(1) The information as to principal occupation, business or employment and Shares beneficially owned or controlled is not within the knowledge of the management of the Corporation and has been furnished by the respective nominees.

(2) 150,000 of these Shares are held directly and the remaining 80,000 Shares are held indirectly through Clarion Overseas Corporation.

(3) 91,304 of these Shares are held directly and the remaining 2,000 Shares are held indirectly through Hawthorne Consulting Corporation.

(4) 1,423,898 of these Shares are held directly, 25,000 of these Shares are held indirectly through Colin Lee Coston and the remaining 220,000 Shares are held indirectly through P&L Ventures Inc.

(5) 130,333 of these Shares are held directly and the remaining 156,522 Shares are held indirectly through Strathmere Associates International Limited. Of the 156,522 Shares being held by Strathmere Associates International Limited, 46,740 Shares are being held in trust for Mr. Trevor-Deutsch's parents. Mr. Trevor-Deutsch is the sole owner of Strathmere Associates International Limited.

(6) The Corporation applied for and obtained a Management Cease Trade Order issued by the British Columbia Securities Commission on June 2, 2004, which provided that the directors, officers and insiders of the Corporation could not trade their securities in the Corporation until all required financial statements have been filed and the order has been revoked. With this Management Cease Trade Order, the Corporation had further time to file the 2003 year end statements and the March 31, 2004 quarterly statements. The required Financial Statements were filed and subsequently on July 15, 2004, the Management Cease Trade Order was revoked.

APPOINTMENT OF AUDITOR

BDO Dunwoody LLP, Chartered Accountants, of 600 - 925 West Georgia Street, Vancouver, British Columbia, will be nominated at the Meeting for reappointment as auditor of the Corporation at a remuneration to be fixed by the directors. BDO Dunwoody LLP was first appointed auditor of the Corporation on June 28, 2004.

AUDIT COMMITTEE AND RELATIONSHIP WITH AUDITOR

Multilateral Instrument 52-110 of the Canadian Securities Administrators ("MI52-110") requires the Corporation, as a venture issuer, to disclose annually in its Management Proxy Circular certain information concerning the constitution of its Audit Committee and its relationship with its independent auditor, as set forth in the following:

The Audit Committee's Charter

The Audit Committee has a charter. A copy of the Audit Committee Charter is attached as Schedule "A" hereto.

Composition of the Audit Committee

The members of the Audit Committee are Dr. Owen A. Anderson, Larry P. Coston and Lawry Trevor-Deutsch. Mr. Trevor-Deutsch is the sole independent member of the Audit Committee. All members are considered to be financially literate.

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Relevant Education and Experience

The Audit Committee members have been in place for over three years, over which time they have built a strong understanding of the accounting principles used by the Corporation to prepare its financial statements, and have the ability to assess the general application of those principles in connection with estimates, accruals and reserves.

In addition, Dr. Anderson was a former partner with BDO Dunwoody. Dr. Anderson has advised private sector and government in management and public policy. Dr. Anderson was Policy Advisor to the Alberta Premier and the Federal Minister, Urban Affairs as well as the Canada Mortgage and Housing Corporation and the National Capital Commission. Dr. Anderson has managed annual government budgets in excess of $100 million as a policy advisor to the governments of Alberta and Canada.

Mr. Coston is President and Chief Operating Officer of Total Energy Services Ltd., a Canadian energy services company.

Mr. Trevor-Deutsch holds a joint Masters of Business Administration from McGill University and the University of Manchester.

Audit Committee Oversight

During the most recently completed financial year, all recommendations of the Audit Committee with respect to financial reporting, and to nomination or compensation of the Corporation's external auditor were adopted by the Board of Directors.

Reliance on Certain Exemptions

The Corporation's auditors, BDO Dunwoody LLP, do not provide material non-audited services.

External Auditor Service Fees

The Audit Committee has reviewed the nature and amount of the non-audited services provided by BDO Dunwoody LLP to the Corporation to ensure auditor independence. Fees incurred with BDO Dunwoody LLP for audit and non-audit services in the last two fiscal years for audit fees are outlined in the following table.

Nature of Services	Fees Paid to Auditor in Year Ended December 31, 2005.	Fees Paid to Auditor in Year Ended December 31, 2004.
Audit Fees(1)	$75,000	$75,000
Audit-Related Fees(2)	$--	$--
Tax Fees(3)	$--	$--
All Other Fees(4)	$--	$--
Total	$75,000	$75,000

Notes:

(1) "Audit Fees" include fees necessary to perform the annual audit and quarterly reviews of the Corporation's consolidated financial statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits.

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(2) "Audit-Related Fees" include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation.

(3) "Tax Fees" include fees for all tax services other than those included in "Audit Fees" and "Audit-Related Fees". This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities.

(4) "All Other Fees" include all other non-audit services.

Exemption

The Corporation is relying upon the exemption in section 6.1 of MI 52-110 in respect of the composition of its Audit Committee and in respect of its reporting obligations under MI 52-110.

CORPORATE GOVERNANCE

General

The Board believes that good corporate governance improves corporate performance and benefits all shareholders. The Canadian Securities Administrators (the "CSA") have adopted National Policy 58-201Corporate Governance Guidelines, which provides non-prescriptive guidelines on corporate governance practices for reporting issuers such as the Corporation. In addition, the CSA have implemented National Instrument 58-101Disclosure of Corporate Governance Practices, which prescribes certain disclosure by the Corporation of its corporate governance practices. This section sets out the Corporation's approach to corporate governance and addresses the Corporation's compliance with NI 58-101.

Board of Directors

Directors are considered to be independent if they have no direct or indirect material relationship with the Corporation. A "material relationship" is a relationship which could, in the view of the Corporation's Board of Directors, be reasonably expected to interfere with the exercise of a director's independent judgment.

The board facilitates its exercise of independent supervision over the Corporation's management through formal board meetings and informal meetings among members of the board and management.

The independent members of the Board of Directors of the Corporation are Lawry Trevor-Deutsch, Ferdinand Rauer and Evelyne Schmeler.

The non-independent directors are Dr. Owen A. Anderson, Dr. Rene Abi-Rached, Omar Take, Thomas Po and Larry P. Coston. The Corporation has determined that Dr. Anderson, Dr. Abi-Rached, Mr. Take, Mr. Po and Mr. Coston are non-independent directors as Dr. Anderson serves as Chief Financial Officer and Chairman of the Board, Dr. Abi-Rached serves as Chief Operating Officer, Mr. Take serves as Chief Project Officer, Mr. Po is a manager of a subsidiary of the Corporation and Mr. Coston is an officer and shareholder of a company that has a material relationship with the Corporation.

Directorships

Mr. Coston is a director of Total Energy Services Ltd. and Total Energy Services Trust both reporting issuers.

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Orientation and Continuing Education

When new directors are appointed, they receive orientation, commensurate with their previous experience, on the Corporation's business, technology and industry and on the responsibilities of directors.

Ethical Business Conduct

The Corporation has a Code of Business Conduct and Ethics to be adhered to by the Directors and Officers and employees of the Corporation in carrying out their duties. The Code of Business Conduct and Ethics can be found on www.sedar.com and written copies of the Code may be obtained upon request to the Secretary of the Corporation.

Nomination of Directors

The Board considers its size each year when it considers the number of directors to recommend to the shareholders for election at the annual meeting of shareholders, taking into account the number required to carry out the Board's duties effectively and to maintain a diversity of views and experience.

The Board does not have a nominating committee, and these functions are currently performed by the Board as a whole. However, if there is a change in the number of directors required by the Corporation, this policy will be reviewed.

Compensation

The Board of Directors is responsible for determining all forms of compensation to be granted to the Chief Executive Officer and the other executive officers of the Corporation.

Other Board Committees

The Board has no other committees other than the Audit Committee and the Independent Committee whose responsibility is to review and make recommendations to the Board with respect to related party transactions. The members of the Independent Committee are Lawry Trevor-Deutsch and Larry P. Coston.

Assessments

The Board monitors the adequacy of information given to directors, communication between the Board and management and the strategic direction and processes of the Board and committees.

COMPENSATION OF EXECUTIVE OFFICERS

Executive Compensation

The Corporation has two executive officers. During the Corporation's financial year ended December 31, 2005 the aggregate direct remuneration paid or payable to the Corporation's executive officers by the Corporation and its subsidiaries, all of whose financial statements are consolidated with those of the Corporation, was $126,072.

"Named Executive Officer" means each Chief Executive Officer, each Chief Financial Officer and each of the three most highly compensated executive officers, other than each Chief Executive Officer and Chief Financial Officer, who were serving as executive officers at the end of the most recently completed fiscal year and whose total salary and bonus exceeds $150,000.

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Roger A. Rached, President and Chief Executive Officer and Owen A. Anderson, Chief Financial Officer are the "Named Executive Officers" of the Corporation for the purposes of the following disclosure. The compensation paid to the Named Executive Officers during the Corporation's three most recently completed financial years is as set out below:

		Annual Compensation			Long Term Compensation
					Awards		Payouts
NAMED EXECUTIVE OFFICERS Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compen-sation ($)	Securities Under Options Granted (#)	Shares or Units Subject to Resale Restrictions ($)	LTIP Payouts ($)	All Other Compensation ($)
Roger A. Rached President and Chief Executive Officer	2005 2004 2003	72,000(1) 72,000(1) 72,000(1)	Nil Nil Nil	Nil Nil Nil	Nil 5,200,000(2) Nil	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil
Owen A. Anderson Chief Financial Officer	2005 2004 2003	54,000 54,000 54,000	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil

Notes:

(1) Paid to RAR Investments Ltd. (controlled by Roger A. Rached) and to R.A.R. Consultants Ltd. (in respect of which Roger A. Rached is an insider). The amounts are paid pursuant to a Management Agreement dated August l, 1992 (the "Management Agreement"). The Management Agreement can be ended for cause at any time without notice.

(2) These options are held through Mira Mar Overseas Ltd., a company owned indirectly by Roger A. Rached.

Long-Term Incentive Plan Awards

Long term incentive plan awards ("LTIP") means "a plan providing compensation intended to motivate performance over a period greater than one financial year. LTIPs do not include option or stock appreciation rights plans or plans for compensation through shares or units that are subject to restrictions on resale. The Corporation did not award any LTIPs to any Named Executive Officer during the most recently completed financial year.

Options

No share options were granted to the Named Executive Officers during the financial year December 31, 2005 and no share options were exercised by the Named Executive Officers during the financial year ended December 31, 2005.

No share options were repriced on behalf of the Named Executive Officers during the financial year ended December 31, 2005.

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Aggregate Option Exercises During the Most Recently Completed Financial Year and Financial Year-End Option Values

NAMED EXECUTIVE OFFICERS Name	Securities Acquired on Exercise (#)	Aggregate Value Realized ($)	Unexercised Options at FY-End (#) Exercisable/Unexercisable	Value of Unexercised in-the-Money Options at FY-End ($) Exercisable/ Unexercisable
Roger A. Rached	Nil	Nil	5,200,000 (Exercisable)	$2,184,000

Termination of Employment, Change in Responsibilities and Employment Contracts

There is no written employment contract between the Corporation and any Named Executive Officer. There is, however, a Management Agreement described above.

There are no compensatory plans or arrangements with respect to any Named Executive Officer, where the Named Executive Officer is entitled to receive more than $100,000 from the Corporation or its subsidiaries, including periodic payments or instalments, in the event of

(1) resignation, retirement or any other termination of the Named Executive Officer's employment with the Corporation and its subsidiaries;

(2) a change of control of the Corporation and any of its subsidiaries; or

(3) a change in the Named Executive Officer's responsibilities following a change of control.

Performance Graph

The following graph compares the total cumulative return to a shareholder who invested $100 in common shares of the Corporation on December 31, 2000 with the cumulative total return of the Canadian Venture Exchange Main Index ("CDNX") and subsequently the TSX Venture Exchange Composite Index ("TSXV"):

[graph]

Notes

(1) On August 1, 2001, the Toronto Stock Exchange acquired the Canadian Venture Exchange and the Canadian Venture Exchange was renamed the TSX Venture Exchange.

(2) On December 7, 2001 the CDNX Main Index was discontinued and the TSX Venture Composite Index was established.

Compensation of Directors

Since the Corporation lacks a compensation, monitoring or share option committee, the Board of Directors is responsible for these functions. Dr. Rene Abi-Rached, Omar Take and Dr. Owen A. Anderson are officers and directors of the Corporation. Thomas Po, a director, is manager of an affiliate of the Corporation. The compensation of the Chief Executive Officer is governed by a Management Agreement, which is described above. The Chief Financial Officer is paid $2,000 per month for being a Director and $2,500 per month for being the Chief Financial Officer.

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Any management bonuses payable under the Management Agreement are designed to focus management attention on consolidated operational goals of the Corporation. To date, no management bonuses have been paid.

Certain directors of the Corporation were paid a monthly director's fee of $2,000 in 2005 (subject to the cash requirements of the Corporation).

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The Corporation has in place a share option plan dated for reference June 9, 2003, as amended and restated on June 28, 2004 (the "Plan"). The Plan has been established to provide incentive to qualified parties to increase their proprietary interest in the Corporation and thereby encourage their continuing association with the Corporation. Pursuant to the Plan, 10% of the issued and outstanding Shares in the Corporation at the time an option is granted are reserved for issuance. The Plan is administered by the directors of the Corporation. The Plan provides that options will be issued pursuant to option agreements to directors, officers, employees or consultants of the Corporation or a subsidiary of the Corporation. All options expire on a date not later than five years after the issuance of such option.

Equity Compensation Plan Information

Plan	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by securityholders (the Plan)	5,200,000	$0.20	7,717,507
Equity compensation plans not approved by securityholders	N/A	N/A	N/A
Total	5,200,000	$0.20	7,717,507

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

No directors, proposed nominees for election as directors, executive officers or their respective associates or affiliates, or other management of the Corporation were indebted to the Corporation as of the end of the most recently completed financial year or as at the date hereof.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

An informed person is one who generally speaking is a director or executive officer or a 10% shareholder of the Corporation. To the knowledge of management of the Corporation, no informed person or nominee for election as a director of the Corporation or any associate or affiliate of any informed person or proposed director had any interest in any transaction which has materially affected or would materially affect the Corporation or any of its subsidiaries during the year ended December 31, 2005, or has any interest in any material transaction in the current year other than as set out below:

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• The Corporation has entered into a Consulting Fee Agreement, dated October 25, 1992. Under the Consulting Fee Agreement, RAR Consultants Ltd. ("RAR Consultants") and Garmeco Canada Int'l Consulting Engineers Ltd. ("Garmeco Canada") have agreed to assist the Corporation by providing detailed engineering designs for the projects that the Corporation undertakes. The Corporation has agreed to pay RAR Consultants and Garmeco Canada an initial fee of 4% of the factory cost price of each individual design and 1% of the factory cost price for subsequent uses of the same design;
• During the 2005 fiscal year, the Corporation paid $72,000 to RAR Consultants, a company controlled by Mr. Rached's family for management fees;
• During the 2005 fiscal year, the Corporation paid $78,000 for rent to 434088 B.C. Ltd, a company controlled by Mr. Rached's family, with respect to the Corporation's Vancouver head office;
• During the 2005 fiscal year, the Corporation paid $126,072 for directors and officers fees;
• During the 2005 fiscal year, the Corporation paid $198,370 for consulting services to a company controlled by Mr. Rached's family;
• During the 2005 fiscal year, the Corporation paid $66,721 for consulting services to Garmeco Canada, a company controlled by Mr. Rached's family;
• During the 2005 fiscal year, Lang Michener LLP, a law firm in which Stephen D. Wortley, the Secretary of the Corporation, is a partner, billed the Corporation $103,016 for professional services;
• At December 31, 2005, loans payable included $1,463,467 payable to Garmeco Canada, a company controlled by Mr. Rached's family;
• At December 31, 2005, $50,000 is included in promissory notes payable from a company controlled by an officer; and
• At December 31, 2005, $5,575,435 is included in deposits received related to joint venture option agreements from companies controlled by the family of an officer.

Creation of New Subsidiary

The Corporation created a new subsidiary IHI International Construction Inc. ("IHI Construction") to carry on international general contracting, customized for all weather and site conditions, on a worldwide basis.

The Corporation entered into a shareholders agreement dated May 1, 2006 (the "Shareholders Agreement") with Garmeco Canada, Garmeco International Consulting Engineers S.A.L., RAR Consultants in respect to each parties' shareholding in IHI Construction. Members of the President's family are shareholders of these companies.

The Shareholders Agreement provides: (i) customary restrictions on transfer such that no shareholder may sell his shares without first offering such shares to the current shareholders; (ii) for the transfer of shares to certain permitted transferees, provided that notice has been given to the other shareholders; (iii) that the Board of Directors of IHI Construction may request that shareholders each contribute additional capital of the Corporation on apro rata basis, either by way of subscription for shares, loan or otherwise; (iv) that if a shareholder provides financial covenant or guarantee to a third party on behalf of the Corporation, then each shareholder's contingent exposure should be in proportion to its shareholdings; and (v) for an offset in the instance of a sale of shares by a selling shareholder.

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MANAGEMENT CONTRACTS

Except as set out herein, there are no management functions of the Corporation which are to any substantial degree performed by a person or company other than the directors or senior officers of the Corporation.

PARTICULARS OF MATTERS TO BE ACTED UPON

Approval of Continuation of Share Option Plan

The TSX Venture Exchange (the "TSXV") requires that each company listed on the exchange have a stock option plan. In order to comply with the policies of the TSXV, and to provide incentive to directors, officers, employees, management and others who provide services to the Corporation or any subsidiary to act in the best interests of the Corporation, the shareholders of the Corporation adopted a Share Option Plan in 2003 (the "Plan").

Under the Plan a maximum of 10% of the issued and outstanding common shares of the Corporation at the time an option is granted, less Shares reserved for issuance outstanding in the Plan, will be reserved for options to be granted at the discretion of the Corporation's board of directors to eligible optionees (the "Optionees"). This type of Plan is called a "rolling" plan. During the Corporation's financial year ended December 31, 2004 and to the date of the mailing of this Management Proxy Circular, only 5,200,000 options to purchase Shares have been granted by the Corporation to Roger A. Rached, President and Chief Executive Officer of the Corporation.

Pursuant to the policies of the TSXV, the continuation of the Plan requires shareholder approval at each annual meeting of the Corporation by ordinary resolution. The Corporation is of the view that the Plan permits the Corporation to attract and maintain the services of executives, employees and other service providers with other companies in the industry. A copy of the Plan will be available for inspection at the Meeting.

At the Meeting, shareholders will be asked to vote on the following resolution, with or without variation:

"Resolved that the Corporation's share option plan dated for reference June 9, 2003, as amended and restated effective June 28, 2004, be ratified and approved for continuation as the share option plan for the Corporation."

An ordinary resolution is a resolution passed by the shareholders of the Corporation at a general meeting by a simple majority of the votes cast in person or by proxy.

The board of directors recommends that you vote in favour of the above resolution.

ADDITIONAL INFORMATION

Additional information relating to the Corporation is on www.Sedar.com. Financial information is provided in the Corporation's comparative financial statements and management discussion and analysis. The Corporation will provide to any person or company, upon request to the Secretary of the Corporation, one copy of any of the following documents:

(a) the comparative financial statements of the Corporation filed with the applicable securities regulatory authorities for the Corporation's most recently completed financial year in respect to for which such financial statements have been issued, together with the report of the auditor, related management's discussion and analysis and any interim financial statements of the Corporation filed with the applicable securities regulatory authorities subsequent to the filing of the annual financial statements; and

<PAGE>

(b) the management proxy circular of the Corporation filed with the applicable securities regulatory authorities in respect of the most recent annual meeting of shareholders of the Corporation which involved the election of directors.

Copies of the above documents will be provided, upon request, free of charge to security holders of the Corporation. The Corporation may require the payment of a reasonable charge from any person or company who is not a security holder of the Corporation, who requests a copy of any such document. The foregoing documents are also available on Sedar at www.Sedar.com.

OTHER MATTERS

The Directors are not aware of any other matters which they anticipate will come before the Meeting as of the date of mailing of this Management Proxy Circular.

SHAREHOLDER PROPOSALS

Pursuant to Canadian law, shareholder proposals to be considered for inclusion in the management proxy circular for the 2007 annual meeting of the Corporation (expected to be held in June 2007) must be received by the Secretary of the Corporation on or before the close of business on March 30, 2007.

DIRECTORS' APPROVAL

The contents of this Management Proxy Circular and its distribution to shareholders have been approved by the Board of Directors of the Corporation.

DATEDat Vancouver, British Columbia, June 1, 2006.

/s/ Roger A. Rached

Roger A. Rached

President and Chief Executive Officer

<PAGE>

International Hi-Tech Industries Inc.
(the "Company")

Corporate Governance

Charter of the Audit Committee

1. Mandate

The Audit Committee will be responsible for managing, on behalf of shareholders of the Company, the relationship between the Company and the external auditors. In particular, the Audit Committee:

(a) must be directly responsible for overseeing the work of external auditors engaged for the purpose of preparing or issuing an auditing report or related work;

(b) must recommend to the board of directors the nomination and compensation of the external auditors;

(c) has responsibility for reviewing significant accounting and reporting issues;

(d) must review the Company's financial statements, MD&A and earnings press releases before the Company publicly discloses this information;

(e) has responsibility for focusing on judgmental areas such as those involving valuations of assets and liabilities;

(f) has responsibility for considering management's handling of proposed audit adjustments identified by external auditors;

(g) has responsibility for satisfying itself that all regulatory compliance matters have been considered in the preparation of the financial statements of the Company;

(h) must establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and

(i) has a responsibility to evaluate whether management is setting the appropriate tone by communicating the importance of internal control and ensuring that all individuals possess an understanding of their roles and responsibilities.The Audit Committee may request any officer or employee of the Company and its subsidiaries or the Company's outside counsel or independent auditor to attend meetings of the Committee or to meet with any members of, or consultants to, the Committee.

The Company shall provide funding to compensate: (i) any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company; and (ii) any independent legal, accounting or other consultants employed by the Audit Committee. The Company shall also provide funding for the Audit Committee's ordinary administrative expenses that are necessary or appropriate in carrying out is duties.

2. Membership of the Audit Committee

Independence

A majority of the members of the Audit Committee must be independent within the meaning as defined in Multilateral Instrument 52-110 (Audit Committees), as amended from time to time.

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The Audit Committee shall select from its membership a chair. The job description of the chair is attached as Exhibit 1 hereto.

Expertise of Audit Committee Members

Each member of the Audit Committee must be financially literate. Financially literate means the ability to read and understand a set of financial statements that represent a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company's financial statements.

The Company will strive to include a financial expert on the Audit Committee. An Audit Committee financial expert means a person having: (i) an understanding of financial statements and accounting principles; (ii) the ability to assess the general application of such accounting principles in connection with the accounting for estimates, accruals and reserves; (iii) experience in preparing, auditing, analyzing or evaluating financial statements that present a similar breadth and level of complexity as the Company's statements; (iv) an understanding of internal controls; and (v) an understanding of an Audit Committee's functions.

3. Meetings of the Audit Committee

The Audit Committee must meet in accordance with a schedule established each year by the board of directors, and at other times as the Audit Committee may determine. A quorum for transaction of business in any meeting of the Audit Committee is a majority of members. At least twice a year, the Audit Committee should meet with the Company's chief financial officer and external auditors separately.

4. Responsibilities of the Audit Committee

The Audit Committee will be responsible for managing, on behalf of the shareholders of the Company, the relationship between the Company and the external auditors. In particular, the Audit Committee has the following responsibilities:

External Auditors

(a) the Audit Committee must recommend to the board of directors:

(i) the external auditors to be nominated for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;

(ii) the compensation of the external auditors; and

(iii) to review major changes to the Company's auditing and accounting principles and practices as suggested by the independent auditor, internal accounting for financial personnel or management;

(b) the Audit Committee must be directly responsible for overseeing the work of the external auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, including the resolution of disagreements between management and the external auditors regarding financial reporting;

(c) with respect to non-audit services, the Audit Committee must pre-approve all non- audit services provided to the Company or its subsidiaries by its external auditors or the external auditors of the Company's subsidiaries;

(d) the Audit Committee has a responsibility to also:

(i) review the auditors' proposed audit scope and approach;

(ii) review the performance of the auditors; and

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(iii) review and confirm the independence of the auditors by obtaining statements from the auditors on relationships between the auditors and the Company, including non-audit services, and discussing the relationships with the auditors;

Accounting Issues

(e) the Audit Committee has a responsibility to:

(i) review significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on the financial statements;

(ii) ask management and the external auditors about significant risks and exposures and plans to minimize such risks; and

(iii) to review major changes to the Company's auditing and accounting principles and practices as suggested by the independent auditor, internal accounting or financial personnel or management;

Financial Statements, MD&A and Press Releases

(f) the Audit Committee:

(i) must review the Company's financial statements, MD&A and earnings press releases before the Company publicly discloses this information;

(ii) in reviewing the annual financial statements, should determine whether they are complete and consistent with the information known to committee members, and assess whether the financial statements reflect appropriate accounting principles;

(iii) should pay particular attention to complex and/or unusual transactions such as restructuring charges and derivative disclosures;

(iv) should focus on judgmental areas such as those involving valuation of assets and liabilities, including, for example, the accounting for and disclosure of loan losses, warranty, professional liability, litigation reserves and other commitments and contingencies;

(v) should consider management's handling of proposed audit adjustments identified by the external auditors;

(vi) should ensure that the external auditors communicate certain required matters to the committee;

(vii) must be satisfied that adequate procedures are in place for the review of the Company's disclosure of financial information extracted or derived from the Company's financial statements, other than the disclosure referred to in paragraph (f)(i) above, and must periodically assess the adequacy of those procedures;

(viii) should be briefed on how management develops and summarizes quarterly financial information, the extent to which the external auditors review quarterly financial information and whether that review is performed on a pre- or post-issuance basis;

(ix) should meet with management, either telephonically or in person to review the interim financial statements;

(x) to gain insight into the fairness of the interim statements and disclosures, must obtain explanations from management on whether:

<PAGE>

a. actual financial results for the quarter or interim period varied significantly from budgeted or projected results;

b. changes in financial ratios and relationships in the interim financial statements are consistent with changes in the Company's operations and financing practices;

c. generally accepted accounting principles have been consistently applied;

d. there are any actual or proposed changes in accounting or financial reporting practices;

e. there are any significant or unusual events or transactions;

f. the Company's financial and operating controls are functioning effectively;

g. the Company has complied with the terms of loan agreements or security indentures; and

h. the interim financial statements contain adequate and appropriate disclosures;

Compliance with Laws and Regulations

(g) the Audit Committee should:

(i) periodically obtain updates from management regarding compliance;

(ii) be satisfied that all regulatory compliance matters have been considered in the preparation of the financial statements;

(iii) review the findings of any examinations by regulatory agencies; and

(iv) review, with the Company's counsel, any legal matters that could have a significant impact on the Company's financial statements;

Employee Complaints

(h) the Audit Committee must establish procedures for:

(i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and

(ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;

Other Responsibilities

(i) the Audit Committee:

(i) must review and approve the Company's hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company;

(ii) should evaluate whether management is setting the appropriate tone by communicating the importance of internal control and ensuring that all individuals possess an understanding of their roles and responsibilities;

(iii) should focus on the extent to which internal and external auditors review computer systems and applications, the security of such systems and applications, and the contingency plan for processing financial information in the event of a systems breakdown;

<PAGE>

(iv) should gain an understanding of whether internal control recommendations made by external auditors have been implemented by management;

(v) should periodically review and reassess the adequacy of this Charter and recommend any proposed changes to the board for approval;

(vi) should review, and if deemed appropriate, approve expense reimbursement requests that are submitted by the chief executive officer or the chief financial officer to the Company for payment;

(vii) assist the board to identify the principal risks of the Company's business and, with management, establish systems and procedures to ensure that these risks are monitored;

(viii) carry out other duties or responsibilities expressly delegated to the Audit Committee by the board;

(ix) to review with management and the independent auditor any correspondence with regulators or governmental agencies and any employee or anonymous complaints or published reports which raise material issues regarding the Company's financial statements or accounting policies; and

(x) to review and consider transactions with related parties and/or affiliated transactions.

5. Authority of the Audit Committee

The Audit Committee shall have the authority to:

(a) engage independent counsel and other advisors as it determines necessary to carry out its duties;

(b) set and pay the compensation for any advisors employed by the Audit Committee; and

(c) communicate directly with the internal and external auditors.

The Audit Committee may delegate any of its powers and authorities to its members as the Committee deems necessary from time to time.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations.

Dated for reference May 1, 2006

<PAGE>

Exhibit 1

International Hi-Tech Industries Inc.
(the "Company")

Corporate Governance

Job Description - Audit Committee Chair

The responsibilities of the Audit Committee chair include, among other things:

 managing the affairs of the Audit Committee and monitoring its effectiveness;

 managing the meetings of the Audit Committee by ensuring meaningful agendas are prepared and guiding deliberations of the Audit Committee so that appropriate decisions and recommendations are made; and

 setting up agendas for meetings of the Audit Committee and ensuring that all matters delegated to the Audit Committee by the Board are being dealt with at the Audit Committee level during the course of the year.

Dated for reference May 1, 2006

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

(Stated in Canadian Dollars)

<PAGE>

BDO DunwoodyLLP 600 Cathedral Place

Chartered Accountants 925 West Georgia Street

Vancouver, BC, Canada V6C 3L2

Telephone: (604) 688-5421

Telefax: (604) 688-5132

E-mail: vancouver@bdo.ca

www.bdo.ca

AUDITORS' REPORT

To the Shareholders

International Hi-Tech Industries Inc.

(A development stage company)

We have audited the consolidated balance sheets of International Hi-Tech Industries Inc. (a development stage company) as at December 31, 2005 and 2004 and the consolidated statements of operations, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 2005. We have also audited the statements of operations and cash flows for the period from September 12, 1990 (inception) to December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and 2004 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2005 and for the period from September 12, 1990 (inception) to December 31, 2005 in accordance with Canadian generally accepted accounting principles.

Chartered Accountants

Vancouver, Canada

March 24, 2006

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(Stated in Canadian Dollars)

	DECEMBER 31
	2005		2004
			(Restated Note 13)
ASSETS
Current
Cash and cash equivalents	$	1,079,947	$	1,890,030
Receivables		103,220		189,779
Prepaid expenses		178,752		191,857
Property held for sale (Note 2)		699,287		-
		2,061,206		2,271,666
Property, Plant and Equipment(Note 3)		16,927,473		17,698,273
Intangible Assets (Note 4)		1,843,853		1,981,156
	$	20,832,532	$	21,951,095
LIABILITIES
Current
Accounts payable and accrued liabilities	$	1,000,216	$	724,951
Deposit (Note 5)		500,000		-
Accrued interest payable		240,541		223,841
Loans payable (Note 6)		1,550,968		83,500
Current portion of long term debt (Note 7)		1,551,539		1,400,950
Current portion of promissory notes payable (Note 8)		58,240		-
		4,901,504		2,433,242
Redeemable Preferred Shares(Note 9)		293,989		582,404
Deposits Received Related To Joint Venture Option Agreements		6,240,776		6,240,776
Long Term Debt(Note 7)		4,886,573		5,042,985
Promissory Notes Payable (Note 8)		638,750		52,000
Non-Controlling Interest		-		18,748
		16,961,592		14,370,155
Contingencies(Note 12)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS (Continued)

(Stated in Canadian Dollars)

	DECEMBER 31
	2005		2004
			(Restated Note 13)
SHAREHOLDERS' EQUITY
Share Capital(Note 9)
Authorized:
An unlimited number of common shares without par value
An unlimited number of Class A preferred shares without par value, of which 60,000,000 have been designated as follows: Series 1 - 50,000,000 shares; Series 2 - 5,000,000 shares; and Series 3 - 5,000,000 shares
Issued and outstanding:
Common Shares
122,175,065 at December 31, 2005 (of which 8,673,984 shares were held in escrow) and 107,175,065 at December 31, 2004 (of which 13,010,976 shares were held in escrow)	$	56,987,431	$	55,974,931
Contributed Surplus		4,229,464		883,564
Deficit Accumulated During The Development Stage		(57,345,955)		(49,277,555)
		3,870,940		7,580,940
	$	20,832,532	$	21,951,095

Approved by the Board of Directors:
Director	Director

<PAGE>

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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Stated in Canadian Dollars)

							PERIOD FROM
							SEPTEMBER 12
							1990 (INCEPTION) TO
	YEARS ENDED DECEMBER 31						DECEMBER 31
	2005		2004		2003		2005
			(Restated Note 13)
Expenses
Audit and accounting	$	99,033	$	168,374	$	159,724	$	1,203,250
Corporation capital taxes		-		-		186,696		536,023
Consulting fees		452,657		499,712		330,295		2,793,036
Depreciation and amortization		818,818		1,252,022		1,589,514		7,673,173
Directors' and officers' fees		198,072		217,196		150,322		1,468,429
Finders', loan guarantee and commitment fees		15,359		509,961		156,085		3,657,535
Foreign exchange		3,917		(31,044)		1,376,973		1,264,525
General		255,592		342,238		289,938		2,970,440
Insurance		80,070		92,396		84,275		560,713
Interest		1,037,915		778,409		660,572		5,866,528
Investor relations		232,921		21,567		25,074		373,416
Legal		163,324		681,656		494,318		5,855,755
Product representation costs		63,497		154,302		160,438		2,462,621
Office rent		103,732		102,000		91,135		988,622
Promotion and presentation		120,157		13,968		15,601		440,399
Property taxes		210,560		269,945		166,589		1,290,699
Repairs and maintenance		59,184		67,180		71,088		819,109
Stock based compensation		3,345,900		578,564		-		3,924,464
Telephone, fax and cellular		38,730		26,356		28,963		657,512
Travel and business promotion		116,938		363,977		288,923		3,534,054
Transfer agent and filing fees		32,701		43,281		35,160		450,121
Wages and benefits		1,047,755		1,006,696		657,790		5,594,437
		8,496,832		7,158,756		7,019,473		54,384,861
Less: Interest and other income		(409,684)		(302,604)		(973,177)		(2,987,465)
Loss From Operations - carried forward		(8,087,148)		(6,856,152)		(6,046,296)		(51,397,396)

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INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

(Stated in Canadian Dollars)

							PERIOD FROM
							SEPTEMBER 12
							1990 (INCEPTION) TO
	YEARS ENDED DECEMBER 31						DECEMBER 31
	2005		2004		2003		2005
			(Restated Note 13)
Loss From Operations - brought forward	$	(8,087,148)	$	(6,856,152)	$	(6,046,296)	$	(51,397,396)
Deferred Project Development Cost Written Down (Note 1(d))		- -		- -		(4,638,737)		(4,638,737)
Gain On Cancellation Of License Rights		-		3,614,500		154,460		7,276,101
Foreign Exchange Gain On Cancellation Of License Rights		- -		1,035,200		- -		1,035,200
Gain On Termination Of Option		-		-		-		259,990
Gain On Issue Of Treasury Shares By Subsidiary Company		- -		- -		- -		1,216,580
Legal Settlement		-		-		-		(200,000)
Write Down Of Note Receivable And Interest (Note 13)		- -		(382,936)		- -		(382,936)
Write Down Of Property, Plant And Equipment (Note 3)		- -		(6,833,188)		- -		(6,833,188)
Net Loss for the Period Before Non-Controlling Interest		(8,087,148)		(9,422,576)		(10,530,573)		(53,664,386)
Non-Controlling Interest		18,748		(1,458,078)		-		(1,814,403)
Net Loss For The Period		(8,068,400)		(10,880,654)		(10,530,573)	$	(55,478,789)
Preferred Share Dividends		-		-		(124,933)
Net Loss Available To Common Shareholders	$	(8,068,400)	$	(10,880,654)	$	(10,655,506)
Loss Per Share, Basic and diluted	$	(0.07)	$	(0.10)	$	(0.10)
Weighted Average Common Shares Outstanding		115,969,586		104,722,372		103,470,774

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

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INTERNATIONAL HI-TECH INDUSTRIES INC.

<PAGE>

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in Canadian Dollars)

							PERIOD FROM
							SEPTEMBER 12, 1990
							(INCEPTION) TO
	YEARS ENDED DECEMBER 31							DECEMBER 31
	2005		2004		2003			2005
			(Restated Note 13)
Cash Flows From Operating Activities
Net loss for the period	$	(8,068,400)	$	(10,880,654)	$	(10,530,573)		$	(55,478,789)
Adjustments To Reconcile Loss To Net Cash Used In Operating Activities
Unrealized exchange adjustment on notes receivable		-		87,412		334,059			273,569
Accrued interest on notes receivable		-		(41,895)		(77,952)			(461,341)
Accrued interest on promissory notes payable (Note 8)		19,990		2,000		-			21,990
Accrued interest on other long term financing agreement (Note 7)		-		107,339		-			107,339
Amortization of discount on redeemable preferred shares (Note 9)		91,725		194,098		194,098			674,129
Accrued Interest on redeemable preferred shares		299,310		-		-			299,310
Gain on cancellation of license rights		-		(3,614,500)		(154,460)			(7,275,501)
Realized exchange gain on cancellation of license rights		-		(1,035,200)		-			(1,035,200)
Gain on issue of treasury shares by subsidiary company		-		-		-			(1,216,580)
Shares issued for loan guarantee and commitment fees		-		318,317		-			1,792,315
Non-controlling interest portion of income (loss) in subsidiary		(18,748)		1,458,078		-			1,814,403
Loss on renegotiation of asset under capital lease		3,563		-		-			3,563
Write down of deferred project development costs		-		-		4,638,737			4,638,737
Write down of note receivable		-		382,936		-			382,936
Write down of property, land and equipment		-		6,833,188		-			6,833,188
Stock based compensation		3,345,900		578,564		-			3,924,464
Depreciation and amortization		818,818		1,252,022		1,589,514			7,673,173
(Increase) Decrease in assets
Receivables		86,559		(97,918)		830			(103,220)
Prepaid expenses		13,105		237,178		(93,324)			(178,754)
Increase (Decrease) in liabilities
Accounts payable and accrued liabilities		275,265		75,527		213,674			1,000,216
Accrued interest payable		16,700		(80,954)		61,454			240,541
Deposit		500,000		-		-			500,000
Net Cash Used In Operating Activities		(2,616,213)		(4,224,462)		(3,823,943)		(35,569,510)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Stated in Canadian Dollars)

							PERIOD FROM
							SEPTEMBER 12
							1990, (INCEPTION) TO
	YEARS ENDED DECEMBER 31						DECEMBER 31
	2005		2004		2003		2005
			(Restated Note 13)
Cash Flows From Investing Activities
Acquisition of property, plant and equipment		(444,133)		(437,616)		(1,811,580)		(30,497,426)
Acquisition of intangible assets		(169,432)		(135,672)		(214,534)		(3,152,068)
Project development costs		-		-		-		(4,638,737)
Notes receivable		-		-		-		(1,385,419)
Net asset deficiency of legal parent at date of reverse take-over transaction		- -		- -		- -		(306,774)
Net non-current assets of subsidiary		-		-		-		(146,418)
Net Cash Used In Investing Activities		(613,565)		(573,288)		(2,026,114)		(40,126,842)
Cash Flows From Financing Activities
Shares issued for cash and share subscriptions		1,012,500		70,000		- -		48,938,413
Issuance of preferred shares		-		-		-		6,256,703
Redemption of preferred shares		(679,450)		-		-		(679,450)
Dividends paid		-		-		(193,324)		(1,560,392)
Contributed surplus		-		-		-		305,000
Non-controlling interest in Canadian Hi-Tech Manufacturing Ltd.		- -		- -		- -		184,319
Issuance of shares by subsidiary company for cash		- -		- -		- -		1,557,500
Dividends paid by subsidiary to non-controlling shareholders		- -		- -		(1,417,448)		(2,339,642)
Cash deposits received related to joint venture option agreements		- -		- -		1,979,024		15,741,733
Increase in restricted cash		-		-		275,463		-
Increase in amount due to related parties		-		-		-		1,848,483
Repayment of amount due to related parties		- -		- -		- -		(1,848,483)
Increase in loans payable		1,467,468		-		-		2,148,468
Repayment in loans payable		-		(209,326)		(149,635)		(597,500)
Increase in long term debt		147,587		4,500,000		-		10,167,358
Repayment of long term debt		(153,410)		(486,866)		(403,767)		(4,021,211)
Proceeds from mortgages payable		-		-		-		3,105,160
Repayment of mortgages payable		-		-		(1,868,000)		(3,105,160)
Increase in promissory notes payable		625,000		50,000		-		675,000
Net Cash Provided By (Used In) Financing Activities		2,419,695		3,923,808		(1,777,687)		76,776,299

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Stated in Canadian Dollars)

							PERIOD FROM
							SEPTEMBER 12
							1990, (INCEPTION) TO
	YEARS ENDED DECEMBER 31						DECEMBER 31
	2005		2004		2003		2005
			(Restated Note 13)
Net Increase (Decrease) In Cash and Cash Equivalents	$	(810,083)	$	(873,942)	$	(7,627,744)	$	1,079,947
Cash and Cash Equivalents, Beginning Of Period		1,890,030		2,763,972		10,391,716		-
Cash and Cash Equivalents, End Of Period	$	1,079,947	$	1,890,030	$	2,763,972	$	1,079,947
Supplemental Disclosure Of Cash Flow Information
Stock based compensation (Note 9)	$	3,345,900	$	578,564	$	-	$	3,924,464
Interest paid	$	464,226	$	25,302	$	313,771	$	3,428,007
Taxes paid	$	-	$	-	$	-	$	-

Supplemental Disclosure Of Non-Cash Financing And Investing Activities

During the year ended December 31, 2004, the Company issued 1,741,058 common shares on the conversion of 2,261,114 Series 3 Class B preferred shares.

During the year ended December 31, 2004, the Company issued $318,317 of common shares in exchange for a loan guarantee (Note 9(ii)).

<PAGE>

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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

									NON-CONTROLLING		DEFICIT
	COMMON STOCK			PREFERRED STOCK					INTEREST		ACCUMULATED
	NUMBER			NUMBER					DEFICIT		DURING THE
	OF			OF			CONTRIBUTED		RELATING TO		DEVELOPMENT
	SHARES	AMOUNT		SHARES	AMOUNT		SURPLUS		DIVIDENDS		STAGE		TOTAL
									(Restated Note 13)		(Restated Note 13)
Balance, December 31, 2002	102,531,371	$	53,546,611	2,261,114	$	2,040,003	$	305,000	$	(21,882)	$	(27,741,395)		$	28,128,337
Conversion of preferred stock to common stock	1,741,058		2,040,003	(2,261,114)		(2,040,003)		-		-		-			-
Non-Controlling interest deficit relating to dividends	-		-	-		-		- -		(1,417,448)		- -			(1,417,448)
Preferred share dividends	-		-	-		-		-		-		(124,933)			(124,933)
Net loss	-		-	-		-		-		-		(10,530,573)			(10,530,573)
Balance, December 31, 2003	104,272,429		55,586,614	-		-		305,000		(1,439,330)		(38,396,901)			16,055,383
Issuance of common stock	250,000		70,000	-		-		-		-		-			70,000
Issuance of common stock in exchange for a loan guarantee (Note 9)	2,652,636		318,317	-		-		-		-		- -			318,317
Stock based compensation (Note 9)	-		-	-		-		578,564		-		-			578,564
Non-controlling interest	-		-	-		-		-		1,439,330		-			1,439,330
Net loss	-		-	-		-		-		-		(10,880,654)			(10,880,654)
Balance, December 31, 2004 (Restated - Note 13)	107,175,065		55,974,931	-		-		883,564		- -		(49,277,555)			7,580,940
Issuance of common stock (Note 9(iii))	15,000,000		1,012,500	-		-		-		-		-			1,012,500
Stock based compensation (Note 9(iii))	-		-	-		-		3,345,900		-		-			3,345,900
Net loss	-		-	-		-		-		-		(8,068,400)			(8,068,400)
Balance, December 31, 2005	122,175,065	$	56,987,431	-	$	-	$	4,229,464	$	-	$	(57,345,955)		$	3,870,940

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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Ability to Continue

International Hi-Tech Industries Inc. (the "Company"), a development stage company, is in the business of developing and commercializing a building construction process that uses completely pre-manufactured customized panels, including floor panels, wall panels and roof panels.

The accompanying consolidated financial statements have been prepared in accordance with Canadian 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. The Company has an accumulated deficit as at December 31, 2005 of $57,345,955 which includes a net loss for 2005 of $8,068,400. The continuation of the Company is dependent upon the continuing financial support of creditors and shareholders, refinancing debts payable, obtaining additional long-term debt or equity financing, as well as achieving and maintaining a profitable level of operations. The Company plans to raise additional equity and debt capital as necessary to finance the operating and capital requirements of the Company. Amounts raised will be used to provide financing for the development and commercialization of the Company's business and for other working capital purposes. While th e Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations.

Above conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might arise from this uncertainty.

b) Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries - Canadian Hi-Tech Manufacturing Ltd. (65% owned), IHI International Holdings Ltd. (50.7% owned), IHI Construction Ltd. (100% owned), IHI Sales Ltd. (100% owned), IHI Developments Ltd. (100% owned), IHI Manufacturing Ltd. (100% owned) and IHI Planning Ltd. (100% owned). All significant intercompany balances and transactions have been eliminated.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES(Continued)

b) Basis of Consolidation (Continued)

During the years ended December 31, 2003 and 2002, the Company paid dividends to non-controlling shareholders of subsidiaries. Dividends paid to the non-controlling shareholders of the Company's subsidiary, IHI International Holdings Ltd., less the non-controlling shareholders share of income of IHI International Holdings Ltd., exceeded the amount of the net equity of the Company's subsidiary attributable to the non-controlling shareholders by $1,439,330 at December 31, 2003. These amounts were recorded as a reduction to shareholders' equity in 2003 as the Company anticipates their recovery from the non-controlling shareholders' share of future net income generated by the subsidiary. The amount was fully recovered in 2004 and as at December 31, 2004, the Company recorded a non-controlling interest of $18,748 on its consolidated balance sheet.

c) Cash and Cash Equivalents

The Company considers cash and cash equivalents to include amounts held in banks and highly liquid investments with maturities at point of purchase of three months or less. The Company places their cash and cash investments with institutions of high credit worthiness. At times, such investments may be in excess of federal insurance limits.

d) Deferred Project Development Costs

The Company defers architectural, design consulting and other costs directly related to the ongoing development and commercialization of its pre-fabrication building product and flexible design program. These costs are to be amortized against related revenues when production commences. During 2003, the Company determined that previously deferred costs were impaired and recorded a $4,638,737 write-down related to these costs. No deferred project development costs were capitalized during 2005 and 2004.

e) Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated amortization and are amortized using the declining-balance basis method at annual rates as follows:

Automotive	30%
Computer equipment	30%
Office furniture and equipment	20%
Other machinery and equipment	20%
Paving	8%

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES(Continued)

e) Property, Plant and Equipment (Continued)

Land and building held for development are recorded at cost. Site preparation costs related to raw land are also recorded at cost. Buildings have not been amortized as commercial production has not yet commenced at December 31, 2005.

f) Intangible Assets

Patent application costs are amortized on a straight-line basis over ten years once a patent is secured.

License rights are amortized on a straight-line basis over ten years.

On an annual basis or when impairment indicators arise, the Company evaluates the future recoverability of property, plant and equipment, intangible assets and deferred project development costs. Impairment losses or write downs to fair value are recorded in the event the net book value of such assets exceeds the estimated undiscounted future cash flows attributable to such assets.

g) Stock Based Compensation

The Company's stock-based compensation plan is described in Note 9(iv).

The Company has adopted the recommendations of CICA Handbook Section 3870 - "Stock Based Compensation and Other Stock Based Payments" ("HB 3870") to account for stock based transactions with officers, directors, and outside consultants. Accordingly the fair value of stock options is charged to operations as appropriate, with an offsetting credit to contributed surplus. The fair value of stock options which vest immediately is recorded at the date of grant; the fair value of options which vest in future is recognized on a straight-line basis over the vesting period. Any consideration received on exercise of stock options together with the related portion of contributed surplus is credited to share capital. The fair value of stock options is assessed using the Black-Scholes Option Pricing Model. The Company adopted the amended recommendation of HB 3870 effective January 1, 2004 on a retroactive basis without restatement. The effect of this change in accounting policy had no effect on t he consolidated financial statements.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES(Continued)

h) Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized for temporary differences between the tax and accounting bases of assets and liabilities, as well as for the benefit of losses available to be carried forward to future years for tax purposes using enacted tax rates in effect in the years in which the differences are expected to reverse. Future income tax assets are evaluated and if realization is not considered more likely than not, a valuation allowance is provided.

i) Joint Ventures

At the present time, the Company does not have any active joint venture ownership interests, however, on commencement of joint venture activities, the Company intends to account for its interest in joint ventures using the proportionate consolidation method whereby the Company will include its pro-rata share of each of the assets, liabilities, revenues and expenses that are subject to joint control with similar items in the Company's financial statements.

j) Deposits Received Related to Joint Venture Option Agreements and Gain on Cancellation of License Rights

Payments related to non-refundable fees and deposits from joint venture option agreements are deferred in the accounts and recorded as revenue upon the transfer of the significant risks and rewards of ownership of the license rights which the Company has determined will occur upon the formation of a joint venture and the Company's ability to deliver the technology to exploit the license has been established.

Proceeds from deposits received from memorandums of understanding that have been entered by the Company are recorded as gain on cancellation of license rights in the period that the notice of cancellation of the memorandum of understanding is issued.

k) Foreign Currency Transactions

Transactions recorded in foreign currencies have been translated into Canadian dollars as follows:

i) monetary items at the rate prevailing at the balance sheet date;

ii) non-monetary items at the historical exchange rate;

iii) revenue and expenses at the rate in effect during the applicable accounting period.

The resulting foreign exchange gains and losses are included in the Consolidated Statements of Operations in the current period.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES(Continued)

l) Loss Per Share

Loss per common share is calculated based on the weighted average number of common shares outstanding during the year. The effects of potential issuances of 20,200,000 (2004 - 5,200,000; 2003 - 34,500,000) common shares on the exercise of stock options and share purchase warrants and conversion of preferred shares would be anti-dilutive and, therefore, basic and diluted loss per share are the same for the years reported.

m) Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, receivables, accounts payable and accrued liabilities, deposit, accrued interest payable, loans payable, long term debt, promissory note payable and redeemable preferred shares,. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair values of the financial instruments other than redeemable preferred shares approximate carrying values due to their short term nature or bearing interest rates that are similar to current market rates. The fair value of the redeemable preferred shares was calculated using a discounted cash flow analysis and approximated the carrying value as the implicit interest rate is similar to current market rates.

n) Redeemable Preferred Shares

The Class B preferred shares issued by Canadian Hi-Tech Manufacturing Ltd. (Canadian Hi-Tech), the Company's 65% owned subsidiary, which are redeemable at $100 per share at the option of the preferred shareholder, were reclassified as financial liabilities in 2002 as the shares will become fully redeemable in 2007 due to the amendment of the escrow shares agreement in 2002. The redeemable preferred shares were originally recorded at the redemption value of $1,100,000. The difference between the proceeds of the Class B preferred shares and the redemption value was recorded as a discount of the redeemable preferred shares and is being amortized over the period from the date of reclassification to the earliest date that the preferred shares are eligible to be redeemed. Accordingly, $1,100,000 was charged as a discount against the redemption value and is being amortized on a straight line basis over 68 months resulting in an annual charge to interest expense. During the year ended December 31, 2005, $679,450 (2004 and 2003 - $Nil) of the Class B preferred shares were redeemed. (Note 9)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES(Continued)

o) Use of Estimates

The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and the recording of liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting periods. Actual results may materially differ from those estimates. The financial statement accounts which required management to make significant estimates and assumptions in determining carrying value included property, plant and equipment, real estate, intangible assets and future income taxes.

p) Property Held for Sale

Property held for sale is recorded at the lower of cost and net realizable value, and is classified as a current asset.

q) Comparative Figures

Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.

2. PROPERTY HELD FOR SALE

Property held for sale consists of four parcels of land no longer needed for corporate purposes. The property is currently listed on the market and is expected to sell within the next fiscal year.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

3. PROPERTY, PLANT AND EQUIPMENT

	2005
			ACCUMULATED
			AMORTIZATION
			AND		NET BOOK
	COST		WRITE DOWNS		VALUE
Land	$	2,800,007	$	-	$	2,800,007
Paving		53,533		11,760		41,773
Automotive		152,703		139,174		13,529
Office furniture and equipment		318,568		277,881		40,687
Computer equipment		185,612		147,450		38,162
Other machinery and equipment		5,952,111		4,059,082		1,893,029
Building		18,390,286		6,290,000		12,100,286
	$	27,852,820	$	10,925,347	$	16,927,473

	2004
			ACCUMULATED
			AMORTIZATION
			AND		NET BOOK
	COST		WRITE DOWNS		VALUE
Land	$	3,432,134	$	-	$	3,432,134
Paving		52,616		7,211		45,405
Automotive		152,703		133,376		19,327
Office furniture and equipment		318,568		264,572		53,996
Computer equipment		179,678		132,366		47,312
Other machinery and equipment		5,980,204		3,582,313		2,397,891
Building construction in progress		17,992,208		6,290,000		11,702,208
	$	28,108,111	$	10,409,838	$	17,698,273

Other machinery and equipment includes assets acquired under capital lease with an original cost of $842,109 (2004 - $842,109). Accumulated amortization provided on this other machinery and equipment totalled$653,263(2004 - $614,871).

<PAGE>

In 2004, as a result of the litigation discussed in Note 12(b), the Company had been unable to complete its Hopcott Road production facility to the point where commercial operations could be pursued. As a result of delays in this regard and other factors, management determined that an impairment in the Company's building and machinery and equipment had occurred and has recorded a $6,833,188 impairment write down in 2004 (2005 and 2003 - $Nil).

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

4. INTANGIBLE ASSETS

	2005
			ACCUMULATED		NET BOOK
	COST		AMORTIZATION		VALUE
Patent application costs	$	2,952,068	$	1,118,215	$	1,833,853
License rights		200,000		190,000		10,000
	$	3,152,068	$	1,308,215	$	1,843,853

	2004
			ACCUMULATED		NET BOOK
	COST		AMORTIZATION		VALUE
Patent application costs	$	2,782,636	$	831,480	$	1,951,156
License rights		200,000		170,000		30,000
	$	2,982,636	$	1,001,480	$	1,981,156

5. DEPOSIT

During the year ended December 31, 2005, the Company received $500,000 which represents the initial license fee payment made to induce the Company to enter into an interim agreement and to negotiate the formal business arrangements of the interim agreement to allow the Company to enter into a business venture with Hi-Tech Canada Development Inc., a company with a director in common, that would involve the use of certain technology licensed to the Company. As at December 31, 2005, the interim agreement had not been finalized and there are no specific terms of repayment.

6. LOANS PAYABLE

	2005		2004
Unsecured and repayable on demand to a company controlled by the family of a Director with interest at 20% per annum. Interest charged during 2005 were $52,558 (2004 - $Nil, 2003 - $72,000)	$	1,463,468	$	- -
Unsecured and repayable on demand at various interest rates		87,500		83,500
	$	1,550,968	$	83,500

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

7. LONG TERM DEBT

	2005		2004
Obligations Under Capital Lease
Various Lease Obligations
Weighted average interest at 8.5% (2004 - 17.64%), maturing in November 2008, combined monthly lease payments of principal and interest of $1,332.	$	45,432	$	21,678
Other Long Term Obligations
Mortgage Payable
Interest at 7% per annum, maturing September 1, 2007, monthly payments of principal and interest of $34,619. The mortgage is collateralized by the Hopcott Road real estate and an officer guarantee (Note 9(ii)).		4,363,430		4,473,617
Other Mortgages
Weighted average interest at 7.75% (2004 - 7.67%), maturing between April 2006 and May 2008, combined monthly payments of principal and interest of $10,899. Two of the three mortgages are collateralized by real estate.		954,606		997,829
Other long term financing agreements
Weighted average interest at 12.00% (2004 - 11.71%), collateralized by equipment, matured in 2004 with combined monthly payments of principal and interest of $51,326. A portion of these amounts are presently under dispute, see Note 12(b) for further details.		1,074,644		950,811
		6,392,680		6,422,257
		6,438,112		6,443,935
Less: Current portion		1,551,539		1,400,950
	$	4,886,573	$	5,042,985

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

7. LONG TERM DEBT (Continued)

The principal payments required on obligations under capital lease and long term debt is approximately as follows:

			OTHER
	CAPITAL		LONG TERM
	LEASES		OBLIGATIONS		TOTAL
2006	$	12,637	$	1,538,902	$	1,551,539
2007	$	13,738	$	4,294,824	$	4,308,562
2008	$	19,057	$	558,954	$	578,011
	$	45,432	$	6,392,680	$	6,438,112

8. PROMISSORY NOTES PAYABLE

	2005		2004
Promissory note payable, is unsecured, payable on or before August 27, 2006, accrues interest at 12% per annum, and is due to company controlled by a Director.	$	50,000	$	50,000
Promissory note payable, is unsecured, payable on or before February 22, 2007, and accrues interest at prime per annum. At December 31, 2005 the prime rate was 5.00%		50,000		-
Promissory notes payable, are unsecured, payable on or before March 17, 2007 to December 28, 2007, and accrue interest at 4% per annum.		475,000		-
Promissory note payable, is unsecured, payable on or before July 11, 2007, and accrues interest at 5% per annum.		100,000		-
		675,000		50,000
Total accrued interest		21,990		2,000
		696,990		52,000
Less: Current portion		58,240		-
	$	638,750	$	52,000

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

9. SHARE CAPITAL

i) Escrow Shares

As at December 31, 2005, included in the Company's issued and outstanding shares, 8,673,984 (2004 - 13,010,976) were held in escrow to be released on the basis of 2,168,496 every six months. These shares were originally issued to the president of the Company and an associate of the president. On January 18, 2000, upon approval by the TSX Venture Exchange ("TSX-V"), the escrow shares were transferred to a company indirectly owned by the president.

ii) Shares Issued in Exchange for a Loan Guarantee

On November 12, 2004 the Company issued 2,652,636 common shares to a company controlled by the Company's Chief Operating Officer in exchange for his guarantee on a first mortgage (Note 7). As these common shares were issued for consideration other than cash, the shares were recorded at the quoted market value of the Company's common shares on the agreement date and recorded as a 2004 expense.

iii) Shares Issued for Cash

During the year ended December 31, 2005, the Company completed a private placement with companies or individuals controlled by or related to the President in the amount of $1,012,500 for 15,000,000 units. Each unit consists of one common share and one share purchase warrant, with each warrant exercisable to purchase one common share of the Company at a price of $0.10 per share until May 31, 2007. For accounting purposes, the shares were recorded at their fair value of $4,358,400 (average of $0.27 per unit) based on the quoted market price of the Company's common share on the date of issuance. The $3,345,900 difference between the trading price and the cash proceeds is included in stock based compensation.

iv) Stock Options

In accordance with the policies of the TSX-V, the Company may grant stock options to directors, senior officers, employees or contractors in consideration of them providing their services to the Company. The exercise price of the stock options must be at least equal to the fair market value on the date of the grant and the optionee's rights under the plan vest immediately. Stock options are granted for a maximum term of five years and the number of shares under option cannot exceed 10% of the Company's total issued and outstanding shares.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

9. SHARE CAPITAL (Continued)

iv) Stock Options (Continued)

Subject to shareholders and TSX-V approval, the Company established a Stock Option Plan (the "Plan"). The maximum number of shares that the Company may reserve for issuance under the Plan at any point in time is 10% of the outstanding shares. Under the Plan, the Company may grant options to its directors, officers, employees, management and consultants. The term of these options is five years. The Board of Directors will determine the terms and matters relating to any awards under the Plan including the exercise price and the number of common shares granted.

As at December 31, 2005 and 2004, the Company had outstanding options for the purchase of additional common shares as follows:

NUMBER OF SHARES	PRICE PER SHARE		EXPIRY DATE
5,200,000	$	0.20	October 6, 2008

A summary of the changes in stock options for the years presented is as follows:

	OPTIONS	WEIGHTED AVERAGE EXERCISE PRICE
Outstanding and exercisable, January 1, 2003	2,600,000	$	0.88
Expired	(2,600,000)		(0.88)
Outstanding and exercisable, December 31, 2003	-		-
Granted	5,200,000		0.20
Outstanding and exercisable, December 31, 2004 and December 31, 2005	5,200,000	$	0.20

<PAGE>

The fair value of each option granted in 2004 was estimated on the grant date using the Black-Scholes option pricing model assuming no dividends were paid, a volatility of the Company's share price of 105%, an annual risk-free interest rate of 3.27% and an expected life equal to the life of the options. The fair value of the 2004 options granted was $0.11 per share.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

9. SHARE CAPITAL (Continued)

iv) Stock Options (Continued)

In connection with the vesting of the stock options, the Company included in consulting fees for the year ended December 31, 2004 stock option compensation in the amount of $578,564 (2005 and 2003 - $Nil).

v) Share Purchase Warrants

As at December 31, 2005, the Company had outstanding share purchase warrants for the purchase of additional common shares as follows:

NUMBER OF SHARES	PRICE PER SHARE		EXPIRY DATE
15,000,000	$	0.10	May 31, 2007

A summary of the changes in share purchase warrants for the periods presented is as follows:

	SHARE PURCHASE WARRANTS	WEIGHTED AVERAGE EXERCISE PRICE
Outstanding and exercisable, January 1, 2003	38,176,557	$	0.55
Expired	(3,676,557)		(1.19)
Outstanding and exercisable, December 31, 2003	34,500,000		(0.48)
Exercised	(250,000)		(0.28)
Expired	(34,250,000)		(0.48)
Outstanding and exercisable, December 31, 2004	-		-
Issued	15,000,000		0.10
Outstanding and exercisable, December 31, 2005	15,000,000	$	0.10

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

9. SHARE CAPITAL (Continued)

vi) Class B Preferred Shares of the Subsidiary

The Company's 65% owned subsidiary, Canadian Hi-Tech., has 11,000 Class B preferred shares outstanding, which are redeemable at $100 per share at the option of the preferred shareholder. With the amendment of the Company's escrow share agreement in 2002, the Class B Preferred Shares of the subsidiary will become fully redeemable on August 21, 2007, the date on which all of the Company's shares are released from escrow.

		Redemption				Carrying
		Value		Discount		Value
Balance, January 1, 2003	$	1,100,000	$	(905,792)	$	194,208
Amortization of discount		-		194,098		194,098
Balance, December 31, 2003		1,100,000		(711,694)		388,306
Amortization of discount		-		194,098		194,098
Balance, December 31, 2004		1,100,000		(517,596)		582,404
Redemption of preferred shares		(679,450)		-		(679,450)
Unamortized discount charged to interest expense as a result of the redemption of preferred shares prior to maturity		-		299,310		299,310
Amortization of discount		-		91,725		91,725
Balance, December 31, 2005	$	420,550	$	(126,561)	$	293,989

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

10. INCOME TAXES

The Company is not current in the filing of its tax returns; but has potential non-capital losses for income tax purposes of $22,869,176 which may be available to reduce taxable income in future years. The benefit of these losses as a future income tax benefit has been reduced by a valuation allowance. If unused, these potential losses expire as follows:

2006	$	2,416,548
2007		3,655,560
2008		1,397,203
2009		2,332,504
2010		5,089,136
2014		4,362,011
2015		3,616,214
	$	22,869,176

The provision for (recovery of) income taxes differs from the amount that would have resulted by applying the Canadian statutory rate of approximately 34.12% (2004 - 35.62%; 2003 - 35.62%) to earnings as follows:

	2005		2004		2003
Income tax (recovery) provision at statutory rates	$	(2,759,335)	$	(3,356,322)	$	(3,750,990)
Effect of reduction in statutory rate		196,289		-		733,426
Non-deductible items		1,281,011		301,189		84,815
Foreign earnings subject to different tax rates		171,750		(850,773)		415,281
Increase in valuation allowance		1,110,285		3,905,906		2,517,468
	$	-	$	-	$	-

The tax benefit of net operating losses carried forward and the associated valuation allowance were reduced by $3,041,539 (2004 - $951,850, 2003 - $666,248), representing the tax effect of losses which expired in the year.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

10. INCOME TAXES (Continued)

The components of future tax assets are as follows:

	2005		2004
Property, plant and equipment	$	3,727,728	$	4,661,207
Non-capital losses		7,802,963		8,800,738
		11,530,691		13,461,945
Less: Valuation allowance		(11,530,691)		(13,461,945)
Future income tax asset	$	-	$	-

11. RELATED PARTY TRANSACTIONS

Related party transactions not disclosed elsewhere in the financial statements are set out below.

During the year ended December 31, 2005, the Company paid the following:

a) $72,000 (2004 - $72,000; 2003 - $72,000) for management fees to a company controlled by the family of an officer.

b) $78,000 (2004 - $58,500; 2003 - $78,000) for rent to a company controlled by a relative of an officer.

c) $126,072 (2004 - $72,597; 2003 - $78,322) for directors and officers fees.

d) $198,370 (2004 - $103,315; 2003 - $88,528) for consulting services to a company controlled by the family of an officer.

e) $66,721 (2004 - $53,225; 2003 - $Nil) for consulting services to a company controlled by a director.

f) $103,016 (2004 - $216,232; 2003 - $154,046) for professional services to a law firm in which an officer is a partner.

g) $50,000 (2004 - $50,000) is included in promissory notes payable from a company controlled by an officer (Note 8).

h) $5,575,435 (2004 - $5,575,435) is included in deposits received related to joint venture option agreements from companies controlled by the family of an officer and companies with a director in common.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

11. RELATED PARTY TRANSACTIONS (Continued)

The Company is party to a consulting fee agreement under which a company controlled by a director, and a second company controlled by this same director's family, will provide all building engineering designs for the Company's projects for an initial fee of 4% of the factory cost of the initial design, and 1% of the factory cost for subsequent use of the same design. The Company has also agreed to pay a royalty to the second company referred to above equal to 1% of net profits realized from the license of the technology being used by the Company.

IHI International Holdings Ltd. ("IHI-International"), a Bermuda company and a 51% owned subsidiary of the Company, holds the right to use the building technology in all countries in the world other than Canada. The Company has agreed to use its best efforts to offer, to its shareholders, shares of IHI-International.

The above-noted transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed by the related parties.

12. CONTINGENCIES

a) Interim joint venture option agreements entered into by the Company with companies controlled by a Director's family and, for which the Company has received payments totalling US$1,900,000 in cash and cash equivalents, provided that there must not be any change in the Company's senior management. The interim agreements further provide that if there is such a change in management, the Company's joint venture partners have the right to cancel the interim agreement and the Company will have to repay the license fee plus an amount equal to 20% of the license fee payment compounded annually calculated from the date of such payment, as at December 31, 2005, $3,906,017 (2004 - $3,256,005). The Company has delivered a general security agreement to its joint venture partners to collateralize the Company's obligations.

b) On March 26, 2002 the Company commenced an action against Fanuc Robotics Canada Ltd., General Electric Capital Canada Inc., Fanuc Robotics North America Inc. and Merrill Lynch in the Supreme Court of British Columbia. The action is for damages arising from the claimed fundamental failure to deliver and implement a "Flexible Panel Welding System" in accordance with agreed specifications as sold to the Company. Without limitation, the action is also for injunctive relief enjoining Merrill Lynch from paying funds pursuant to a letter of credit relating to the sale of said system. Statements of Defence have been filed on behalf of the Defendants, Fanuc Robotics Canada Ltd., Fanuc Robotics North America Inc., and General Electric Capital Canada Inc. The Defendants, Fanuc Robotics Canada Ltd. and Fanuc Robotics North America Inc., have filed a counterclaim against the Company for judgement in the amount of $87,645, plus interest, as well as other relief, respecting which the Company has filed a Defence

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

12. CONTINGENCIES (Continued)

seeking dismissal of said counterclaim with costs (see Note 7). The Defendant, General Electric Capital Canada Inc., has filed a counterclaim against the Company for judgement in the amount of $780,509, plus interest, as well as other relief, respecting which the Company has filed a Defence seeking dismissal of said counterclaim with costs. The Defendant Fanuc Robotics Canada Ltd. has notified the Company that it takes the position that Fanuc Robotics Canada Ltd. complied with its obligations under the contract related to the Flexible Panel Welding System, which the Company also disputes. The outcome of these matters is not presently determinable.

c) The Company is also a party to various other legal claims which have arisen in the normal course of business, none of which are expected to have a material adverse effect on the financial position or results of operations of the Company.

13. RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL STATEMENTS

The December 31, 2004 financial statements have been restated to reflect the reversal of the deposit related to the receivable which was written off in 2004.

The prior period adjustments resulted in the following changes to the Company's comparative consolidated balance sheet and consolidated statement of income as at, and for the year ended, December 31, 2004:

Consolidated Balance Sheet

		2004
Deposits received related to Joint Venture Option Agreements, as previously reported	$	7,431,032
Reversal of deposit related to note receivable previously written off		(1,190,256)
Deposits received related to Joint Venture Option Agreements, as restated	$	6,240,776
Non-controlling interest deficit relating to dividends, as previously reported	$	(568,048)
Adjustment of non-controlling interest related to the reversal of deposits		586,796
Non-controlling interest, as restated	$	18,748
Deficit Accumulated During the Development Stage, as previously reported	$	(49,881,015)
Reversal of deposit related to note receivable previously written off		1,190,256
Adjustment of non-controlling interest related to the reversal of deposits		(586,796)
	$	(49,277,555)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

(Stated in Canadian Dollars)

13. RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Consolidated Statement of Operations

			SEPTEMBER 12
	For the year ended		1990 (INCEPTION) TO
	December 31		DECEMBER 31
	2004		2004
Write down of note receivable and interest, as previously reported	$	(1,573,192)	$	(1,573,192)
Reversal of deposit related to note receivable previously written off		1,190,256		1,190,256
Write down of note receivable and interest, as restated	$	(382,936)	$	(382,936)
Non-controlling interest as previously stated	$	(871,282)	$		(1,246,355)
Adjustment of non-controlling interest related to the reversal of the deposit		(586,796)			(586,796)
Non-controlling interest, as restated	$	(1,458,078)	$		(1,833,151)
Net loss for the year, as previously stated	$	(11,484,114)	$	(48,013,849)
Reversal of deposit related to note receivable previously written off		1,190,256		1,190,256
Adjustment to non-controlling interest		(586,796)		(586,796)
Net loss for the period, as restated	$	(10,880,654)	$	(47,410,389)

	For the year ended
	December 31
	2004
Loss per share, basic and diluted, as previously stated	$	(0.11)
Loss per share, basic and diluted, as restated	$	(0.10)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

MANAGEMENT DISCUSSION & ANALYSIS
FOR THE YEAR ENDED
DECEMBER 31, 2005

May 1, 2006

<PAGE>

Overview

The principal business of International Hi-Tech Industries Inc. (the "Corporation") is the development and commercialization of a new building system (the "Technology") in Canada, and internationally through the Corporation's 50.7% owned subsidiary, IHI International Holdings Ltd. ("IHI International"). The Canadian rights to the Technology are held by the Corporation pursuant to a license agreement which terminates on March 16, 2092 (the "Canadian License Agreement"). The international rights to the Technology are held by IHI International pursuant to a license agreement which terminates on October 4, 2093 (the "International License Agreement").

Management is committed to enhancing the financial return on the Corporation's $20.8 million of assets, primarily invested in the Corporation's permanent manufacturing facility at 7393 Hopcott Road, Delta, British Columbia (the "Facility"). In addition, the Corporation will continue to pursue strategic alliances that increase revenue and that are compatible with its corporate culture.

The Corporation is progressing with construction of its Optima Tower Project, a high-rise development located in Surrey Central City, British Columbia. The project is attracting interest from local and international developers and from contractors, shareholders and buyers. The Optima Tower will be home to a 4,300 square foot child care facility operated by the YMCA of Greater Vancouver. Following receipt of the building permit for the project, the Corporation estimates that the first Optima tower should be erected in approximately six weeks after the onsite construction reaches the ground level. A full scale two bedroom suite, incorporating the Corporation's pre-manufactured foundations, will be assembled at the Optima Presentation Centre after obtaining the building permits for the project.

The Corporation has also entered into a Memorandum of Understanding to establish a 5,000 square foot high-end "show home" in the Middle East Gulf region. The Corporation expects the home to be finished, erected on site, and ready for viewing before the end of September 2006.

The Corporation continues to develop additional innovative prototypes for the lucrative oil and mining industries in Canada. These prototypes range from temporary housing accommodations to insulated and air tight storage units, mobile schools, mobile insulated environmental mats, septic tanks, commercial buildings, industrial shops and job site offices. A fully integrated prototype building, measuring 40x80x25 feet, is designed to be fully erected within eight to sixteen hours, depending on the crew experience. The only site preparation for the building is a levelled compacted ground. The ground slab panels that are part of the three dimensional structure act as a floating foundation and are designed to accommodate a 100,000 pound caterpillar loader. Recently, a prototype structure was erected successfully in Northern Alberta and has been attracting interest from several potential clients.

The Corporation announced that its potential joint venture partner for the Canadian Prairie region has secured a approximate 15 acre heavy industrial zoned site for a manufacturing facility, incorporating the Technology. The acquisition has been completed.

Manufacturing Facility

The building for the Facility is complete.

Attainment of Commercial Production

The Corporation is progressing in its plan to deal with implementing several welding measures to minimize the impact of the equipment supplied by FANUC Robotics Canada Ltd. and General Electric Capital Canada Inc. ("Fanuc-GE"), which the Corporation claims is deficient. Phase 1 of the Corporation's Plan was successfully completed in July of 2002 with the installation of semi-manual welding units. The Corporation has purchased equipment to complete Phase 2 which will allow for semi-automated cutting and welding units. The Corporation expects to complete Phase 3, the final phase, by the end of 2006. The budget to complete Phase 3 is approximately $5 million. These phases are intended to solve most of the issues associated with the fully flexible automated welding and cutting systems involved in the Corporation's manufacturing process and to replace the system supplied by Fanuc-GE. See "Legal Proceedings" below.

<PAGE>

An additional Mobile Industrial Building has been manufactured and will be erected at the Corporation's Facility site once necessary permits are secured. The new structure will be separated from the main production building and is intended to house an automated welding production line. The line will be designed to allow the Corporation to achieve production at full capacity rates.

The Corporation is not ready for production at full capacity rates.

Application of Building Technology

The Corporation has moved ahead with a number of prototype manufacturing projects and tests to demonstrate the attractiveness of the Technology in very severe climatic conditions.

Intellectual Property

The United States Patent and Trademark office has granted United States Patent No. 5584151 from the divisional application relating to foundation components of the Technology. The United States Patent and Trademark office has also granted United States Patent Nos. 5862639 and 5785904 relating to the panels and the method of securing architectural finish elements, respectively. Over 110 patent applications and applications for other forms of protection have been filed worldwide to attempt to establish exclusionary rights to the Technology in at least 180 countries or regions.

On May 11, 2005, the Corporation announced that patents have been issued in Croatia. Additional patents have also been issued in Bahrain, Brazil, Hong Kong, Israel, Mexico and Venezuela.

On December 6, 2005, the Corporation announced that Angolan Patent No. 35 has been issued. In addition to patents issued in Japan, the Corporation announced that additional patents have been allowed in Europe and China and other patents have been accepted in Iceland.

Selected Annual Financial Information

The selected annual financial information below for the years ended December 31, 2003 to 2005 are taken from our financial statements. The statements for the years ended December 31, 2005, 2004 and 2003 have been prepared according to Canadian GAAP and have been audited by BDO Dunwoody LLP, independent chartered accountants.

The prior year comparative information has been restated to reflect a 2004 accounting error in the financial reporting for a note receivable and the related deposit received related to joint venture option agreements. The December 31, 2004 financial statements are being restated to reflect the reversal of the previously recorded deposit related to the receivable which was previously treated as uncollectible in 2004. No further restatements of prior year comparative information have been made.

All financial data presented below is in Canadian dollars.

The following table sets forth selected consolidated financial information with respect to the Corporation for the last three fiscal years ended December 31, 2005:

	YEAR ENDED
	December 31, 2005 $	December 31, 2004 (Restated) $	December 31, 2003 $
Total Revenue1	409,684	302,604	973,177
Gain On Cancellation of License Rights	--	3,614,500	154,460
Foreign Exchange Gain On Cancellation of License Rights	--	1,035,200	--
Income (Loss) from Operations	(8,087,148)	(6,856,152)	(6,046,296)
Net Income (Loss)	(8,068,400)2	(10,880,654)	(10,530,573)
Net Income (Loss) Per Share	(0.07)	(0.10)	(0.10)
Total Assets	20,832,532	21,951,095	25,054,388
Long Term Debt	4,886,573	5,042,985	741,169
Cash Dividends (Preferred Shares)	--	--	(124,933)

1 Interest and other income

2 Included in this loss is $3,345,900 (2004 - $578,564) stock based compensation, which were non-cash expenses, further described in note 9 of the financial statements.

The Corporation has incurred losses to date including a net loss for the current year of $8,068,400. The continuation of the Corporation is dependent upon the continuing financial support of creditors and shareholders, refinancing debts payable, obtaining additional long term debt or equity financing, as well as achieving and maintaining a profitable level of operations. The Corporation plans to raise additional equity and debt capital as necessary to finance the operating and capital requirements of the Corporation. See "Capital Requirements, Resources and Liquidity" for details relating to the Corporation's recent private placement. Amounts raised will be used to provide financing for the development and commercialization of the Corporation's business and for other working capital purposes. While the Corporation is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations.

Payments related to non-refundable fees and deposits under memoranda of understanding ("MOUs") are deferred in the accounts and recorded as revenue upon the transfer of the significant risks and rewards of ownership of the license rights which the Corporation has determined will occur upon the formation of a joint venture and the Corporation's ability to deliver the technology to exploit the license has been established.

Proceeds from non-refundable deposits received under MOUs that have been received by the Corporation are recorded as gain on cancellation of license rights in the period that the notice of cancellation of the MOU is issued.

Results of Operations

The Corporation had a net loss of $8,068,400 for the year ended December 31, 2005, as compared to a net loss of $10,880,654 for the year ended December 31, 2004.

As at the end of fiscal 2005, the Corporation had retained 26 interim license agreements that call for the establishment of up to 30Hi-Tech Factories.

The Corporation expects that the budget for Phase 3 will be approximately $5,000,000. The Corporation has made a claim of damages in excess of $5,000,000 in connection with the litigation commenced by the Corporation against Fanuc-GE. The Corporation intends to raise additional funds through equity financings, sale of it licenses or from profits generated from its development project. There can be no assurance that the Corporation will be successful in raising these funds.

Depreciation and amortization expenses decreased from $1,252,022 for the year ended December 31, 2004 to $818,818 for the year ended December 31, 2005. Depreciation and amortization is a non-cash charge.

<PAGE>

General and administration expenses (comprised of all general and administration expenses except interest and foreign exchange and depreciation and amortization) increased from $5,159,369 for the year ended December 31, 2004 to $6,636,182 for the year ended December 31, 2005.

Summary of Quarterly Results

The selected quarterly information below for the eight quarters ended December 31, 2005 are taken from our financial statements. The statements for the quarter ended December 31, 2005 have been prepared according to Canadian GAAP.

All financial data presented below is in Canadian dollars.

The following table sets forth selected consolidated financial information with respect to the Corporation for the eight quarters ended December 31, 2005:

	December 2005 $	September 2005 $	June 2005 $	March 2005 $	December 2004 $	September 2004 $	June 2004 $	March 2004 $
I Total Revenue(1)	234,915	22,819	70,004	81,946	33,342	(25,950)	217,789	144,107
Income (Loss) Before Extraordinary Items	(4,676,992)	(1,002,801)	(1,339,575)	(1,067,780)	(2,560,095)	(1,659,794)	(1,579,371)	(1,056,892)
Income (Loss) Before Extraordinary Items Per Share	(0.04)	(0.01)	(0.01)	(0.01)	(0.02)	(0.02)	(0.01)	(0.01)
Net Income (Loss)	(4,658,244)	(1,002,801)	(1,339,575)	(1,067,780)	(6,584,597)	(1,659,794)	(1,579,371)	(1,056,892)

1 Interest and Other Income

Capital Requirements, Resources and Liquidity

The Corporation's cash balance at December 31, 2005 was $1,079,947 (December 31, 2004 - $1,890,030). As at December 31, 2005, the Corporation had a working capital deficit of $2,840,298 (compared to a working capital deficit of $161,576 as at December 31, 2004).

The Corporation in 2005 spent $444,133 in cash on the acquisition of property, plant and equipment compared to cash used in the acquisition of property, plant and equipment in 2004 of $437,616.

The Corporation in 2005 spent $169,432 in cash on the acquisition of intangible assets compared to cash used in the acquisition of intangible assets in 2004 of $135,672.

During 2005 the Corporation had increased cash inflow compared to the prior year due to increase of shares issued for cash, loans payable to related parties, increase in long term debt and a deposit received related to an interim agreement.

With respect to financing activities during 2005, $500,000 was received in cash as deposits related to interim agreements (in 2004 - $nil).

As at December 31, 2005, the Facility, including the property, plant and equipment, had a net book value of approximately $16.9 million. The historical cost of the Facility is approximately $27.9 million.

The Corporation has a first mortgage financing over the Corporation's Hopcott Road Property in the amount of $4,500,000. The term of the mortgage is for three years, maturing September 1, 2007, with an annual interest rate of 7%.

<PAGE>

To deal with its working capital deficiency of $2,840,298 as at year end, the Corporation arranged a private placement of 7,000,000 units at a price of $0.60 per unit for total proceeds of $4,200,000. Each unit will be comprised of one common share and one non-transferable share purchase warrant entitling the holder thereof to purchase one additional common share for a term of two years at a price of $0.80 per share. The proceeds raised will be used for working capital relating to construction projects the Corporation is bidding for and awarded, for applying to obtain the necessary performance bonds for such projects, for general working capital and to pay down debts. The private placement was approved by the TSX Venture Exchange on April 17, 2006 and has not closed yet. The longer term outlook for the Corporation's liquidity will depend on the Corporation's success in accessing internally generated cash flow from the sales of its products and license fees generated from memoranda of u nderstanding.

Contingencies

A portion of the amounts shown as contingency amounts in the Corporation's Financial Statements are amounts owed to members of Mr. Rached's family.

Risks and Uncertainties

The following is an overview of some of the risks related to our business. If any of these risks actually occur, our business objectives may not be met or could be seriously impacted. You should carefully consider the risks described below when reviewing the information contained in this Management Discussion and Analysis. There may also be other unexpected events that could similarly impact our future operations.

Interim Agreements

There is no assurance that the interim agreements or memoranda of understanding ("MOUs" and sometimes referred to as "joint venture option agreements") relating to our proposed joint ventures will ever result in projects being completed or amounts due under MOUs being paid.

We May Not Be Able To Start Full Capacity Commercial Production.

We have spent most of our efforts over the past 11 years to date in activities intended to establish our business, including:

• marketing our Technology;
• making patent applications for the Technology; and
• looking for potential joint venture partners.

We have earned no material revenues from product sales and our full capacity operations have not begun. As this is a new business, we may experience typical problems, experiences, difficulties, complications and delays. We must develop and implement systems, standards and procedures for every aspect of our operations. We may not be able to complete all of these items as soon as we would like. We will continue to incur expenses before we start full capacity operations, and these expenses may be partially covered by some additional operating revenues.

The Corporation is progressing in its plan to deal with implementing several welding measures to minimize the impact of the equipment supplied by Fanuc-GE, which the Corporation claims is deficient. Phase 1 of the Corporation's Plan was successfully completed in July of 2002 with the installation of semi-manual welding units. The Corporation has purchased equipment to complete Phase 2 which will allow for semi-automated cutting and welding units. The Corporation expects to complete Phase 3, the final phase, by the end of 2006. The budget to complete Phase 3 is approximately $5 million. These phases are intended to solve most of the issues associated with the fully flexible automated welding and cutting systems involved in the Corporation's manufacturing process and to replace the system supplied by Fanuc-GE. See "Legal Proceedings" below.

<PAGE>

We may be exposed to product liability claims.

Upon the development and commercialization of the Technology, we may become subject to product liability lawsuits which could result in significant expense to us, adversely affecting our business and financial conditions.

We Have Had Losses In Each Of Our Years Of Operation.

We have had net losses in each of our years of operation. For the year ended December 31, 2005, we had a net loss of $8,068,400. We may never become profitable. We may not be able to generate significant revenue through product sales based on the Technology. On December 31, 2005, our accumulated deficit was $57,345,955.

Situations May Arise Where Our Interests Could Conflict With Those Of Management.

Some of our directors and officers have business interests in companies that have entered into agreements with us. Mr. Rached is our President. Members of Mr. Rached's family control RAR Consultants Ltd. ("RAR Consultants"), the licensor of the Technology. If we broke the Canadian License Agreement or if our subsidiary, IHI International, broke the International License Agreement, the licenses would be returned to RAR Consultants. Our subsidiary, Canadian Hi-Tech Manufacturing Ltd. ("Canadian Hi-Tech") has entered into a Consulting Fee Agreement dated October 25, 1992 with RAR Consultants and Garmeco Canada - Int'l Consulting Engineers Ltd. ("Garmeco Canada") (a company controlled by relatives of Mr. Rached) regarding designs produced by Garmeco Canada and used by us. Mr. Rached is the President and a Director of IHI Construction Ltd., our wholly owned subsidiary, contractually responsible for the construction of our manufacturing facility. Lease payments are now made to 434088 B .C. Ltd., a company controlled by Mr. Rached's family. We have agreed to pay an aggregate management fee of $6,000 a month to RAR Investments Ltd. and RAR Consultants.

Any conflicts are normally resolved according to theCanada Business Corporations Act ("CBCA") that requires disclosures of conflicts at meetings of the directors where we would be acquiring assets or dealing in assets in which directors have an interest. These directors are then prevented from voting on any resolution passed by the Board where they have a conflict. However, the CBCA lets directors with a potential conflict vote on any resolution relating to:

• his or her remuneration as a director;
• indemnities or insurance for directors; and
• a contract with an affiliate.

Our directors and officers are legally required to act fairly and in our best interest and are not permitted to ignore their duty to us for their own benefit.

We Will Need Additional Financing.

Based on our estimate of costs in connection with planned development and demonstration projects, we will require at least $7 million over the next two to three years to pay for our development and commercialization activities. This will include:

• the manufacture of additional demonstration show homes and other projects;
• the further development and enhancement of our manufacturing capability; and
• for our working capital requirements.

<PAGE>

Our estimated cash requirements over this period will be funded from our existing financial resources and potentially through:

• private placement investments with our shareholders;
• conventional bank financing;
• proceeds from deposits on MOUs; and
• product orders.

If we experience significant cost overruns on any of these activities and cannot raise additional funds, we may need to cut back or delay some of our activities.

Our Business Will Suffer If We Lose Key Skilled Personnel.

We will be dependent on certain members of our management and engineering staff, and if we lose their services our business could be severely impacted. In particular, we will rely on the services of Mr. Rached. Mr. Rached has extended his personal credit to support our business. If Mr. Rached is unable to pay his creditors, there is a risk that his assets, including his holdings in our shares, could be subject to creditor enforcement proceedings. In addition, our ability to manage growth effectively will require that we continue to implement and improve our management systems and recruit and train new employees. We may not be able to successfully attract and hire skilled and experienced personnel. We lack employment agreements with any of our executive officers or employees and do not carry key person insurance on any of their lives.

We May Not Be Able To Succeed In A Competitive Marketplace.

Our products will compete in areas where there is strong competition. Other companies, some of which will have substantially greater resources than us, are currently developing and selling products that are competitive with our products.

Our Officers And Directors May Be In A Position To Influence The Election Of Our Board Of Directors.

Mr. Rached through Mira Mar Overseas Ltd. owns 10,842,478 Common Shares or 8.9% and holds options to purchase 5,200,000 Common Shares at $0.20 per share expiring October 6, 2008. Therefore, Mr. Rached may be in a position to influence the election of our Board of Directors. Also, we do not currently have an Independent Compensation Committee. There is no independent oversight or supervision over management compensation. These functions are performed by the Board of Directors.

We May Never Achieve Commercial Production.

Currently we have limited finished housing products commercially available for sale. We may never:

• develop finished housing products commercially for sale in large quantities;
• meet all applicable regulatory standards in all territories where we would like to sell products;
• be able to produce at commercial costs; or
• be successful in marketing or achieving acceptable profit margins.

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The public may be reluctant or slow to accept our unconventional building system. The Technology introduces a new concept and as such has not been thoroughly tested in practical terms. The degree of pre-manufacturing and engineering is extensive and any error or omission could prove costly.

Our Strategic Alliances May Not Achieve Their Goals.

We expect to partially rely on strategic alliances for development contracts, assistance in product design and development, volume purchase orders and manufacturing and marketing expertise. Even if we are successful in forming these alliances, they may not achieve their goals.

We May Not Be Able To Comply With Extensive And Stringent Government Regulation In Canada, The United States, And Elsewhere.

We may not be able to comply with, or continue to comply with, current or future governmental regulations in every jurisdiction where we conduct our business operations. Compliance may be very expensive or may cause us to interrupt our operations or restrict our future activities. If IHI International conducts business in the United States, we may not be able to comply with regulations relating to the Occupational Safety and Health Act and environmental protection. If we are unable to comply with such requirements, we could be subject to penalties, including restrictions on our business operations, monetary liability and criminal sanctions, any of which could hurt our business.

Our Proposed Joint Venture Activities In Foreign Countries May Experience Problems We Would Not Normally Find In The United States Or Canada.

Joint venture operations in Germany, Luxembourg, the Philippines, Egypt, Costa Rica, Nicaragua, Panama and other foreign countries may face risks common to foreign operations in the construction industry. These risks include:

• political and economic uncertainties;
• contract cancellation or unilateral modification of contract rights;
• operating restrictions;
• currency repatriation restrictions;
• expropriation;
• export restrictions;
• increased taxes; and
• other foreign governmental intervention risks.

We May Not Be Able To Protect Our Intellectual Property In All Markets.

Our ability to compete effectively will depend, in part, on the ability of RAR Consultants, the licensor of the Technology, to maintain patents for the Technology. Some of the licensor's patent applications have received favourable examination reports, and in some cases, patents have been issued (including three United States patents). Patents may not be issued in every country. The licensor may not be able to protect or maintain its patents. The patents may not be enforceable or provide meaningful protection from our competitors. In addition, the laws of certain foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Even if a competitor's products were to infringe patents held under license by us, enforcing patent rights in an infringement action would be costly.

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Although we believe that the Technology and our manufacturing process do not infringe upon the property rights of any third parties, this may not be the case. If our products or building system are found to infringe the rights of third parties, we may not be able to get a license from the intellectual property owner at a reasonable cost or at all. We have an exclusive license to use the Technology in Canada and our subsidiary, IHI International, has the exclusive license to use the Technology in all countries of the world other than Canada. Both the Canadian and International License Agreements are for 99 year terms; however, the licensor may not continue or renew the licenses. The licensor may also develop a new system to replace the Technology and choose not to license this new technology to us.

The Success Of Our Business Relies Heavily On Services To Be Provided By RAR Consultants.

The commercialization of the Technology will depend, in part, upon services to be provided by RAR Consultants. These services are not subject to the Canadian or International License Agreement. On March 5, 1997, Garmeco Canada and RAR Consultants confirmed that the services they have committed to provide include providing the analytical design software owned by RAR Consultants. RAR Consultants may not continue or renew the Consulting Fee Agreement on the current terms.

We May Not Carry Enough Insurance.

Although we carry commercial general liability and product liability insurance of up to $5 million, this level of coverage may not be adequate to protect us against all general and commercial claims. Any general, commercial or product liability claim which is not covered by our general or product liability insurance or is over the policy liability limits could impact our financial condition. We may not be able to maintain our current general liability or product liability insurance on reasonable terms.

Off-Balance Sheet Arrangements

The Corporation does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Corporation's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Related Party Transactions

The following are the only transactions that occurred during fiscal 2005 that have affected or will affect the Corporation, and involved directors, officers or individuals related to the Corporation:

• The Corporation has entered into a Consulting Fee Agreement, dated October 25, 1992. Under the Consulting Fee Agreement, RAR Consultants and Garmeco Canada have agreed to assist the Corporation by providing detailed engineering designs for the projects that the Corporation undertakes. The Corporation has agreed to pay RAR Consultants and Garmeco Canada an initial fee of 4% of the factory cost price of each individual design and 1% of the factory cost price for subsequent uses of the same design;
• During the 2005 fiscal year, the Corporation paid $72,000 to RAR Consultants, a company controlled by Mr. Rached's family for management fees;
• During the 2005 fiscal year, the Corporation paid $78,000 for rent to 434088 B.C. Ltd, a company controlled by Mr. Rached's family, with respect to the Corporation's Vancouver head office;
• During the 2005 fiscal year, the Corporation paid $126,072 for directors and officers fees;
• During the 2005 fiscal year, the Corporation paid $198,370 for consulting services to a company controlled by Mr. Rached's family;
• During the 2005 fiscal year, the Corporation paid $66,721 for consulting services to Garmeco Canada, a company controlled by Mr. Rached's family;
• During the 2005 fiscal year, Lang Michener LLP, a law firm in which Stephen D. Wortley, the Secretary of the Corporation, is a partner, billed the Corporation $103,016 for professional services;
• At December 31, 2005, loans payable includes $1,463,467 payable to Garmeco Canada, a company controlled by Mr. Rached's family;
• At December 31, 2005, $50,000 is included in promissory notes payable from a company controlled by an officer; and
• At December 31, 2005, $5,575,435 is included in deposits received related to joint venture option agreements from companies controlled by the family of an officer.

Changes in Accounting Policies including Initial Adoption

There have been no changes in the Corporation's accounting policies in 2005 and management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, could have a material effect on the accompanying financial statements.

Financial Instruments and Other Instruments

The Corporation's financial instruments consist of cash and cash equivalents, redeemable preferred shares, receivables, notes receivable and accrued interest, accounts payable and accrued interest payable, loans payable, long term debt and promissory note payable. Unless otherwise noted, it is management's opinion that the Corporation is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair values of these financial instruments other than redeemable preferred shares approximate carrying values due to their short term nature or bearing interest rates that are similar to current market rates. The fair value of the redeemable shares was calculated using discounted cash flow analysis and approximated the carrying value as the implicit interest rate is similar to current market rates.

Forward-Looking Statements

All statements other than statements of historical fact in this Management Discussion and Analysis are forward-looking statements, including, without limitation, statements regarding future financial position, business strategy, proposed acquisitions, budgets, litigation, projected costs and plans, and objectives of or involving the Corporation. Readers can identify many of these statements by looking for words such as "believes", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof.

There are no assurances that the plans, intentions, or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions, which if different could cause results to differ materially from those expressed in the forward-looking statement. Additional information on these and other factors is included in the Corporation's 2004 Annual Report on Form 20-F, which may be found on SEDAR at www.sedar.com or on EDGAR at www.sec.gov/edgar.shtml.

Legal Proceedings

On March 26, 2002, the Corporation commenced an action against FANUC Robotics Canada Ltd., General Electric Capital Canada Inc., Fanuc Robotics North America Inc. and Merrill Lynch in the Supreme Court of British Columbia. The action is for damages arising from the claimed fundamental failure to deliver and implement a "Flexible Panel Welding System" in accordance with agreed specifications as sold to the Corporation. The Defendant FANUC Robotics Canada Ltd. has notified the Corporation that it takes the position FANUC Robotics Canada Ltd. has complied with its obligations under the contract related to the Flexible Panel Welding System and that following the demand by General Electric Capital Inc., $400,000 was released to General Electric Capital Canada Inc. from an original $600,000 letter of credit provided by the Corporation. Pursuant to the December, 2000 Recourse Agreement between the Defendant, General Electric Capital Canada Inc., and the Defendant, FANUC Robotics Canada Ltd ., the Corporation has been advised that on June 30, 2004 the Defendant, General Electric Capital Canada Inc., was paid $400,000 plus GST and provided an assignment of its cause of action in respect thereof. The Corporation's proceedings against Merrill Lynch have been dismissed on consent of all parties. Examinations for discovery in the within proceedings are in the process of completion. Ongoing case management conferences have been held before the presiding Judge, Justice Ballance, in support of the revised trial commencement date of November 14, 2005. This case is still at trial.

Additional Disclosure for Venture Issuers without Significant Revenue

The following table sets forth selected consolidated financial information with respect to the Corporation for the period ended December 31, 2005 and 2004:

	December 31, 2005 $	December 31, 2004 $
Deferred Development Costs	--	--
General and Administration Expenses	6,636,182	5,159,699
Foreign Exchange	3,917	(31,044)
Interest	1,037,915	778,409
Depreciation and Amortization	818,818	1,252,022

Disclosure of Outstanding Share Data

To date, the Corporation's issued and outstanding share capital is 122,175,065. The Corporation currently has outstanding options to purchase 5,200,000 common shares of the Corporation and warrants to purchase 15,000,000 common shares.

Additional Information

Additional information relating to the Corporation may be found on SEDAR at www.sedar.com.