International Hi Tech Industries 20F 2005 Annual report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

[ ]	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12(g) OF THESECURITIES EXCHANGE ACT OF 1934
	OR
[ X ]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
	For the fiscal year endedDecember 31, 2005
	OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________ to _______________
	OR
[ ]	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
	Date of event requiring this shell company report __________________________

Commission file number0-24364

INTERNATIONAL HI-TECH INDUSTRIES INC.

(Exact name of Registrant as specified in its charter)

CANADA

(Jurisdiction of incorporation or organization)

1096 West 10th Avenue
Vancouver, British Columbia, Canada, V6H 1H8

(Address of principal executive offices)

Securities registered or to be registered pursuant to section 12(b) of the Act:

Title of each Class		Name of each exchange on which registered
Common Shares without par value		N/A

Securities registered or to be registered pursuant to Section 12(g) of the Act: N/A

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: N/A

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

122,175,065 Common Shares without par value as of December 31, 2005

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [ X ]

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If this report is an annual report or transition report, indicate by check mark if the registrant is not required to file reports pursuant to section 13 or 15(d) of theSecurities Exchange Act of 1934.

Yes [ ] No [ X ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [ X ]

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [ X ] Item 18 [ ]

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12-b of the Exchange Act):

Yes [ ] No [ X ]

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TABLE OF CONTENTS

		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		iii
PART 1		1
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3.	KEY INFORMATION	1
	SELECTED FINANCIAL DATA	1
	CAPITALIZATION AND INDEBTEDNESS	4
	REASONS FOR THE OFFER AND USE OF PROCEEDS	4
	RISK FACTORS	4
ITEM 4.	INFORMATION ON THE COMPANY	10
	HISTORY AND DEVELOPMENT OF THE CORPORATION	10
	BUSINESS OVERVIEW	13
	ORGANIZATIONAL STRUCTURE	27
	PROPERTY, PLANT AND EQUIPMENT	28
ITEM 4A.	UNRESOLVED STAFF COMMENTS	28
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	28
	OVERVIEW	28
	CRITICAL ACCOUNTING POLICIES	29
	OPERATING RESULTS	30
	LIQUIDITY AND CAPITAL RESOURCES	32
	TECHNOLOGY AND LICENSES	33
	OFF-BALANCE SHEET ARRANGEMENTS	34
	CONTRACTUAL OBLIGATIONS	34
	SAFE HARBOR	34
	NEW ACCOUNTING PRONOUNCEMENTS	34
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	35
	DIRECTORS AND SENIOR MANAGEMENT	35
	BIOGRAPHIES OF OUR SENIOR MANAGEMENT AND DIRECTORS	37
	COMPENSATION	39
	TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS	41
	BOARD PRACTICES	41
	EMPLOYEES	42
	SHARE OWNERSHIP	42
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	42
	MAJOR SHAREHOLDERS	42
	RELATED PARTY TRANSACTIONS	43
	INTERESTS OF EXPERTS AND COUNSEL	45
ITEM 8.	FINANCIAL INFORMATION	45
	CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION	45
	LEGAL PROCEEDINGS	45
	DIVIDEND POLICY	45
	SIGNIFICANT CHANGES	45
ITEM 9.	THE OFFER AND LISTING	46
	OFFER AND LISTING DETAILS	46
	PLAN OF DISTRIBUTION	46
	MARKETS	46
	SELLING SHAREHOLDERS	46
	DILUTION	47
	EXPENSES OF THE ISSUE	47
ITEM 10.	ADDITIONAL INFORMATION	47
	SHARE CAPITAL	47
	ARTICLES OF ASSOCIATION	47
	MATERIAL CONTRACTS	48
	EXCHANGE CONTROLS	49
	TAXATION	50
	DIVIDENDS AND PAYING AGENTS	54
	STATEMENT BY EXPERTS	54
	DOCUMENTS ON DISPLAY	54
	SUBSIDIARY INFORMATION	54
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	54
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	55
PART II		55
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	55
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	55
ITEM 15.	CONTROLS AND PROCEDURES	55
ITEM 16.	[RESERVED]	55
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	55
ITEM 16B.	CODE OF BUSINESS CONDUCT AND ETHICS	56
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	56
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	56
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	57
PART III		57
ITEM 17.	FINANCIAL STATEMENTS	57
ITEM 18.	FINANCIAL STATEMENTS	57
ITEM 19.	EXHIBITS	57
	SIGNATURE	60

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by forward-looking words such an "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," and "would" or similar words. Forward-looking statements are not guarantees of future performance and involve substantial risks and uncertainties. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our shareholders. However, there may be events in the future that we are not able to predict accurately or control. Therefore, these statements should not be regarded as a representation by us that any of our objectives or plans will be achieved or that any of our operating expectations will be realized. Our revenues and results of operations are difficult to forecast and could differ materially from those projected in the forward-looking statements contained in this Annual Report.

The factors listed below in the section captioned "Key Information - Risk Factors," as well as any cautionary language in this Annual Report, provide examples of risks, uncertainties, and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this Annual Report could have a material adverse effect on our business, results of operations and financial position. The risk factors should not be considered to be complete; we undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events after the date hereof, or to reflect the occurrence of unanticipated events.

__________________________________

Unless otherwise indicated, all references to "IHI", "we", "us", "our" and the "Corporation" refer to International Hi-Tech Industries Inc. and its subsidiaries, unless the context otherwise requires.

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PART 1

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Selected Financial Data

The financial data found on pages 2 and 3 for the years ended December 31, 2005 to 2001 and elsewhere in this Annual Report are taken from our financial statements. The statements for the years ended December 31, 2005 and 2004 have been prepared according to Canadian Generally Accepted Accounting Principles ("Canadian GAAP") and have been audited by BDO Dunwoody LLP, independent chartered accountants. The statements for the years ended December 31, 2002 to 2001 have been prepared according to Canadian GAAP and have been audited by Morgan & Company, independent chartered accountants.

You should read the following selected financial data together with our Consolidated Financial Statements and refer to the section captioned "Operating and Financial Review and Prospects".

Note 13 to our consolidated financial statements provides a description of the principal differences between Canadian GAAP and United States Generally Accepted Accounting Principles ("US GAAP") as they relate to us and a reconciliation of US GAAP to our consolidated financial statements.

We restated our financial statements for the Corporation of December 31, 2004 to reflect the reversal of the deposit related to the receivable which was written off in 2004. See Note 14 to our consolidated financial statements for further details.

All financial data presented below is in Canadian dollars.

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Income Statement Data

	Year Ended December 31
	2005	2004 (Restated)	2003	2002	2001
CANADIAN GAAP
REVENUE
Interest and other income	$ 409,684	$ 302,604	$ 973,177	$ 347,516	$ 425,633
EXPENSES
General administration	6,636,182	5,159,669	3,392,414	2,566,383	2,654,812
Interest	1,037,915	778,409	660,572	893,124	688,506
Foreign Exchange	3,917	(31,044)	1,376,973	(25,517)	(59,806)
Depreciation and amortization	818,818	1,252,022	1,589,514	1,592,210	878,382
	8,496,832	7,158,756	7,019,473	5,026,200	4,161,894
INCOME (LOSS) BEFORE THE FOLLOWING:	(8,087,148)	(6,856,152)	(6,046,296)	(4,678,684)	(3,736,261)
Deferred project development cost write-down	--	--	(4,638,737)	--	--
Gain on cancellation of license rights	--	3,614,500	154,460	3,293,839	--
Foreign Exchange Gain on Cancellation of License Rights	--	1,035,200	--	--	--
Gain on issue of treasury shares by subsidiary company	--	--	--	--	825,717
Write down of note receivable and accrued interest	--	(382,936)	--	--	--
Write down of property, plant and equipment	--	(6,833,188)	--	--	--
Non-controlling interest in (income) loss of subsidiary	18,748	(1,458,078)	--	(900,311)	171,782
NET INCOME (LOSS) FOR THE PERIOD	$( 8,068,400)	$ (10,880,654)	$ (10,530,573)	$ (2,285,156)	$ (2,738,762)
NET INCOME (LOSS) PER SHARE	$(0.07)	$(0.10)	$(0.10)	$(0.04)	$(0.04)

		Year Ended December 31
	2005		2004 (Restated)	2003 (Restated)	2002 (Restated)	2001
US GAAP
REVENUE	$ --		$ --	$ --	$ --	$ --
EXPENSES
General administration	9,486,182		5,159,369	3,392,414	2,566,383	2,654,812
Foreign Exchange	3,917		(31,044)	1,376,973	(25,517)	(59,806)
Depreciation and amortization	818,818		1,252,022	1,589,514	1,592,210	878,382
Project Development Costs	--		--	--	34,410	82,787
Write down of note receivable and accrued interest	--		382,936	--	--	--
Write down of property, plant and equipment	--		6,833,188	--	--	--
	10,308,917		13,596,471	6,358,901	4,167,486	3,556,175
OPERATING INCOME (LOSS) FOR THE PERIOD	(10,308,917)		(13,596,471)	(6,358,901)	(4,167,486)	(3,556,175)
OTHER INCOME AND EXPENSES
Interest	(837,483)		(799,064)	(644,872)	(848,173)	(688,506)
Interest and other income	409,684		302,604	973,177	347,516	425,633
Gain on cancellation of license rights	--		3,614,500	154,460	3,293,839	--
Foreign Exchange Gain on Cancellation of License Rights	--		1,035,200	--	--	--
Gain on issue of treasury shares by subsidiary company	--		--	--	--	825,717
Non-controlling interest in (income) loss of subsidiary	18,748		(1,458,078)	--	(900,311)	171,782
NET (INCOME) LOSS FOR THE PERIOD	$(10,717,968)		$ (10,901,309)	$ (5,876,136)	$ (2,274,615)	$ (2,821,549)
NET INCOME (LOSS) PER SHARE	$(0.09)		$(0.10)	$(0.06)	$(0.03)	$(0.07)

Balance Sheet Data

	Year Ended December 31
	2005	2004 (Restated)	2003	2002	2001
CANADIAN GAAP
Working Capital (Deficiency)	$(2,840,298)	$ (161,576)	$ 455,530	$ 6,756,069	$ 98,824
Project Development Costs	--	--	--	4,638,737	4,604,327
Total assets	20,832,532	21,951,095	32,094,928	44,363,885	34,422,634
Accounts Payable and Short Term Debt	4,901,504	2,433,242	2,829,338	4,339,512	4,199,469
Long Term Liabilities	12,060,088	11,936,913	13,210,207	11,896,036	13,110,328
Net Assets	3,870,940	7,580,940	16,055,383	28,128,337	17,112,837

US GAAP			(Restated)	(Restated)
Working Capital (Deficiency)	$(2,840,298)	$ (161,576)	$ 455,530	$ 8,630,884	$ 98,824
Total Assets	20,832,532	21,951,095	32,094,928	39,725,148	29,818,307
Accounts Payable and Short Term Debt	4,901,504	2,433,242	2,829,338	4,339,512	4,199,469
Long Term Liabilities	11,956,464	12,033,721	13,286,360	11,987,889	13,110,328
Net Assets	3,974,564	7,484,132	15,979,230	23,397,747	12,508,510
SHARE DATA
Number of Common Shares	122,175,065	107,175,065	104,272,429	102,531,371	65,009,121
Number of Series 2 Preferred Shares	--	--	--	--	3,925,000
Number of Series 3 Preferred Shares	--	--	--	2,261,114	2,261,114
Dividends Declared per Series 2 Preferred Share	--	--	--	-- --	0.16
Dividends Declared per Series 3 Preferred Share	--	--	0.06	0.18	0.27

Notes:

(1) Under US GAAP, project development costs would have been charged to expense as incurred, not capitalized on the balance sheet.

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EXCHANGE RATE INFORMATION

The following table sets forth, for the periods indicated, the average, high, low and end of period noon buying rates in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York. Such rates are set forth as U.S. dollars per Cdn$1.00 and are the inverse of rates quoted by the Federal Reserve Bank of New York for Canadian dollars per US$1.00. On July 11, 2006, the inverse of the noon buying rate was Cdn$1.00 equalled US$0.8819.

Period	Average(1)	High	Low	Period End
Year Ended
December 31, 2005	0.8282	0.8690	0.7872	0.8579
December 31, 2004	0.7719	0.8493	0.7957	0.8310
December 31, 2003	0.7209	0.7880	0.6349	0.7738
December 31, 2002	0.6370	0.6619	0.6200	0.6329
December 31, 2001	0.6459	0.6697	0.6241	0.6279
Month Ended
June 30, 2006	0.8979	0.9098	0.8896	0.8969
May 31, 2006	0.9009	0.9100	0.8903	0.9069
April 30, 2006	0.8721	0.8926	0.8534	0.8926
March 31, 2006	0.8642	0.8834	0.8531	0.8569
February 28, 2006	0.8704	0.8788	0.8638	0.8788
January 31, 2006	0.8642	0.8744	0.8528	0.8744

(1) The average of the exchange rates on the last day of each month during the applicable period.

Capitalization and Indebtedness

Not applicable.

Reasons for the Offer and Use of Proceeds

Not applicable.

Risk Factors

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 adversely impacted. You should carefully consider the risks described below when reviewing the information contained in this Annual Report. There may also be other unexpected events or events that we currently consider immaterial 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 which could adversely impact our business, results of operations and financial condition.

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:

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marketing our new building system (the "Technology") which is described under the caption, "Information on the Company - Business Overview";

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 which could adversely impact our business. We will continue to incur expenses before we start full capacity operations, and these expenses may be partially covered by some additional operating revenues. In January, 2001, we received our first limited production order for our advanced panel system. Since April 2002, we received further orders for prototype houses and projects incorporating the Technology.

We are progressing in our plan to implement several measures to minimize the impact of the flexible welding and cutting system supplied by FANUC Robotics Canada Ltd. and General Electric Capital Canada Inc. ("Fanuc-GE") for our permanent manufacturing facility in Delta, British Columbia (the "Facility"). We claim that the equipment supplied by Fanuc-GE is deficient. Phase I of our plan was successfully completed in July of 2002 with the installation of a semi-manual welding unit. We have just purchased equipment to complete Phase II which will allow for semi-automated cutting and welding units. We expect to complete Phase III, the final phase, by the end of 2006. These Phases are intended to solve most of the issues associated with the fully-flexible automated welding and cutting systems involved in our manufacturing process and to replace the system supplied by Fanuc-GE. See "Key Information - Risk Factors - We May Be A Party To Certain Legal Proceedings From Time To Time" for a descri ption of the lawsuit that we have commenced against Fanuc-GE.

We May Be Exposed To Product Liability Claims.

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

We May Not Receive Material Income From Certain Orders.

Since April 2002, we received further orders for prototype houses and projects incorporating the Technology. We have not and do not expect to earn any material income from these orders but have and expect to incur expenses related to these orders. We have also undertaken a number of prototype manufacturing projects and tests at our expense to demonstrate the attractiveness of the Technology.

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. See "Operating and Financial Review and Prospects - Operating Results".

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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 Holdings Ltd. ("IHI International"), broke the International License Agreement, the licenses would be returned to RAR Consultants. The Canadian License Agreement and the International License Agreement are described under the caption "Information on the Company - History and Development of the Corporation - General Development of the Business". 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 International Consultants of Canada Ltd. (now renamed as "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. The Consulting Agreement is described under the caption "Information on the Company - History and Development of the Corporation - General Development of the Business - Consulting Fee Agreement". Mr. Rached is the President and a Director of IHI Construction Ltd., our wholly owned subsidiary, contractually responsible for the construction of our Facility. Our company and our subsidiaries have made lease payments for our head office to RAR Investments Ltd. ("RAR Investments"), a company controlled by Mr. Rached. 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 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.

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

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private placement investments with our shareholders;

conventional bank financing; and

proceeds from deposits on MOUs.

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. If we are unable to compete effectively in our markets, our business, results of operations and financial condition will be materially adversely affected. See "Information on the Company - Business Overview - Narrative Description of the Business - Competition".

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 8.4% of our outstanding Common Shares 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 do not have any finished housing products commercially available for sale and the other products we have produced for sale have been limited. We may never:

develop any finished housing products commercially for sale;

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. See "Operating and Financial Review and Prospects - Technology and Licenses". The licensor may not be able to protect or maintain its

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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.

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, which could materially adversely impact our business.

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.

Our Auditors Have Expressed Substantial Doubt About Our Ability To Continue As A Going Concern.

Our audited financial statements for the period from inception to December 31, 2005 have been prepared assuming that we will continue as a going concern. We have incurred net losses since inception and, as a result, our auditors have expressed substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We May Be A Party To Certain Legal Proceedings From Time To Time.

We may be a party to legal proceedings from time to time, the cost of which could adversely impact our financial condition.

Fanuc-GE

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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. This case is still at trial.

ITEM 4. INFORMATION ON THECOMPANY

History and Development of the Corporation

Incorporation

International Hi-Tech Industries Inc. was incorporated under the name "Wild Horse Industries Inc." on February 16, 1987 in the Province of British Columbia. On December 22, 1992, we changed our name to International Hi-Tech Industries Inc. and consolidated the share capital on the basis of seven old Common Shares for one new Common Share. Effective January 27, 1994, we subdivided our capital structure on the basis of one old Common Share for two new Common Shares. We operate as a corporation under theCBCA.

Our principal business is the development and commercialization of the Technology in Canada and internationally.

Our head office is located at 1096 West 10th Avenue, Vancouver, British Columbia, V6H 1H8 (telephone: (604) 733-5400) and our registered and records offices are located at 1500 - 1055 West Georgia Street, Vancouver, British Columbia, V6E 4N7.

General Development of the Business

Acquisition of Canadian Rights to the Technology

Roger A. Rached (the President of International Hi-Tech Industries Inc.) developed the Technology and the related product designs over a period of 10 years during his employment with Garmeco International Consulting Engineers S.A.L. ("Garmeco"). Garmeco designs engineered buildings for the international market. Garmeco also has offices in Canada. All rights to the Technology have been transferred by Garmeco and Garmeco Canada to RAR Consultants (a company controlled by Mr. Rached's family).

In May 1993, we purchased from Mr. Rached 65% of the equity of Canadian Hi-Tech. The principal asset of Canadian Hi-Tech was a license from RAR Consultants (the "Canadian License") to design, market, distribute and erect products in Canada based upon the Technology.

We have paid for substantially all costs associated with the development of the Technology and assumed Canadian Hi-Tech's obligations. The Canadian rights to the Technology were assigned to International Hi-Tech Industries Inc. from Canadian Hi-Tech, our 65% owned subsidiary on June 17, 1996. In return, among other things, International Hi-Tech Industries Inc. will receive all future license fees and benefits in Canada.

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The Canadian License Agreement ends on March 16, 2092. If we become bankrupt or insolvent or break any term of the license we do not correct, the Canadian License Agreement can be ended earlier. If we break the agreement, the licensor (RAR Consultants) may end the Canadian License Agreement and we will have to pay to RAR Consultants the greater of $1 million and the amount of damages established by arbitration.

The Canadian License Agreement requires us:

to pay all of RAR Consultants' costs to apply for, prosecute, register and maintain patents relating to the Technology for Canada;

to use our best efforts to promote, market and sell products which use the Technology;

to obtain public and product liability insurance in connection with the sale of products using the Technology; and

to indemnify RAR Consultants against any claims arising out of our use of the Technology.

As a condition of acquiring the Canadian License Agreement, we entered into a royalty agreement under which we will pay the original assignor of the license (Canadian Hi-Tech) 1% of the net profits from using the Technology in Canada. As payment for the license, we discharged Canadian Hi-Tech's debt to us and gave a demand promissory note to Canadian Hi-Tech for $370,000 with interest payable at 7% per annum (now paid), for a total payment of approximately $1 million.

Acquisition of Worldwide (non-Canadian) Rights to the Technology

On October 3, 1994, we reached an agreement (the "International License Agreement") with RAR Consultants giving IHI International, a Bermuda company and our subsidiary, the right to use the Technology in all countries in the world other than Canada. RAR Consultants is controlled by Mr. Rached's family. Under this agreement,

IHI International has a license (the "International License") to use the Technology in all countries other than Canada for a 99 year term; and

IHI International has paid RAR Consultants $200,000 and has agreed to pay RAR Consultants a royalty equal to 1% of the net profits from the Technology.

The International License Agreement is the same as the Canadian License Agreement in all other respects, and was signed on June 17, 1996.

We have also committed:

to offer our shareholders shares in IHI International after 2006 (consistent with securities laws);

to try to make IHI International a reporting company in fiscal 2007;

to make IHI International responsible for all ongoing costs associated with any show home events outside of Canada; and

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to have IHI International pay us $150,000 for all expenses that have already been incurred by us in marketing the Technology in Europe.

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RAR Consultants, R.I. Investments, Garmeco Canada, Garmeco, our company and IHI International have agreed to enter into a shareholders' agreement governing the affairs of IHI International. The Shareholders' Agreement is expected to include:

a requirement for pro-rata cash contributions to the ongoing business of IHI International;

a right of first refusal with respect to any proposed disposition of IHI International Common Shares by shareholders other than the Corporation;

a clause that a majority of the IHI International directors must approve certain transactions before they may be undertaken such as:

capital expenditures of more than $50,000;

the issuance of securities of IHI International;

the entry into of any contract that is negotiated on a non-arm's length basis; or

the completion of any transaction out of the ordinary course of the business of IHI International.

At least one of IHI International's directors must be nominated by us, and at least one director must be nominated by RAR Consultants.

Consulting Fee Agreement

We have entered into a Consulting Fee Agreement, dated October 25, 1992. Under the Consulting Fee Agreement, RAR Consultants and Garmeco Canada have agreed to assist us by providing detailed engineering designs for the projects that we undertake. We have 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.

Principal Capital Expenditures and Divestitures

During the fiscal year ended December 31, 2005, our principal capital expenditures were $444,133 (2004 - $437,616; 2003 - $1,811,580) for the acquisition of property, plant and equipment, primarily with respect to our Facility.

The other principal capital expenditures for fiscal 2005 were $169,432 (2004 - $135,672; 2003 - $214,534) for intangible assets consisting primarily of patent application costs.

Capital expenditures have been funded by the Corporation from cash on hand, which has been primarily derived from the proceeds of private placements of Common Shares and from cash deposits received related to joint venture option agreements.

There have not been any material capital divestitures by the Corporation.

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Business Overview

General

The development and commercialization of the Technology is our principal business focus. Commercialization of the building process based on the Technology will require market acceptance of its unconventional nature. We have manufactured and assembled demonstration show homes in Luxembourg and in Vancouver and our Facility. These projects have allowed potential customers to evaluate the Technology. We have yet to deliver housing products for commercial purposes and generate revenue from the commercial sale of our housing products. In January, 2001, we received our first limited production order for our advanced panel system. Since April 2002, we received further orders for prototype houses and projects incorporating the Technology. We do not expect to earn any material income from these orders. We have also undertaken a number of prototype manufacturing projects and tests to demonstrate the attractiveness of the Technology. We are progressing in our plan to implement several me asures to minimize the impact of the welding equipment supplied by Fanuc-GE for our Facility. We claim that the equipment supplied by Fanuc-GE is deficient. Phase I of our plan was successfully completed in July of 2002 with the installation of a semi-manual welding unit. We have purchased equipment to complete Phase II which will allow for semi-automated cutting and welding units. The Corporation expects to complete Phase III, the final phase, by the end of 2006. These Phases are intended to solve most of the issues associated with the fully-flexible automated welding and cutting systems involved in our manufacturing process and to replace the system supplied by Fanuc-GE. See "Key Information - Risk Factors - We May Be A Party To Certain Legal Proceedings From Time To Time" for a description of the lawsuit that we have commenced against Fanuc-GE.

Narrative Description of Business

Technology Under License to International Hi-Tech Industries Inc. and to IHI International

The Technology is a building construction process that uses completely manufactured prefabricated panels, including floor panels, wall panels and roof panels. The prefabricated panels are made of special reinforced concrete, rigid foam and cold formed metals, with built-in rectangular hollow metal tubing acting as panel framing. The floor and wall panels are complete with interior and exterior finishes, windows, plumbing and electrical services. Foundations using the Technology are completely prefabricated with fully integrated structural, electrical and plumbing connections. Spaces such as kitchens can be pre-assembled and can be transported in a container formed by the panels.

The basic design of a wall panel uses structural steel tubing as framework, tensioned by steel cables. Rigid foam forms the centre section of the panel that is sandwiched between concrete on the inside and stucco/concrete on the outside. Sources of raw materials for the panels are readily available locally.

Not only the steel tube sections, wire mesh, cables and steel brackets required for a wall panel, but also the density and thickness of the wall panel, will vary according to the building location and application. A computer program that has been developed by RAR Consultants determines each panel design, based on the variables provided. As the Technology does not use moulds, panels can be manufactured in virtually any size and configuration.

Based on the results from the manufacture and assembly of demonstration show homes in Luxembourg and in Vancouver, British Columbia we believe that a typical 3,000 square foot house can be assembled on a prepared site in approximately 100 man-hours using a small crane and a crew of four or five workers.

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We expect the Technology to provide a cost advantage over conventional on-site and pre-manufactured/pre-fabricated building technologies. For a 1,000 square foot single storey home, erected in Canada, the advantage can be nearly as high as approximately 30% based on the erected cost comparisons provided by Nu-Westech Engineering Limited ("Nu-Westech") of Vancouver, British Columbia in its report dated April 29, 1993. Examples from the Nu-Westech report are as follows:

Building Type	Conventional Wood Frame per ft²*	IHI per ft²*	% Saved
1,000 Square foot, single storey, residential	$62.60	$31.36	49.90
Two Storey Custom Duplex (1,655 ft/unit)	$65.23	$39.08	40.09
Three Storey Triplex (1,100 ft/unit)	$47.53	$34.31	27.81
	Pre-Engineered Steel per ft²	IHI per ft²*	% Saved
Industrial Plant 48,000 sq. ft. - nonspecialized	$33.75	$22.45	33.48

Notes:

* All cost comparisons are based on equivalent finishings, interiors, and mechanical and electrical fittings. Figures do not include contractor's profit and overhead. Conventional figures also do not include premium for R2000 construction and certification. On average in conventional construction in North America, the contractor's profit and overhead ranges between 10% to 20% compared to our projected average of $10 for profit and overhead per square foot for construction. Our figures are theoretical as we have yet to begin commercial production.

Compared to conventional wood-frame structures, we believe that the Technology will provide:

increased safety levels (with non-combustible materials);

improved energy efficiency;

better sound insulation; and

superior resistance to insect and bacterial infiltration.

A patent application covering our earthquake, wind resistant and fire resistant pre-fabricated building panels and structures was filed with the United States Patent and Trademark Office. The patent application contained eight independent claims and 64 dependent claims. After review by an Examiner at the United States Patent & Trademark Office three patent applications were filed to obtain protection for the Technology in the United States. The three patents are for the panels, a foundation, and a method for attaching an architectural finish element to a surface. The United States Patent and Trademark office has granted United States Patent No. 5,584,151 for the foundation components of the Technology, Patent No. 5,862,639 relating to the panels and United States Patent No. 5,785,904 relating to the method for attaching architectural finish elements. Over 110 patent applications and applications for other forms of protection have been filed worldwide for the T echnology in at least 180 countries or regions. We may not be successful in obtaining all patents for the Technology in every jurisdiction. We have abandoned our patent application for attaching architectural finish elements in Australia.

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To date, the original English language patent has been translated into: Algerian, Armenian, Arabic, Azerbaijan, Bulgarian, Chinese, Croatian, Czech, Estonian, Finnish, French, Georgian, Hungarian, Icelandic, Indonesian, Japanese, Korean, Latvian, Lithuanian, Macedonian, Mongolian, Norwegian, Polish, Portuguese, Romanian, Russian, Serbian, Slovak, Slovenian, Spanish, Thai, Turkish and Vietnamese.

A Patent Cooperation Treaty is in place for most European countries. An International Preliminary Examining Authority has been set up under this treaty. In April 1996, an International Preliminary Examination Report on the Technology was favourable, stating that the panels and foundation in our application met the PCT requirements for novelty, inventive step and industrial applicability. A European patent application has been granted. Provisional protection, giving RAR Consultants the right to collect damages if the patent is infringed, is in place in Austria, Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden, Switzerland, Liechtenstein and the United Kingdom. Provisional protection is not available in Monaco and The Netherlands.

A patent has been issued by the African Regional Industrial Property Organization ("ARIPO"). The ARIPO patent covers the following countries: Botswana, Gambia, Ghana, Kenya, Lesotho, Swaziland, Uganda, Zambia and Zimbabwe. A second ARIPO patent has been issued for Malawi and Sudan.

Canada has issued Patent No. 2,176,481 and Patent No. 2,257,661 relating to the Technology.

The European Region Patent (No. 0736124) has been fully validated.

We are preparing a new extensive series of patents to be filed internationally within the next 12 months. This will give us extended protection for 20 years from the date of filing for the Technology that we hold under license.

We are planning to file for additional new sets of worldwide patents in 2006/2007.

We also have patents for the Technology in: American Samoa, Angola, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Bangladesh, Belarus, Belgium, Benin, Bolivia, Brazil, Bulgaria, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, China, Columbia, Congo, Croatia, Cuba, Czech Republic, Denmark, the Dominican Republic, Ecuador, Egypt, El Salvador, Ethiopia, Europe, France, Gabon, Georgia, Germany, Ghaza Strip, Greece, Guam, Guinea, Haiti, Honduras, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Ivory Coast, Japan, Jordan, Kazakhstan, Kyrgyztan, Latvia, Lebanon, Liberia, Libya, Lithuania, Luxembourg, Macedonia, Madagascar, Malawi, Malaysia, Mali, Malta, Mauritania, Mexico, Moldavia, Monaco, Mongolia, Morocco, Namibia, The Netherlands, New Zealand, Nicaragua, Niger, Nigeria, North Korea, Norway, Pakistan, Panama, Paraguay, Peru, the Philippines, Poland, Portugal, Puerto Rico, the Republic of Georgia, Romania, the Russian Fede ration, Rwanda, Senegal, Singapore, Slovak Republic, Slovenia, South Africa (including Bophuthatswana, Transkei, Venda), South Korea, Spain, Sri Lanka, Sudan, Sweden, Switzerland/Liechtenstein, Syria, Taiwan, Tajikistan, Tangier, Thailand, Trinidad-Tobago, Togo, Tunisia, Turkey, Turkmenistan, Ukraine, the United Arab Emirates, the United Kingdom, the U.S. Virgin Islands, Uruguay, Uzbekistan, Venezuela, Vietnam, West Bank, Yugoslavia and Zaire.

Even though patent protection for the Technology has now been issued or is pending in over 180 countries or regions throughout the world the patents may not be enforceable or protect us from competitors. Even if a competitor's products were to infringe patents for the Technology, enforcing the patent rights in an infringement action would be expensive.

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Conventional Building Designs and Major Features of the Technology

Conventional prefabricated buildings panels, in general, act as building components that can be fastened to a pre-fabricated frame structure. Many man-hours are usually required to pre-erect the frame structure and prepare it for attachment of prefabricated panels. If dimensional tolerances in the pre-erected frame and/or the prefabricated panels are not adhered to, the differences can accumulate over large spans and could result in the panels not properly fitting on the pre-erected frame. Based on:

the development of a prototype of a portion of a building using panels derived from the Technology;

the assembly of full-sized "show homes" in Luxembourg and in Vancouver, British Columbia using the same type of panels; and

the completion of the structure for the Facility using the same type of panels;

we believe that the Technology's prefabrication and assembly processes should address these short-comings associated with conventional prefabricated building panels.

A consideration in most conventional building designs is the susceptibility of the building to seismic forces such as those created by earthquake activity. The solid unitary foundation usually used in most conventional building designs is unable to act with sufficient resiliency and elasticity to absorb seismic forces without cracking or breaking. In addition, the wall portions of the frame of a conventionally built structure are typically formed of wood that is nailed together. Seismic forces may easily be sufficient to rip apart nailed walls resulting in localized failure of the frame, which in turn can lead to a collapse of a wall and potential collapse of the building. Therefore what is desirable is a sufficiently resilient elastic building foundation and frame structure, able to withstand and distribute seismic forces.

Conventional prefabricated panels also suffer from the disadvantage of being generally unable to withstand hurricane force winds. Based on the information that was filed by RAR Consultants with the United States Patent and Trademark Office, and independent test results (see "Satisfaction and Influence of Government Regulations" below), we believe that the panels derived from the Technology will be able to absorb, withstand, or distribute adverse loads or forces typically produced due to earthquakes, strong winds, hurricanes, or fires. A feature of the Technology lies in biasing (or pulling inward) of at least one of the frame components to allow the panels to absorb, withstand or distribute such loads or forces. The Technology allows for a relatively resilient elastic structure which can withstand and distribute various natural forces, thereby preventing cracking or breaking of the structure. Conventional structures, on the other hand, are rigid and not sufficiently resilient or elastic t o withstand the forces that a building may be subjected to without cracking or breaking.

With the Technology, forces imposed on panel components used in a structure are transferred to the foundation which acts to absorb and distribute such forces. The foundation components incorporating the Technology are the subject of United States Patent No. 5,584,151. The panels are the subject of United States Patent No. 5,862,639 and the method of securing architectural finish elements is the subject of United States Patent No. 5,785,904.

Markets

As an alternative to conventional construction methods, the potential uses for the Technology cover a wide spectrum of applications, including residential (single and multiple family high-rise and low-rise), commercial and industrial construction. We intend to initially target the markets for single and multi-

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family residential units. Our initial focus will be to build factories in other parts of the world for our joint ventures (see "IHI International" below).

To familiarize consumers with the advantages of the Technology, it is our intent to manufacture and assemble "show homes" that will have a selling price starting from approximately $50 per square foot. Such homes will include high quality finishings and sophisticated architectural designs, such as suspended balconies, vaulted ceilings and curved walls. We believe that the penetration of the residential market will be achieved principally because the finish of erected panels using the Technology will not be materially distinguishable from exterior finishes of conventionally built homes, and the cost for a 1,000 square foot single storey home manufactured in Canada using the Technology is expected to be approximately 30% less than the cost of a conventionally built home. The finished housing product will have superior strength as demonstrated by physical tests conducted by Intertek Testing Services NA. LTD., ("Intertek") p/k/a Inchcape Testing Services NA. LTD. See "Satisfaction and Influen ce of Government Regulations" below.

We believe the principal "drivers" for the demand for the Technology include:

the sustained growth of the need for affordable housing;

our progress in demonstrating that the Technology can be used to meet this need economically and commercially;

the successful panel test results, conducted by an independent testing agency (the panels tested were used to build our Facility and are the same type of panel that we will use for manufacturing and commercialization);

the building standards and building code approvals for the Technology received to date; and

the patents issued for the Technology in various countries including three patents in the United States.

Development of Technology and Manufacturing Capacity

In March, 1994, Canadian Hi-Tech developed a prototype of a portion of a building using panels made from the Technology, and demonstrated the assembly of the prototype to investors and contractors. A structural dry run, where full size panels were used to construct a portion of a building, was demonstrated to investors, contractors and government representatives in July and August, 1994. The building panels were of typical design complexity (i.e., with respect to wiring, plumbing, insulation, etc.) and were produced by Canadian Hi-Tech at its pilot manufacturing facility located in Surrey, British Columbia, Canada.

In September of 1994, the assembly process for a 2,200 square foot house was demonstrated to investors and potential strategic partners. These events were in preparation for the show home demonstration event that was held in Luxembourg in October, 1994. During 1994, Canadian Hi-Tech increased the size of its pilot manufacturing facility from 6,000 square feet to 15,600 square feet at a cost of approximately $300,000, and acquired equipment at a cost of approximately $300,000. It then manufactured 150 full-size panels each ranging in size from approximately 20 square feet to 200 square feet. This development of a larger pilot manufacturing capability has allowed Canadian Hi-Tech to manufacture the panels for both the Luxembourg show home and for the Vancouver show home.

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The two-storey 3,000 square foot Vancouver show home was built for the1999 B.C. Home and Garden Show. The show took place inB.C. Place Stadium in February, 1999. At the show, we received a recognition certificate from Lafarge Canada Inc. (a major Canadian producer of cement), a special recognition award from Southex Exhibitions Inc. and a recognition award from The Greater Vancouver Home Builders' Association in appreciation for our outstanding contribution to the show. The show home has been reassembled and expanded and is now on display in Vancouver.

We are progressing in our plan to implement several measures to minimize the impact of the welding equipment supplied by Fanuc-GE for our Facility. We claim that the equipment supplied by Fanuc-GE is deficient. Phase I of our plan was successfully completed in July of 2002 with the installation of semi-manual welding unit. We have just purchased equipment to complete Phase II which will allow for a semi-automated cutting and welding units. The Corporation expects to complete Phase III, the final phase, by the end of 2006. These Phases are intended to solve most of the issues associated with the fully-flexible automated welding and cutting systems involved in our manufacturing process and to replace the system supplied by Fanuc-GE. See "Key Information - Risk Factors - We May Be A Party To Certain Legal Proceedings From Time To Time". The Facility is expected to be able to produce 5,000 square feet of finished housing per shift, using one production line. During the first year of full operation, the Facility is expected to produce a mixture of building types, such as single and multi-family housing (both hi-rise and low-rise), commercial and industrial buildings. We are not ready for production at full capacity rates.

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

We own the property (approximately 15 acres) on which the Facility is located, free of any liens, charges or encumbrances. The address of the Facility is 7393 Hopcott Road, Delta, British Columbia.

For a description of our Facility see "Information on the Company - Property, Plant and Equipment".

Commercial Panel Production at our Permanent Manufacturing Facility

To successfully market our products, we will need to develop our manufacturing capability both domestically and abroad. We are currently manufacturing panels on a semi-automated basis at our Facility in the Tilbury Industrial area at 7393 Hopcott Road, Delta, British Columbia.

Our business plan for the last three years has focused on (i) implementing several measures to minimize the impact of the welding equipment supplied by Fanuc-GE for our Facility; and (ii) to complete a number of prototype manufacturing projects and tests to demonstrate the attractiveness of the Technology.

We have developed a three-phase plan to deal with equipment supplied by Fanuc-GE. Phase I of our plan was successfully completed in July of 2002 with the installation of a semi-manual welding unit. We have just purchased equipment to complete Phase II which will allow for semi-automated cutting and welding units. The Corporation expects to complete Phase III, the final phase, by the end of 2006. These Phases are intended to solve most of the issues associated with the fully-flexible automated welding and cutting systems involved in our manufacturing process and to replace the system supplied by Fanuc-GE.

Our prototype manufacturing projects over the last three years have included the following:

we have developed a mobile home and mobile classroom;

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we have developed a floating dock marina;

we have developed a new form of insulated concrete water tank and road panels for sale in the Arctic region; and

we have manufactured our first industrial mobile factory.

All of these projects utilize the Technology. The greatest operating risks we face are that we may not meet our development goals or begin full scale commercial panel production. We will attempt to manage this risk by using the Technology in different types of buildings and in different building markets.

Satisfaction and Influence of Government Regulations

The development of the Technology and the time by which our products will be commercially produced may be influenced by government policies and regulations. We are in the continuous process of commissioning tests for local and international certification standards. In Canada, commercialization of our products will depend upon obtaining Canadian building standards and building code approvals as well as similar approvals from jurisdictions in which we intend to market our products.

Intertek has undertaken structural testing of our products in order to verify the structural design capacity and help us obtain building code approvals in British Columbia. The tests simulated industry test standards in British Columbia and included testing loading capacities of full size, prototype wall, floor and roof panels. For the wall panels, the testing procedures simulated loads that the panels would face under gravity, wind and seismic loading. For the roof panels, the testing procedures simulated gravity loads from snow and for the floor panels the testing simulated operating machinery loads on a factory floor. Preliminary fire tests conducted by Intertek indicated that the wall panels could meet British Columbia building code requirements for a two hour fire resistance rating. Intertek have told us that British Columbia building code standards are generally equivalent to those in other areas of North America. IHI International's potential joint venture partners have also told us that British Columbia building code standards are the same as or better than the standards in many of the markets where our joint ventures will operate, such as the Philippines, Luxembourg, Dubai, Egypt and Costa Rica.

Nu-Westech used the structural test data and analytical calculations to determine the suitability of the panels for use in our Facility and to get the final building permit for the Facility. The test panels withstood test loads that exceeded those required by the British Columbia building code. In four cases, the test panel withstood the maximum load test with only minor cracking in the concrete surface of the test panel. In one case, the test panel failed when a load factor that was six times greater than that required by the British Columbia building code was applied to the test panel. All requirements under the British Columbia building code were satisfied and failure of the panels occurred only at testing levels above the required testing levels. Our Facility's final building permit was issued on February 4, 1997.

Intertek will also help us in meeting the standards of the Manufactured Home Act (British Columbia). The construction, purchase, sale, movement and use of manufactured housing in British Columbia is covered by the Manufactured Home Act. Regulations under the Manufactured Home Act set up comprehensive construction standards for manufactured homes and cover all aspects of manufactured home construction. Manufactured housing must meet the construction standards of the Canadian Standards Association. A representative of the Canadian Standards Association will carry out compliance inspections during the manufacturing process at our Facility. Our manufactured homes will also be subject to local zoning and housing regulations.

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Underwriters' Laboratories of Canada is conducting all required fire testing on our panels so that we may use the panels in building construction in North America, Europe and Japan.

Competition

There are a number of companies involved in the manufacture and assembly of prefabricated buildings. We believe that almost all of them have greater financial and personnel resources than we do and that they could be a significant competitive threat to us. We believe that the building construction process under license to us offers a number of advantages over our potential competitors including

improved structural design and finishing;

reduced dependency on skilled labour at the building site; and

cost advantages.

In the construction of residential units, we believe that the nearest comparable product to ours that is presently used by most of our potential competitors is a prefabricated lumber panel using expanded polystyrene. The framework uses two-by-four or two-by-six construction that is screwed or nailed together. Exterior sheeting is attached to the panel once expanded polystyrene has been added to the framework. Prefabricated lumber panels require that interior and exterior finishes be applied on-site by subcontractors and that roof, floor and ceiling structures be erected by conventional methods. We believe that this process will not be as time and cost-effective as our process.

In the area of light industrial construction, we believe that the nearest comparable product to ours is precast tilt-up panels, using a significant amount of concrete. If tilt-up panels are used, the roof structure of a particular building is generally constructed in a conventional manner with tar and gravel being used as a sealing agent, again a process which we believe will not be as time and cost-effective as the construction process to which the Technology relates.

IHI International

On October 3, 1994, we signed an agreement with RAR Consultants giving IHI International, a Bermuda company and our subsidiary, the right to use the Technology in all countries in the world other than Canada.

Joint ventures and strategic alliances will be critical to our success. In addition to reducing the financial requirements of expansion, market risk is significantly reduced when we work with partners who already know their territory. In this way, we do not have to enter unknown geographical regions and learn how to penetrate the market. Specific terms of the joint ventures vary from region to region, but so far in all cases, our company or its subsidiary retains a 51% equity in the venture. This assures quality control and ensures that all aspects of business development meet our objectives.

Several potential joint venture partners have signed memorandum or understanding or MOUs and several more are in negotiation. Current MOUs are summarized here.

Proposed Joint Ventures to be Established in The United Kingdom

IHI International entered into a MOU dated January 15, 2003, as amended on May 9 and November 8, 2003, with Garmeco, a company controlled by members of Mr. Rached's family, to promote, develop and market the Technology and to establish and operate a factory in the United Kingdom.

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Garmeco is to be responsible to contribute US$11,000,000 to the joint venture (which amount is intended to fund factory construction and business operations) with US$1,000,000 payable to IHI International upon the formation of the joint venture US$2,300,000 payable two months after the formation of the joint venture, a further US$2,200,000 payable upon shipment of the panels (based on the Technology) necessary to construct the joint venture's factory, a further US$2,600,000 upon shipment of the equipment for the factory and the balance US$2,900,000 on substantial completion of the factory.

IHI International is to contribute the following to each joint venture:

a license to allow the joint venture in each territory to use the Technology held under license by IHI International in the manufacturing, selling and constructing of modular residential housing units; and

all technical expertise required to plan, build and operate the proposed factories and manufacture panels at production levels contained in a business plan to be prepared and completed by Garmeco and approved by IHI International.

For each joint venture, the following conditions must be met:

satisfactory completion of a business plan by Garmeco which is to contain a fair and reasonable description of all matters that are, or could be, material to the business of the joint venture. IHI International will require some form of independent support for the financial and other assumptions to be included in the business plan;

satisfactory completion of a due diligence review by IHI International to satisfy itself that certain key legal, political and financial issues have been considered and do not pose a threat to the viability and success of the joint venture;

Garmeco must make a US$1,000,000 payment to IHI International on account of a license fee for license, which has now been paid. This license fee is in addition to the US$11,000,000 contribution to the joint venture. Garmeco has paid IHI International US$1,000,000 on account of the license fee for the factory;

the Corporation obtaining all necessary regulatory approvals; and

the creation, approval by respective companies and execution of formal documentation establishing the joint venture.

The joint venture will establish its own distribution network.

Other MOUs

The following table summarizes other MOUs.

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Territory	Date of MOU	Number of Factories Contemplated	Joint Venture Partner	Total Amount of License Fee	Amount of License Fee Paid	Amount of License Fee Remaining to be Paid	Due Date of Remaining Amount of License Fee	Further Contribution to be Made by Joint Venture Partner on and after Formal Establishment of Joint Venture
Philippines	March 15, 1995	2	Pohangco, Inc.	US$1,000,000	US$500,000	US$500,000	Upon completion of our Facility	US$9,000,000
Luxembourg and Surrounding Region⁽¹⁾	November 27, 1995 Amended on October 5, 1997 and April 13, 2001	1	Veda Consult S.A.	US$2,450,000	US$400,000	US$2,050,000	Upon establishment of the Joint Venture⁽²⁾	US$9,000,000
Costa Rica	August 27, 1997	1	Edificaciones del Futuro S.A.	Cdn1,000,000	Cdn$100,000	Cdn$900,000	Upon establishment of the Joint Venture	US$900,000,000
Ontario	July 10, 1998	1	Hi-Tech Canada Development Inc.	Cdn$1,500,000	Cdn$1,500,000	--	--	US$10,000,000
Prairie Region, Canada	February 28, 1999 Amended on November 28, 2003	1	Hi-Tech Canada Development Inc.	Cdn$1,500,000	Cdn$150,000	Cdn$1,350,000	December 31, 2005⁽³⁾	US$13,000,000
State of Alaska^(4)(5)(8)	September 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$50,000	US$950,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
State of Washington^(4)(5)(8)	September 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
State of Oregon^(4)(5)(8)	September 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Western and Southern Regions of California^(4)(5)(6)(8)	September 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Mexico^(4)(5)(8)	September 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Chile, Colombia, Ecuador, El Salvador, Guatemala and Peru^(4)(5)(8)	September 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$150,000	US$850,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
States of New York, New Jersey and Pennsylvania^(4)(5)(8)	November 3, 2001 Amended on May 17, 2002, August 31, 2002 and November 8, 2003	2	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Washington, DC and the States of Virginia, Maryland and Delaware^(4)(5)(8)	November 3, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Beijing Region^(4)(5)(7)(8)	November 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Shanghai Region^(4)(5)(7)(8)	November 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Tokyo and Northern Japan^(4)(5)(8)	December 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Osaka and Southern Japan^(4)(5)(8)	December 9, 2001 Amended on May 17, 2002 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2007 and the establishment of the Joint Venture	US$11,000,000
Arizona, New Mexico and Nevada⁽⁴⁾⁽⁹⁾	August 2, 2002 Amended on May 9, 2003 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2008 and the establishment of the Joint Venture	US$11,000,000
New England and the States of Maine, Vermont, New Hampshire, Massachusetts, Rhode Island and Connecticut⁽⁴⁾⁽⁹⁾	August 2, 2002 Amended on May 9, 2003 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2008 and the establishment of the Joint Venture	US$11,000,000
South East U.S. Region^(4)(9)(10)	August 31, 2002 Amended on May 9, 2003 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2008 and the establishment of the Joint Venture	US$11,000,000
South Central U.S. Region^(4)(9)(11)	August 31, 2002 Amended on May 9, 2003 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2008 and the establishment of the Joint Venture	US$11,000,000
States of Michigan and Illinois⁽⁴⁾⁽⁹⁾	October 26, 2002 Amended on May 9, 2003 and November 8, 2003	1	Earthquake Resistance Structures Inc.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2009 and the establishment of the Joint Venture	US$11,000,000
The Greater Hashemite Kingdom of Jordan^{(4)(9)(12)(14)}	January 13, 2003 Amended on May 9, 2003 and November 8, 2003	1	Garmeco International Consulting Engineers S.A.L.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2009 and the establishment of the Joint Venture	US$11,000,000
The Republic of France^{(4)(9)(13)(14)}	January 14, 2003 Amended on May 9, 2003 and November 8, 2003	1	Garmeco International Consulting Engineers S.A.L.	US$1,000,000	US$100,000	US$900,000	On the earlier of December 31, 2009 and the establishment of the Joint Venture	US$11,000,000

Notes:

(1) On April 13, 2001 the Territory was expanded to include additional areas in Germany -- the balance of Baden-Wurttemberg (Stuttgart and Tubingen), Bayern, Bremen, Hamburg, Hessen, Niedersachsen, Nordrhein-Westfalen, Schleswig-Holstein - as well as the rest of Belgium, and the Netherlands. Veda Consult S.A. made a down payment of US$125,000 on a total fee of US$1,250,000 for the expansion of the license area.

(2) On October 5, 1997 the terms of the MOU were amended to allow the balance of the license fee (U.S. $925,000) to be paid in two installments: 50% on June 30, 1998 and 50% on September 30, 1998. Under the original terms of this MOU, the balance of the license fee was due on December 4, 1997. IHI International has accepted two demand notes from Veda Consult, dated June 30 and September 30, 1998 each in the amount of US$462,500 as payment for the balance of the license fee (US$925,000). The demand notes bear interest at a rate of 6.5% per annum.

(3) On November 28, 2003 the terms of the MOU were amended to allow the payment of the balance of the license fee to be paid on or before December 31, 2005 and to increase the amount of the contribution to be made by Hi-Tech Canada Development Inc. to US$13,000,000. During the year ended December 31, 2005, the Corporation received $500,000, which represents the initial license fee payment made to induce the Corporation to negotiate the formal business arrangements of the interim agreement. The interim agreement contemplates that the Corporation will 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 Corporation. As at December 31, 2005, the interim agreement had not been finalized and there are no specific terms of repayment.

(4) On November 8, 2003 the terms of the MOUs were amended to delay all financial contribution deadlines by one year.

(5) On November 8, 2003 the Territory was expanded to include South East Asia (other than the Philippines) and the balance of South America.

(6) Earthquake Resistance Structures Inc., which is controlled by a member of Mr. Rached's family, will have a first right of refusal for Northeast regions, i.e. balance of California (Sacremento area).

(7) Earthquake Resistance Structures Inc will have a first right of refusal for other licenses covering the rest of the People's Republic of China.

(8) These MOUs provide that in the event of non-performance by us of our obligations under the MOUs our joint venture partner has the right to cancel the MOU and we 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. We have delivered a general security agreement to our joint venture partner to secure our obligations.

(9) These MOUs provide that in the event of non-performance by us of our obligations under the MOUs our joint venture partner has the right to cancel the MOU and we will have to repay the license fee plus an amount equal to 12% of the license fee payment compounded annually calculated from the date of such payment. We have delivered a general security agreement to our joint venture partner to secure our obligations.

(10) The Territory covers the States of Florida, Georgia, Alabama, Mississippi, North Carolina and South Carolina.

(11) The Territory covers the States of Texas, Oklahoma, Arkansas and Louisianna.

(12) The Territory includes the exclusive distribution rights for Lebanon, Syria, Iraq, Palestinian Territories and Israel.

(13) The Territory excludes Alsace, Lorraine and Champagne-Ardenne.

(14) Garmeco International Consulting Engineers S.A.L. is controlled by members of Mr. Rached's family.

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RecentProjects

Surrey High-Rise Development

On August 25, 2005, we announced that we are progressing with construction of our 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, we estimate 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 our pre-manufactured foundations, will be assembled at the Optima Presentation Centre after obtaining the building permits for the project.

Show Home

On August 25, 2005, we announced that we have entered into negotiations with respect to an MOU to establish a 5,000 square foot high-end "show home" in the Middle East Gulf region. We expect the home to be finished, erected on site, and ready for viewing before the end of September 2006.

Prototype Projects for the Oil and Mining Industries

On August 25, 2005, we announced that we are continuing 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.

New Industrial Building Underway

On December 6, 2005, we announced that an additional Mobile Industrial Building has been manufactured and will be erected at our 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 us to achieve production at full capacity rates.

Prairie Manufacturing Facility

On December 6, 2006, we announced that our potential joint venture partner for the Canadian Prairie region has secured an approximate 15 acre heavy industrial zoned site for a manufacturing facility, incorporating the Technology. The acquisition has been completed.

Potential Applications of Hi-Tech Building System

On December 6, 2005, we announced that as an alternative to conventional construction methods, the potential uses for our Technology covers a wide spectrum of applications, including residential (single and multiple family high-rise and low-rise), commercial and industrial construction. We are currently

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studying, and in a number of cases have been retained to prepare shop drawings for, several projects, including ski and golf resort villas, warehouses in Canada and the United States, a high-rise tower in Vancouver, a residential complex in the Okanagan and an office building in Northern Alberta. We are eager to move beyond the prototype manufacturing projects that have been its focus to date and to move towards production at full commercial rates once automated welding capabilities are achieved.

Recent Financing

On February 27, 2006, we announced that we were offering by way of a non-brokered private placement a total of up to 7,000,000 Units at a price of $0.60 per Unit. Each Unit is comprised of one common share and one non-transferable share purchase warrant entitling the holder thereof to purchase one additional common share at a price of $0.80 per share for a two year period. Proceeds from the financing will be used for working capital relating to our construction projects we are bidding for and awarded, for applying to obtain the necessary performance bonds for such projects, for general working capital and to pay down debts. A finder's fee was paid to certain finders in accordance with the policies of the TSX Venture Exchange ("TSX-V"). The private placement closed on May 9, 2006.

Securities Held in Escrow

Of our issued and outstanding Common Shares, 6,505,486 are escrow shares and have restrictions attached to them. Of these escrow shares, 214,286 were acquired by an associate of Mr. Rached from our former principals, and we issued 21,470,672 escrow shares to Mr. Rached for $107,145, which was paid in cash by Mr. Rached in 1992. The Escrow Shares were issued to Mr. Rached in connection with the acquisition by the Corporation of the Canadian rights to the Technology pursuant to the Canadian License Agreement which ends on March 16, 2092. On January 18, 2000 the Escrow Shares were transferred to Mira Mar Overseas Ltd. The transfer of the Escrow Shares was approved by the Exchange on November 8, 1999. Mr. Rached indirectly owns 100% of Mira Mar Overseas Ltd. On February 21, 2002, 1,084,248 Escrow Shares were released from escrow, on August 21, 2002, 1,084,248 Escrow Shares were released from escrow, on February 21, 2003, 1,084,248 Escrow Shares were released from escrow, on August 2 1, 2003, 1,084,248 Escrow Shares were released from escrow, on February 21, 2004, 2,168,496 Escrow Shares were released from escrow, on August 21, 2004, 2,168,496 Escrow Shares were released from escrow, on February 21, 2005, 2,168,496 Escrow Shares were released from escrow, on August 31, 2005, 2,168,496 were released from escrow and on February 21, 2006, 2,168,496 were released from escrow. The remaining Escrow Shares will be released in accordance with the following schedule:

Date of Release	Number of Escrow Shares
August 21, 2006	2,168,496
February 21, 2007	2,168,496
August 21, 2007	2,168,494

Organizational Structure

We have eight principal subsidiaries:

Canadian Hi-Tech Manufacturing Ltd. is our 65% owned British Columbia subsidiary that conducts product development for the Technology;

IHI International Holdings Ltd. is our 50.7% owned Bermuda subsidiary that was established to develop and commercialize the Technology internationally;

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IHI Construction Ltd. is our wholly-owned British Columbia subsidiary that supervises construction activities for our Facility;

IHI Developments Ltd. is our wholly-owned British Columbia subsidiary that participates in the development of projects incorporating the Technology;

IHI Sales Ltd. is our wholly-owned British Columbia subsidiary that conducts sales activities;

IHI Planning Ltd. is our wholly-owned British Columbia subsidiary that conducts planning activities;

IHI Manufacturing Ltd. is our wholly-owned British Columbia subsidiary that conducts manufacturing activities; and

IHI International Construction Inc. is our 73% owned British Columbia subsidiary that carries on international general contracting, customized for all weather and site conditions, on a worldwide basis.

Canadian Hi-Tech Manufacturing and IHI Construction Ltd. are both incorporated under the laws of British Columbia. IHI International Holdings is a Bermuda company.

Property, Plant and Equipment

We have a manufacturing facility located in Delta, British Columbia at which we produce our products. Its size is approximately 77,000 square feet (including offices and storage areas). We produced all of the 1,300 panels for the Facility which is located in the Tilbury Industrial area in Delta, British Columbia. The Tilbury Industrial area is a modern industrial park with year-round ocean shipping, and four major rail lines. A rail spur tie-in is located within 30 meters of our property. A fully computerized state of the art concrete batching plant has been installed and is operational.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following operating and financial review should be read together with our consolidated financial statements included elsewhere herein. Our consolidated financial statements are stated in Canadian dollars and are prepared according to Canadian GAAP. Note 13 of our financial statements provides a description of the principal differences between Canadian GAAP and US GAAP.

Overview

Our principal business is developing, manufacturing and marketing our Technology. Commercialization of the building process based on the Technology will require market acceptance of its unconventional nature. We have manufactured and assembled demonstration show homes in Luxembourg and in Vancouver. Our Facility in Delta, British Columbia was built with the Technology. These projects have allowed potential customers to evaluate the Technology.

We have yet to deliver housing products for commercial purposes and generate revenue from the commercial sale of our housing products. We have undertaken a number of prototype manufacturing

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projects and tests to demonstrate the attractiveness of the Technology. These have included the development of a mobile home and mobile classroom, a floating dock marina and a form of insulated concrete water tank and road panels for sale in the Arctic Region.

Our Facility has not been ready to produce building panels incorporating the Technology on a fully-automated basis because of problems that we experienced with welding equipment supplied by Fanuc-GE for our Facility. We expect to complete measures to deal with these problems by the end of 2006.

Joint ventures and strategic alliances have been critical to our cash generation activities and are expected to be critical to our success. In addition to reducing the financial requirements of expansion, market risk is significantly reduced when we work with partners who already know their territory. Specific terms of joint ventures vary from region to region, but to date in all cases, our company or its subsidiary (IHI International) retains a 51% equity interest in the venture. In connection with potential joint venture partnerships, IHI International may elect to reduce its equity from its traditional 51%/49% participation in favour of IHI International to a lower percentage.

In 2005 and 2004, the Corporation financed its operations from the proceeds of long term debt financings. In 2003, the Corporation financed its operations mainly from deposits paid by third parties under MOUs that contemplate the possibility of establishing a joint venture or strategic alliance. The purpose of these joint ventures or strategic alliances is to produce for sale building panels incorporating the Technology. While we have been successful in obtaining deposits under the MOUs, many of the MOUs have been cancelled, including because of the failure of the other party to procure financing for all of its payment obligations or the failure to provide a viable business plan, as required by the MOUs. See "Information on the Company - Business Overview - Narrative Description of Business" for a discussion of our MOUs.

Our goal for the remaining portion of 2006 and for 2007 is to manufacture panels for a potential high rise development in Surrey, British Columbia and to complete all projects under contract. In order to secure that project and to fund our plan of operations for the remaining portion of this year and for 2007, we will require further working capital financing and the project will require construction financing. While we are hopeful that we will be able to secure the required financing, there is no assurance that we will be able do so. If this funding is not obtained, and if we are unable to secure other sources of funding, we may need to curtail our prototype manufacturing operations. In the past, we have been successful in obtaining financing, when required, particularly from Mr. Rached's family. Much of the cash that has been required to fund the Corporation's operations has been generated from private placements of our equity shares purchased by companies controlled by Mr. Rached's fa mily or from deposits paid under MOU's entered into with companies controlled by Mr. Rached's family.

Critical Accounting Policies

The Corporation's significant accounting policies are as follows:

Deferred Project Development Costs

The Corporation 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 which will be amortized against related revenues when production commences. During 2003, the Corporation determined that previously deferred costs were impaired and recorded a $4,638,737 write-down related to these costs.

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Stock Based Compensation

Effective January 1, 2004 the Corporation adopted on a retroactive basis without restatement, the amended recommendations of CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments", which requires companies to adopt the fair value method for all stock-based awards granted on or after January 1, 2002. Previously the Corporation used the intrinsic value method of accounting for stock options granted to employees and directors (for services rendered as a director) whereby the Corporation was only required to disclose the pro forma effect of stock options granted to the above noted parties in the notes to the financial statements. The effect of this change in accounting policy had no effect on the consolidated financial statements.

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

Operating Results

The Corporation did not have any material operating revenue during its fiscal year ended December 31, 2005, 2004 and 2003.

Year ended December 31, 2005 versus year ended December 31, 2004

We 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, we had retained 25 interim license agreements that call for the establishment of up to 27Hi-Tech Factories.

During fiscal 2005, we did not record a gain on cancellation of license rights as compared to a gain on cancellation of license rights of $3,614,500 for the year ended December 31, 2004. We did not cancel any MOUs regarding such license rights in 2005, so we did not record any gain for that year, whereas in 2004 we cancelled a number of these MOUs because we determined that we were entitled to do so.

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, due to the write down of assets in 2004.

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,due to the hiring of additional staff at the Corporation's Facility and head office.

Interest expenses increased from $778,409 for the year ended December 31, 2004 to $1,037,915 for the year ended December 31, 2005, due to higher borrowings during 2005.

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Stock based compensation increased from $578,564 for the year ended December 31, 2004 to $3,345,900 for the year ended December 31, 2005. During the year ended December 31, 2005, the Corporation 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 Corporation 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 $0.29 per unit) based on the quoted market price of the Corporation'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.

We expect that the budget for Phase III of the measures required to solve the issues associated with the fully-flexible automated welding and cutting systems involved in our manufacturing process and to replace the system supplied by Fanuc-GE will be approximately $5,000,000. See "Information on the Company - Business Overview - Narrative Description of Business - Commercial Panel Production at our Permanent Manufacturing Facility". We have made a claim of damages in excess of $5,000,000 in connection with the litigation commenced by us against Fanuc-GE. We intend to raise additional funds for this project through equity financings, sale of our licenses or from profits generated from our development project. There can be no assurance that we will be successful in raising these funds.

Our continuation 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. We plan to raise additional equity and debt capital as necessary to finance our operating and capital requirements. Amounts raised will be used to provide us with financing for the development and commercialization of our business and for other working capital purposes. While we are expending our best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations.

Year ended December 31, 2004 versus year ended December 31, 2003

We had a net loss of $10,880,654 for the year ended December 31, 2004, as compared to a net loss of $10,655,506 for the year ended December 31, 2003. The net loss for fiscal 2004 resulted from a $6,833,188 impairment write-down related to our building construction in progress and machinery and equipment, a $392,936 write-down related to a note receivable and accrued interest, and to depreciation and amortization costs of $1,252,022.

Payments related to non-refundable fees and deposits under memoranda of understanding or 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 we have determined will occur upon the formation of a joint venture and our 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 us are recorded as gain on cancellation of license rights in the period that the notice of cancellation of the MOU is issued.

As at the end of fiscal 2004, we had retained 26 interim license agreements that call for the establishment of up to 30Hi-Tech Factories.

During fiscal 2004, we recorded a gain on cancellation of license rights of approximately $3,614,500 as compared to $154,460 for the year ended December 31, 2003. In 2004 we cancelled a number of MOUs regarding such license rights because we determined that we were entitled to do so, whereas in 2003 we cancelled far fewer of these MOUs.

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In 2004, as a result of the litigation discussed under "Key Information - Risk Factors - We May Be A Party To Certain Legal Proceedings From Time To Time - Fanuc-GE", we have been unable to complete the Facility to the point where commercial operations at full capacity rates can be pursued. As a result of delays in this regard and other factors, management determined that an impairment in our building construction in progress and machinery and equipment had occurred and has recorded a $6,833,188 impairment write down (2003 and 2002 - $Nil ).

Administrative expenses increased in connection with the Surrey High-Rise Development and the negotiation of potential new MOUs.

Liquidity and Capital Resources

Our cash balance at December 31, 2005 was $1,079,947 (December 31, 2004 - $1,890,030). As at December 31, 2005, we had a working capital deficit of $2,840,298 (compared to a working capital deficit of $161,576 as at December 31, 2004). The primary reason for the decrease in our cash balance and the increase in our working capital deficit between December 31, 2004 and December 31, 2005 is that while our expenditures remained fairly consistent year-to-year, our cash inflow from financing activities decreased between 2004 and 2005.

In 2005 we 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. In 2005 we 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 we had cash inflow of $2,419,695from financing activities due to increase of shares issued for cash, loans payable to related parties, increase in long term debt and promissory note as compared to a cash inflow of $3,923,808 during 2004.

With respect to operating activities during 2005, $500,000 was received in cash as deposits relating to interim agreements that are under negotiation (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, as compared to a depreciated net book value of approximately $17.7 million as at December 31, 2004. The historical cost of the Facility is approximately $27.9 million.

We have 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%.

We have a loan payable to Garmeco Canada, a company controlled by Mr. Rached's family, in the amount of $1,463,468 as at December 31, 2005. The loan is repayable on demand with interest at 20% per annum. The interest charged on the loan during 2005 was $52,558 (in 2004 - $nil; ; 2003 - $72,000).

We also have a series of small loans in the aggregate amount of $87,500 as at December 31, 2005 (2004 - $83,500) repayable on demand at various interest rates.

To deal with our working capital deficiency of $2,840,298 as at year end, we 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 is 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 we are bidding for

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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-V on April 17, 2006 and closed on May 9, 2006. 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 understanding.

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.

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

private placement investments with our shareholders;

mortgage financing of the Facility;

conventional bank financing; and

proceeds from deposits on MOUs.

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.

Technology and Licenses

RAR Consultants, the owner of the Technology, has to rely on patent, trade secret and contract laws to protect its rights relating to the Technology that is under license to our company and to our subsidiary, IHI International.

Our ability to compete effectively will depend, in part, on our ability to protect the Technology and related manufacturing processes. RAR Consultants is responsible for getting patents for the Technology and protecting them. We are required to pay for these activities.

During the fiscal year ended December 31, 2005, $169,432 (2004 - $135,672; 2003 - $214,534) was spent on patent application costs and license rights.

To December 31, 2002, the Corporation had recorded $4,638,737 (2001 - $4,604,327) of deferred project development costs related to research and development by the Corporation. These costs were written off in the 2003 fiscal year as the Corporation had determined they were not recoverable.

See also "Information on the Company - Business Overview - Narrative Description of Business - Development of Technology and Manufacturing Capacity".

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Off-Balance Sheet Arrangements

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

Contractual Obligations

As of the date of the balance sheet for the Corporation's last fiscal year end contained herein, the Corporation's known contractual obligations identified in the following table are:

	Payments Due by Period ($'s)
Contractual Obligations	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Long-Term Debt Obligations other than Capital Lease Obligations	6,392,680	1,538,902	4,853,778	--	--
Capital Lease Obligations	45,432	12,637	32,795	--	--
Operating Lease Obligations	--	--	--	--	--
Purchase Obligations	--	--	--	--	--
Promissory Note	696,990	58,240	638,750	--	--
Total	7,135,102	1,609,779	5,525,323	--	--

Safe Harbor

The safe harbor provided in Section 27A of theSecurities Act and Section 21E of theExchange Act applies to forward-looking information provided pursuant to the disclosure of Off-Balance Sheet Arrangements and Contractual Obligations.

New Accounting Pronouncements

US GAAP

The FASB issued FASB Interpretation No. ("FIN") 47 - "Accounting for Conditional Asset Retirement Obligations" in March 2005. FIN 47 clarifies that an entity must record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. This interpretation also clarifies the circumstances under which an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This Interpretation is effective no later than the end of fiscal years ending after December 15, 2005. This guidance did not have a material impact on the Corporation's financial statements.

In November 2005, the FASB issued Staff Position No. FAS 115-1 - "The Meeting of Other-Than-Temporary Impairment and Its Application to Certain Investments" ("FSP 115-1"). FSP 115-1 provides accounting guidance for identifying and recognizing other-than-temporary impairments of debt and equity securities, as well as cost method investments in addition to disclosure requirements. FSP 115-1 is effective for reporting periods beginning after December 15, 2005, and earlier application is permitted. The Corporation has determined that the adoption of FSP 115-1 does not have an impact on its result of operations or financial position.

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In December 2004, FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004) ("SFAS 123 (revised 2004)"), "Share-Based Payment". This Statement requires that the cost resulting from all share-based transactions be recorded in the financial statements. The Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. The Statement replaces FASB Statement No. 123 "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for Stock Issued to Employees". The provisions of this Statement will be effective for the Corporation beginning with its fiscal year ending 2006. The Corp oration has not yet determined the effect of future implementation of the adoption of SFAS 123 (revised 2004) on its results of operations or financial position.

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.

Canadian Standards

In April 2005, the CICA issued new Section 1530 "Comprehensive Income", the new section establishes standards for reporting and display of comprehensive income. The main feature of Section 1530 is a requirement for an enterprise to present comprehensive income and its components, as well as net income, in its financial statements. Section 1530 will apply for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

In April 2005, the CICA issued new Section 3251 "Equity". The new section, which replaces section 3250 "Surplus", establishes standards for the presentation of equity and changes in equity during the reporting year. The main feature of Section 3250 is a requirement for an enterprise to present separately each of the changes in equity during the year, including comprehensive income, as well as components of equity at the end of the year. Section 3251 will apply for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

In April 2005, the CICA issued new Section 3855 "Financial instruments - recognition and measurement", which establishes standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. The main features of Section 3855 are classified financial assets as held for trading, held to maturity, loans and receivables, or available for sales and their measurement. Section 3855 will apply for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

In April 2005, the CICA issued new Section 3861 "Financial instruments - disclosure and presentation", which replaces section 3860 "Financial instruments - disclosure and presentation", and establishes standards for the presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. Section 3861 will apply for fiscal years beginning on or after October 1, 2006.

In April 2005, the CICA issued new Section 3865 "Hedges", which establishes standards for when and how hedge accounting may be applied. Section 3865 should be applied for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006.

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The Corporation has not yet determined the effect of future implementation of these new standards on its financial statements.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

Our directors and executive officers are:

Name	Age	Position and Office Held⁽¹⁾	Shares Beneficially Owned or Controlled	Percentage of Outstanding Shares
Roger A. Rached Vancouver, B.C. Canada	45	President and Chief Executive Officer (also the President, Chief Executive Officer and a Director of IHI International, Canadian Hi-Tech, IHI Construction Ltd. and IHI International Construction Inc.)	16,042,478⁽²⁾	11.9%
Dr. Rene Abi-Rached Vancouver, B.C. Canada	48	Chief Operating Officer and Director	20,000	*
Omar Take Vancouver, B.C. Canada	58	Chief Project Officer and Director	230,000⁽³⁾	*
Evelyne Schmeler Luxembourg City Luxembourg	43	Director (also a Director of Canadian Hi-Tech)	52,500	*
Ferdinand Rauer Dusseldorf Germany	65	Director	50,000	*
Thomas Po North Vancouver, B.C. Canada	69	Director (also a Director of Canadian Hi-Tech)	97,000	*
Lawry Trevor-Deutsch Ottawa, Ontario Canada	49	Director	286,855⁽⁴⁾	*
Dr. Owen A. Anderson Richmond, B.C. Canada	61	Chief Financial Officer and Director	93,304⁽⁵⁾	*
Larry P. Coston Calgary, Alberta Canada	53	Director	1,668,898⁽⁶⁾	1.2%
Cary Green North York, Ontario Canada	49	Vice-President, Business Development	93,000	*
Stephen D. Wortley North Vancouver, B.C. Canada	47	Secretary	1,000	*
Directors and Senior Management			18,635,035⁽⁷⁾	13.9%

Notes:

* Less than 1%.

(1) All information as to principal occupation, business or employment and Shares beneficially owned or controlled has been furnished by the respective persons.

(2) 6,505,486 of these Shares are held in escrow by Mira Mar Overseas Ltd., which is indirectly owned by Roger A. Rached. To the extent permitted by law, these Shares are pledged to lenders. 2,168,496 of these Shares were released from escrow on August 21, 2005 and the remaining 2,168,496 Shares were released from escrow on February 21, 2006. Includes options to acquire 5,200,000 shares at an exercise price of $0.20 per share expiring October 6, 2008.

(3) 150,000 of these Shares are held directly and the remaining 80,000 Shares are held indirectly through Clarion Overseas Corporation.

(4) 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.

(5) 91,304 of these Shares are held directly and the remaining 2,000 Shares are held indirectly through Hawthorne Consulting Corporation.

(6) 1,423,898 of these Shares are held directly, 25,000 of the Shares are held indirectly through Colin Lee Coston and the remaining 220,000 Shares are held indirectly through P&L Ventures Inc.

(7) This amount includes 10,842,478 shares held in escrow by Mira Mar Overseas Ltd. and includes options to acquire 5,200,000 shares at an exercise price of $0.20 per share expiring October 6, 2008.

Biographies of Our Senior Management and Directors

Roger A. Rached, a Canadian citizen, is the founder of the IHI Group of companies and has been the President and CEO of International Hi-Tech Industries Inc. since May 1993. Mr. Rached is also President, Chief Executive Officer and a Director of IHI International, Canadian Hi-Tech, IHI Construction Ltd. and IHI International Construction Inc. After graduating with a Masters degree from Stanford University, Faculty of Engineering (Civil/Structural) in 1984, Mr. Rached managed the family's international business of the Garmeco Group, an architectural, engineering and construction management company based in Lebanon since 1948. After the commencement of full commercial production, Mr. Rached will concentrate on the international implementation of the Corporation's Technology, through its majority owned subsidiary, IHI International.

Mr. Rached is a member of The American Society of Civil Engineers, American Construction Institute, Transportation & Development Institute, Canadian & Greater Vancouver Home Builder's Association, Vancouver Board of Trade, Urban Development Institute and many other prestigious international associations.

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Dr. Rene Abi-Rached, a Canadian citizen, was appointed as our Chief Operating Officer on December 1, 2000. Dr. Rached was our Executive Officer from September 23, 1999 to December 1, 2000. Dr. Rached received his doctorate degree in engineering from Stanford University and was both a professor in the Engineering Faculty of the University of British Columbia and the American University of Beirut. Dr. Rached is also President of Garmeco Canada where he has gained experience in the commercial, institutional and residential building industries. He has extensive experience in computerized robotics and automation in manufacturing as well as a broad background in energy management. Dr. Rached will be responsible for the start-up of commercial production, the completion of factory equipment installation and the implementation of our business plan.

Omar Take, a Mexican national, was appointed as our Chief Project Officer on December 1, 2000. Mr. Take is a pre-eminent individual in the architectural and building design businesses. Mr. Take has been our consultant since 1997 and has helped to introduce us to the majority of our joint venture partners in Europe, the U.S.A. and the Middle East. Mr. Take has been an associate of the prominent architectural firm Kenzo Tange Associates for the past 22 years and has served as Kenzo Tange's Vice-President for Europe and the Middle East since 1989. As Chief project Officer, Mr. Take leads our project design team and consults with client architects world-wide.

Evelyne Schmeler, a Belgian national, was appointed as a Director of the Corporation on April 10, 1997 and has been a Director of Canadian Hi-Tech since March 27, 1996. Ms. Schmeler is also a Director and Public Relations Manager of Veda Consult, a Luxembourg based advisory company, that she co-founded in November 1995. Veda Consult is a joint venture partner of IHI International for Luxembourg and surrounding regions. Before joining Veda Consult she was a real estate broker with Cote Sud, a real estate agency, in Menton, France, from April 1994 to June 1995. In 1990, Ms. Schmeler was a member of the Securities and Portfolio Management Department of ABC Banque International in Monaco. Ms. Schmeler received a degree in distribution and marketing from the Institut Superieur Economique of Liege in September 1983. Ms. Schmeler is fluent in several languages including English, French and German and she has a basic knowledge of Italian.

Ferdinand Rauer, a German national, was appointed a Director in June, 1997. Ferdinand Rauer has worldwide construction project management experience with MAN Gutehoffnungshütte AG, a project management company in Germany. Mr. Rauer has consulted for the international steel industry with conglomerates such as Krupp and Mannesmann. He brings in-depth knowledge of all aspects of the construction process for countries where IHI International has joint venture agreements in place or pending. He is currently Advisor to the Executive Management of Thyssen Group (the 4th largest construction company in Germany). He is responsible for developing business in Africa and Germany.

Thomas Po, a Canadian Citizen, was appointed as our Director on May 18, 1998 and has been a Director of Canadian Hi-Tech since 1996. Since 1995, Mr. Po has been the Manager of our R & D facility in Surrey, B.C. He is responsible for production, research, and administration. Mr. Po has been a Director of Pohangco Inc. since 1962. Pohangco is a commodities and land development company based in the Philippines, and is also the Joint Venture Partner of IHI International in both the Northern Philippines and the Southern Philippines.

Lawry Trevor-Deutsch, a Canadian citizen, was appointed as our Director on May 28, 1999. Mr. Trevor-Deutsch is President of Strathmere Associates International Ltd. Mr. Trevor-Deutsch who holds a Master of Science degree from Carleton University and a joint MBA from McGill University and the University of Manchester, is a business development consultant with 17 years of experience, specializing in strategic planning, technology development and government relations. Based in Ottawa, Mr. Trevor-Deutsch is associated with consulting firms across Canada and has served on the Boards of Directors of a number of professional and not-for-profit associations.

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Among his current development projects, Mr. Trevor-Deutsch is under contract with the World Bank in Washington, D.C., assisting with its business planning in Washington, Eastern Europe and South America for the Global Development Learning Network. He is under contract or has recently completed projects for several corporations and government departments and also manages the Bayer Advisor Council on Bioethics for Bayer Canada Inc. He has considerable international experience, having worked in Europe, Africa, Taiwan and the Caribbean. Mr. Trevor-Deutsch is frequently an invited speaker to conferences, colleges and international delegations and maintains Secret-level security clearance with the Canadian Government.

Dr. Owen A. Anderson, a Canadian citizen, was appointed as our Chief Financial Officer on April 24, 2001. 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 and staff of over 1,000. In 1997, Dr. Anderson established Hawthorne Consulting Corp. Inc., specializing in strategic business management and public policy. Dr. Anderson has been our government relations consultant since 1999. Dr. Anderson is Governor of The Council for Canadian Unity, and Chairman Emeritus of the Pacific Corridor Enterprise Council. Dr. Anderson is a recipient of the Chairman's Award for outstanding service on the Board of the Vancouver Board of Trade, and was awarded the Cana da 125 Medal by the Governor General.

Larry P. Coston, a Canadian citizen, was appointed as our Director on June 28, 2002. Mr. Coston is a graduate of the Southern Alberta Institute of Technology (SAIT) with recognition as a Registered Engineering Technologist (R.E.T.). He has 32 years experience in the Canadian petroleum industry, specializing in Sales and Marketing for the upstream service sector, and has occupied senior positions with several companies, most recently as President and Chief Operating Officer of Total Energy Services Ltd. Total Energy Services Ltd. is a public company listed on the Toronto Stock Exchange under the symbol TOT.UN. Mr. Coston has successfully completed various committee executive responsibilities with the Canadian Association of Drilling Engineers (CADE), the Petroleum Service Association of Canada (PSAC), the Canadian Association of Oilwell Drilling Contractors (CAODC) and a number of other industry associations.

Cary Green, a Canadian citizen, was appointed as our Vice-President, Business Development on May 18, 2001. Mr. Green is also Executive Vice-President of Development for Toronto-based property firm Verdiroc Development Corporation and is a principal and partner in Greenwin Property Management, Canada's largest residential property company with over 71,000 properties under management. Mr. Green is also a member of the Urban Development Round Table Task Force on Rental Development in Metro Toronto.

Mr. Green has 20 years of experience in the area of property development. During his career, Mr. Green has overseen the development of approximately 3,500 high-rise residential units in Ontario, as well as retail and commercial projects in Quebec and Ontario.

Stephen D. Wortley, a Canadian citizen, has been our Secretary since November, 1993 and was also one of our directors until November, 1994. Mr. Wortley has been a partner of Lang Michener LLP, one of Canada's largest law firms, since February 1, 1991. Educated in Vancouver, Mr. Wortley received a Diploma of Technology from the British Columbia Institute of Technology and specialized in Administrative Management. Mr. Wortley graduated from the University of British Columbia Law School in 1984 and was called to the British Columbia Bar in 1985. Before joining Lang Michener, Mr. Wortley was a Law Clerk of the British Columbia Court of Appeal. Corporate and securities matters are Mr. Wortley's practice emphasis and he acts as our general corporate solicitor.

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Compensation

We signed a management agreement on August 1, 1992 (the "Management Agreement") with RAR Investments and agreed to pay an aggregate fee of $6,000 per month to RAR Investments and RAR Consultants for management fees. The parties have agreed to extend the agreement on a month-to-month basis.

Roger A. Rached, President and Chief Executive Officer, Dr. Owen A. Anderson, Chief Financial Officer, Rene Abi-Rached, Ph.D., Chief Operating Officer and Omar Take, Chief Project Officer are members of our senior management team (the "Named Executive Officers"). The compensation paid to the Named Executive Officers during our three most recently completed financial years is set out below.

SUMMARY COMPENSATION TABLE
		Annual Compensation			Long Term Compensation
					Awards		Payouts
Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compen-sation ($)	Securities Under Options/ SARs Granted (#)	Restricted Shares or Restricted Share Units ($)	LTIP Payouts ($)	All Other Compen-sation ($)
Roger A. Rached President and Chief Executive Officer	2005	72,000⁽¹⁾	Nil	Nil	Nil	Nil	Nil	Nil
	2004	72,000⁽¹⁾	Nil	Nil	5,200,000⁽²⁾	Nil	Nil	Nil
	2003	72,000⁽¹⁾	Nil	Nil	Nil	Nil	Nil	Nil
Dr. Owen A. Anderson Chief Financial Officer	2005	48,000	Nil	Nil	Nil	Nil	Nil	Nil
	2004	48,000	Nil	Nil	Nil	Nil	Nil	Nil
	2003	48,000	Nil	Nil	Nil	Nil	Nil	Nil

(1)Paid to RAR Investments (controlled by Roger A. Rached) and to R.A.R. Consultants (in respect of which Roger A. Rached is an insider). The amounts are paid pursuant to a Management Agreement dated August l, 1992. See "Major Shareholders and Related Party Transactions - Related Party Transactions".

(2) On June 9, 2004 we granted 5,200,000 options to acquire our Shares to Mira Mar Overseas Ltd., a company controlled by Mr. Rached, at an exercise price of $0.20 per share expiring on October 6, 2008.

During the financial year ended December 31, 2005 we did not give any long term incentive plan awards or share appreciation rights to any of our officers.

We have not granted any options to purchase our Shares to any of our directors and officers other than Roger A. Rached. Roger A. Rached did not exercise any share purchase options during the year ended December 31, 2005, nor has he ever exercised any share purchase options.

Lawry Trevor-Deutsch, Larry P. Coston, Dr. Owen A. Anderson and Omar Take are paid a monthly director's fee of $2,000 per month. In addition to the compensation set out in the Summary Compensation Table above, during fiscal 2005 we paid $126,072 (2004 - $72,579; 2003 - $78,322) for director's and officer's fees.

No other cash compensation, including salaries, fees, commissions, or bonuses were paid to our directors and officers.

We do not have any profit sharing or retirement benefit plans. There are no arrangements for payments to any member of management in case they lost their job with a change in the control of our company.

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Common Share Option Plan

We have established a Stock Option Plan (the "Plan"). The maximum number of shares that may be reserved for issuance under the Plan at any point in time is 10% of the outstanding shares. Options to purchase common shares under the Plan may be granted to a bona fide director, officer, employee, management company employee, consultant or company consultant. The terms of any option grant under the Plan including the exercise price of an option, will be set by the Board of Directors at the time such option is granted pursuant to the Plan.

As of July 11, 2006, the only options outstanding are those options granted as of June 9, 2004 to Mira Mar Overseas Ltd., a company owned indirectly by Roger A. Rached, to acquire 5,200,000 Common Shares at $0.20 each to October 6, 2008.

Termination of Employment, Change in Responsibilities and Employment Contracts

We do not have a compensation plan or any other arrangements in place in case Mr. Roger A. Rached or any other officer, or any director:

resigns,

retires,

is removed from his position, or

has his job description changed following a change in the control of our company.

Board Practices

All directors are elected and their term of office expires at our next annual general meeting which we expect to be in June, 2006. All officers have a term of office lasting until they are removed or replaced by the Board of Directors. The following table sets out the periods during which our officers have served:

Name	Office Held	Period an Officer of the Corporation
Roger A. Rached	President Chief Executive Officer	May 17, 1993 to present October 20, 2002 to present
Dr. Rene Abi-Rached	Chief Operating Officer	December 1, 2000 to present
Dr. Owen A. Anderson	Chief Financial Officer	April 24, 2001 to present
Omar Take	Chief Project Officer	December 1, 2000 to present
Cary Green	Vice-President, Business Development	May 18, 2001 to present
Stephen D. Wortley	Secretary	November 8, 1993 to present

Our Board of Directors has established an Audit Committee. The Audit Committee of the Board functions pursuant to a charter adopted by the Board. The function of the Audit Committee generally is to oversee the audit of the Corporation's financial statements performed by the Corporation's external

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auditors and to recommend the nomination and compensation of external auditors. The Audit Committee also assists the Board of Directors of the Corporation in carrying out its responsibilities relating to the Corporation's financial, accounting and reporting processes, the Corporation's system of internal accounting and financial controls and the Corporation's compliance with related legal and regulatory requirements. The members of the Audit Committee are Dr. Owen A. Anderson, Lawry Trevor-Deutsch and Larry P. Coston.

The Board has also established an Independent Committee. The function of the Independent Committee is to assist the Board of Directors in carrying out its responsibilities relating to the fairness of transactions between the Corporation and related parties. The members of the Independent Committee are Lawry Trevor-Deutsch and Larry P. Coston.

The Corporation does not have a Compensation Committee, rather compensation of directors and officers is determined by the Board.

Employees

During each of the years ended December 31, 2003 and December 31, 2004, we had approximately 36 employees and during the year ended December 31, 2005, we had approximately 45 employees including management, office staff, workers and labourers responsible for the production of the panels for the construction of the Facility.

Recruitment of qualified individuals for managerial positions in marketing, engineering and architecture will also be our objective over the next 12 to 24 months. To date, we have hired an experienced team of approximately 12 consultants to assist in the development of the Technology. Where appropriate, we will continue to hire consultants with expertise in marketing, engineering (as it relates to construction) and architecture.

We believe that we can continue to attract skilled personnel for all areas and we have been able to keep turnover to a minimum. However, the competition to hire skilled professionals is intense; therefore, we may not be successful in our recruiting efforts.

Share Ownership

See "Directors, Senior Management and Employees - Directors and Senior Management" for share ownership information.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

Our securities are recorded with our transfer agent. Some of those shares are registered in the name of intermediaries such as brokerage houses and clearing houses on behalf of their clients, and we do not know who the owners are. We are not owned or controlled by a corporation or foreign government nor have we arranged for a change in our control. As of the date of this Annual Report, we were not limited as to the number of Common Shares and preferred shares we could issue. Of the preferred shares we have designated:

50,000,000 as Preferred Shares, Series 1 (none of these are issued or outstanding),

5,000,000 as Preferred Shares, Series 2 (none of these are issued or outstanding), and

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5,000,000 as Preferred Shares, Series 3 (none of these are issued or outstanding).

The holders of Preferred Shares cannot vote except in those circumstances required by Canadian law.

The following table sets out certain information regarding the ownership of our Common Shares by those shareholders that we know owns more than 5% of our Common Shares. As of July 11, 2006, 129,175,065 of our Common Shares were outstanding.

Identity of Person or Group	Number ofShares	Percentage ofClass
Roger A. Rached	10,842,478⁽¹⁾⁽²⁾	8.4%⁽¹⁾
Garmeco International Consulting Engineers S.A.L.	12,758,933	9.9%

Notes:

(1) 6,505,486 of these Shares are held in escrow by Mira Mar Overseas Ltd., which is indirectly owned by Roger A. Rached. 2,168,496 of these Shares were released from escrow on August 21, 2005 and the remaining 2,168,496 Shares were released from escrow on February 21, 2006.

(2) To the extent permitted by law, these shares are pledged to lenders.

As at December 31, 2005, Roger A. Rached held 10,842,478 Common shares, as at December 31, 2004, Roger A. Rached held 13,010,974 Common Shares, as at December 31, 2003, Roger A. Rached held 17,347,966 Common Shares and as at December 31, 2002, Roger A. Rached held 19,516,462 Common Shares.

Under the British ColumbiaSecurities Act insiders (those who are officers, directors, or holders of 10% or more of our Shares) must file insider reports to record changes in their ownership of our stock within 10 days following a trade in our stock. Copies of these reports are available electronically via the internet through the System for Electronic Disclosure by Insiders ("SEDI") at the SEDI web site (www.sedi.ca).

The Corporation's major shareholders do not have different voting rights on the Common Shares they hold than other holders of Common Shares.

As of July 11, 2006, there are 103 U.S. registered shareholders holding a total of 7,973,253 Common Shares of the Corporation.

Related Party Transactions

Except as disclosed below, we have not since January 1, 2005, being the date of the beginning of our most recently completed fiscal year, entered into or made, and do not propose to enter into or make:

(1) any transaction with a related party that is either material to us or to the related party;

(2) any transaction with a related party that is unusual in its nature or conditions, involving goods, services or tangible or intangible assets;

(3) any loans or guarantees directly by us or through any of our subsidiaries to or for the benefit of any related party.

During the 2005 fiscal year, we paid $72,000 to RAR Consultants, a company controlled by Mr. Rached's family for management fees;

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During the 2005 fiscal year, we 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, we paid $126,072 for directors' and officers' fees;

During the 2005 fiscal year, we paid $198,370 for consulting services to a company controlled by Mr. Rached's family;

During the 2005 fiscal year, we 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 $1,463,468 payable to Garmeco Canada, a company controlled by Mr. Rached's family;

At December 31, 2005, $50,000 is included in promissory notes payable to a director of the Corporation;

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;

We entered into a shareholders' agreement dated May 1, 2006 (the "Shareholders' Agreement") with Garmeco Canada, Garmeco, RAR Consultants in respect to each parties' shareholding in IHI International Construction Inc. 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 International Construction Inc. may request that shareholders each contribute additional capital of the Corporation on a pro 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; and

We entered into a Commercial Lease Renewal dated June 7, 2006 with 434088 B.C. Ltd., a company controlled by Mr. Rached's family, with respect to our Vancouver head office.

We have entered into a Consulting Fee Agreement dated October 25, 1992. Under the Consulting Fee Agreement, RAR Consultants and Garmeco Canada have agreed to assist us by providing detailed engineering designs for the projects that we undertake. We have 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;

We have entered into a Management Agreement dated August 1, 1992, and subsequently amended on March 3, 1993 and July 16, 1993. Under the Management Agreement, Canadian Hi-Tech has agreed to pay RAR Investments $6,000 per month as a management fee. Mr. Rached, the President and Chief Executive Officer of the Corporation, controls RAR Investments and is the President and Director of Canadian Hi-Tech. In addition, Canadian Hi-Tech may pay discretionary bonuses to RAR Investments

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for its services under the Management Agreement in such amount as may be set by the Directors from time to time in their sole discretion. The Management Agreement expires on September 11, 2002 unless earlier terminated in writing by any of the parties to the Management Agreement. In connection with the acquisition of the Canadian rights to the Technology and the Hopcott Road Property by the Corporation, Canadian Hi-Tech's rights under the Management Agreement have been assigned to the Corporation and the Corporation has assumed Canadian Hi-Tech's obligations under the Management Agreement. The Corporation's obligations, pursuant to the aforementioned assignment, were novated under a Novation Agreement dated June 17, 1996. The parties have agreed to extend the Management Agreement on a month-to-month basis;

Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

The financial statements required as part of this Annual Report are filed under Item 17 of this Annual Report.

Legal Proceedings

Fanuc-GE

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 Lt d., 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. This case is still at trial. See "Key Information - Risk Factors".

Dividend Policy

We have not paid any dividends on our outstanding Common Shares since incorporation and we do not expect that we will in the foreseeable future. We have paid dividends on our Preferred Shares. IHI International has paid dividends on its Common Shares. See "Major Shareholders and Related Party Transactions - Related Party Transactions".

Significant Changes

There have been no significant changes to report since the date of our financial statements included with this Annual Report on Form 20-F except as disclosed herein.

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ITEM 9. THE OFFER AND LISTING

Offer and Listing Details

Trading Markets

TSX-V IHI - Trading in Canadian Dollars			OTC Bulletin Board IHITF - Trading in United States dollars
	High	Low		High	Low
	($)	($)		($)	($)
Annual			Annual
2005	0.82	0.14	2004	0.73	0.12
2004	0.41	0.09	2004	0.34	0.07
2003	0.52	0.22	2003	0.335	0.181
2002	0.88	0.23	2002	0.55	0.15
2001	1.25	0.73	2001	0.85	0.45

Calendar 2004			Calendar 2004
First Quarter	0.41	0.20	First Quarter	0.31	0.16
Second Quarter	0.31	0.18	Second Quarter	0.34	0.13
Third Quarter	0.30	0.20	Third Quarter	0.23	0.15
Fourth Quarter	0.24	0.09	Fourth Quarter	0.19	0.072

Calendar 2005			Calendar 2005
First Quarter	0.39	0.18	First Quarter	0.32	0.13
Second Quarter	0.35	0.16	Second Quarter	0.29	0.12
Third Quarter	0.31	0.14	Third Quarter	0.26	0.12
Fourth Quarter	0.82	0.19	Fourth Quarter	0.73	0.15

Monthly			Monthly
June 2006	0.66	0.50	June 2006	0.61	0.45
May 2006	0.81	0.65	May 2006	0.73	0.51
April 2006	0.85	0.60	April 2006	0.73	0.55
March 2006	0.89	0.75	March 2006	0.77	0.32
February 2006	0.83	0.54	February 2006	0.73	0.43
January 2006	0.71	0.56	January 2006	0.62	0.48

Plan of Distribution

Not applicable.

Markets

Our Common Shares have been trading on the TSX-V since May 20, 1993. Our Common Shares also began being quoted in the United States on the OTC Bulletin Board in April, 1995.

Selling Shareholders

Not applicable.

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Dilution

Not applicable.

Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

Share Capital

Not applicable.

Articles of Association

Our Restated Articles of Incorporation are registered with Industry Canada under Certificate No. 326451-3. A copy of the Restated Articles of Incorporation has been previously filed with the Corporation's Form F-1.

Objects and Purposes

Our Restated Articles of Incorporation do not specify objects or purposes.

Directors Powers and Limitations

Our Restated Articles of Incorporation specify that there will be a minimum of three and a maximum of eight directors. Under our Restated Articles of Incorporation the directors are entitled between successive annual general meeting to appoint one or more additional directors but not more than one-third of the number of directors or actually elected at the preceding annual meeting. Directors automatically retire at the commencement of each annual meeting subject to being re-elected.

Although our directors and officers have various fiduciary obligations to the Corporation, situations may arise where the interests of the directors and officers could conflict with those of the Corporation. The potential conflicts of interest arise as a result of common ownership and certain common directors, officers, and personnel of the Corporation and their associates and affiliates. These conflicts are addressed by the CBCA (in the case of the Corporation) which requires disclosures of conflicts at meetings of the directors held for the purposes, inter alia, of 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 with respect to any such acquisition or dealing.

The CBCA, however, provides that directors who have an interest in the contract or transaction can vote on any resolution if the contract or transaction they are approving relates to the remuneration of the director, relates to indemnities or insurance for directors or is with an affiliate.

The directors and officers of the Corporation are, both by statute and at common law, required to act fairly and in the best interest of the Corporation and are not permitted to breach this fiduciary duty for their own benefit.

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Shareholders' Meetings

Under the CBCA, our directors must call an annual meeting of shareholders not later than 15 months after holding the last preceding annual meeting but no later than six months after the end of our financial year and may at any time call a special meeting of shareholders.

For the purpose of determining shareholders entitled to receive notice of a meeting of shareholders, our directors may fix in advance a date as the record date for such determination, but such record date shall not precede by more than 60 days or by less than 21 days the date on which the meeting is to be held.

Under the CBCA, notice of the time and place of a meeting of shareholders shall be sent not less than 21 days nor more than 50 days before the meeting to each shareholder entitled to vote at the meeting. A rule of the Canadian Securities Regulators sets out that meeting materials should be sent to registered holders approximately 30 days before the meeting date, so that such registered holders can forward the materials to beneficial holders.

Common Shares

The holders of Common Shares are entitled to one vote for each share on all matters submitted to a vote of shareholders. There is no cumulative voting with respect to the election of directors. Accordingly, holders of a majority of the shares entitled to vote in any election of directors may elect all of the directors standing for election. Subject to preferences that may be applicable to any then outstanding Preferred Shares, the holders of Common Shares are entitled to receive such dividends, if any, as may be declared by the Board of Directors from time to time out of legally available funds. Upon liquidation, dissolution or winding up of the Corporation, the holders of Common Shares are entitled to share rateably in all assets of the Corporation that are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of holders of any Preferred Shares then outstanding. The holders of Common Shares have no redemption or conv ersion rights. The rights, preferences and privileges of holders of Common Shares are subject to the rights of the holders of shares of any series of Preferred Shares that the Corporation may issue in the future.

Preferred Shares

The Corporation's Restated Articles of Incorporation authorizes the issuance of Preferred Shares in series, with designations, rights and preferences determined from time to time by its Board of Directors. The holders of Preferred Shares are not entitled to vote except to the extent required by Canadian law.

There are no Series 1, Series 2 or Series 3 Preferred Shares issued or outstanding.

Material Contracts

Within the two years before the date hereof, we have not entered into, and we are not currently contemplating entering into any contracts material to us, other than contracts in the ordinary course of our business, except as follows:

Amendment to the International License Agreement dated June 23, 2004 providing for, among other things, the intention to distribute Common Shares of IHI International after 2006 and in accordance with applicable securities laws as described under "Information on the Company - History and Development of the Corporation - General Development of the Business - Acquisition of Worldwide (non-Canadian) Rights to the Technology";

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Guarantee Agreement dated August 10, 2004 between the Corporation and Dr. Rene Abi-Rached with respect to a first mortgage over the Corporation's Hopcott Road Property;

A subsidiary of the Corporation delivered a Promissory Note for $50,000 due August 27, 2006 with interest at 12% per annum, to a director of the Corporation, in consideration of a loan of $50,000;

Commercial Lease Renewal dated June 17, 2005 between the Corporation and 434088 B.C. Ltd., a company controlled by Mr. Rached's family, with respect to the Corporation's Vancouver head office;

form of Subscription Agreement pursuant to which certain investors acquired our Common Shares and Warrants as described under "Information no the Company - Business Overview - Narrative Description of Business - Recent Projects - Recent Financing";

Shareholders' Agreement among the Corporation, Garmeco Canada, Garmeco, RAR Consultants and IHI International Construction Inc. dated as of May 1, 2006 as described under "Major Shareholders and Related Party Transactions - Related Party Transactions"; and

Commercial Lease Renewal dated June 7, 2006 between the Corporation and 434088 B.C. Ltd., a company controlled by Mr. Rached's family, with respect to the Corporation's Vancouver head office.

Exchange Controls

There is no limitation imposed by Canadian law or by the charter or other constituent documents of the Corporation on the right of a non-resident to hold or vote Common Shares of the Corporation, other than as provided in the Investment Canada Act (Canada) (the "Investment Act.") The following discussion summarizes the principal features of the Investment Act for a non-resident who proposes to acquire Common Shares of the Corporation. It is general only, it is not a substitute for independent advice from an investor's own advisor, and it does not anticipate statutory or regulatory amendments.

The Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a "Canadian" as defined in the Investment Act (a "non-Canadian"), unless after review the Director of Investments appointed by the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. An investment in Common Shares of the Corporation by a non-Canadian other than a "WTO Investor" (as defined in the Investment Act and used in this discussion) when the Corporation was not controlled by a WTO (World Trade Organization) Investor, would be reviewable under the Investment Act if it was an investment to acquire control of the Corporation and the gross value of the assets of the Corporation was $5,000,000 or more, or if an order for review was made by a federal cabinet on the grounds that the investment related to Canada's cultural heritage or natio nal identity, regardless of the value of the assets of the Corporation. An investment in Common Shares of the Corporation by a WTO Investor, or by a non-Canadian when the Corporation was controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment to acquire control of the Corporation and the gross value of assets of the Corporation, as determined in accordance with the regulations promulgated under the Investment Act, in 2006 exceeds $265,000,000. A non-Canadian would acquire control of the Corporation for the purposes of the Investment Act if the non-Canadian acquired a majority of the Common Shares of the Corporation. The acquisition of less than a majority, but more than a third, of the Common Shares of the Corporation would be presumed to be an acquisition

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of control of the Corporation unless it could be established that, on the acquisition, the Corporation was not controlled in fact by the acquiror through the ownership of Common Shares of the Corporation.

Certain transactions relating to Common Shares of the Corporation would be exempt from the Investment Act, including the:

acquisition of Common Shares of the Corporation by a person in the ordinary course of that person's business as a trader or dealer in securities;

acquisition of control of the Corporation in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act; and

acquisition of control of the Corporation by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of the Corporation, through the ownership of Common Shares of the Corporation, remained unchanged.

Taxation

Canadian Federal Income Tax Considerations

The following discussion summarizes the principal Canadian federal income tax considerations generally applicable to a person (an "Investor") who acquires one or more Common Shares of the Corporation, and who at all material times for the purposes of the Income Tax Act (Canada) (the "Canadian Act") deals at arm's length with the Corporation, holds all Common Shares solely as capital property, is a non-resident of Canada, and does not, and is not deemed to, use or hold any Common Shares in or in the course of carrying on business in Canada. It is assumed that the Common Shares will at all material time be listed on a stock exchange that is prescribed for the purposes of the Canadian Act.

This summary is based on the current provisions of the Canadian Act, including the regulations thereunder, and the Canada-United States Income Tax Convention (1980) (the "Treaty") as amended. This summary takes into account all specific proposals to amend the Canadian Act and the regulations thereunder publicly announced by the government of Canada to the date hereof and the Corporation's understanding of the current published administrative and assessing practices of the Canada Revenue Agency ("CRA"). It is assumed that all such amendments will be enacted substantially as currently proposed, and that there will be no other material change to any such law or practice, although no assurances can be given in these respects. This summary does not take into account any provincial, territorial or foreign income tax law or treaty other than the Treaty.

This summary is not, and is not to be construed as, tax advice to any particular Investor. Each prospective and current Investor is urged to obtain independent advice as to the Canadian income tax consequences of an investment in Common Shares applicable to the Investor's particular circumstances.

An Investor generally will not be subject to tax pursuant to the Canadian Act on any capital gain realized by the Investor on a disposition of a Common Share unless the Common Share is "taxable Canadian property", and is not "treaty-protected property", of the Investor for purposes of the Canadian Act. A Common Share that is disposed of by an Investor will not constitute taxable Canadian property of the Investor provided that neither the Investor, nor one or more persons with whom the Investor did not deal at arm's length, alone or together at any time in the 60 months immediately preceding the disposition owned, or owned any right to acquire, 25% or more of the issued shares of any class of the capital stock

<PAGE>

of the Corporation. The Common Share will be a treaty-protected property of the Investor if, under the terms of an applicable bilateral tax treaty, any gain realized by the Investor on disposition of the share is exempt from Canadian income tax under Part I of the Canadian Act. For example, pursuant to the Treaty, a Common Share of the Corporation held by an Investor who is a resident of the United States for the purposes of the Treaty will generally constitute treaty-protected property, provided that the value of the Common Share is not derived principally from real property (including resource properties) situated in Canada and that the Investor does not have, and has not had within the 12-month period, preceding the disposition, a "permanent establishment" or a "fixed base" available to the Investor in Canada.

An Investor whose Common Shares constitute taxable Canadian property and are not treaty-protected property, and who disposes of one or more Common Shares in a taxation year, will realize a capital gain (capital loss) equal to the amount by which the proceeds of disposition therefor exceed (are exceeded by) the adjusted cost base thereof to the Investor and the Investor's reasonable costs of disposition. The Investor will be required to include one half of any such capital gain (taxable capital gain) in the Investor's taxable income earned in Canada for the taxation year and to pay Canadian income tax accordingly. The Investor will be entitled to deduct one half of any such capital loss (allowable capital loss) against taxable capital gains included in the Investor's taxable income earned in Canada in the taxation year and, to the extent not so deductible, against taxable capital gains included in the Investor's taxable income earned in Canada in any of the three preceding taxation years or in any subsequent taxation year.

Each Investor will be required to pay Canadian withholding tax on the amount of any dividend, including any stock dividend, paid or credited or deemed to be paid or credited by the Corporation to the Investor on a Common Share. The rate of withholding tax is 25% of the gross amount of the dividend, or such lower rate as may be available under an applicable income tax treaty. Pursuant to the Treaty, the rate of withholding tax applicable to a dividend paid on a Common Share to an Investor who is a resident of the United States for the purposes of the Treaty is 5% if the Investor is a company that owns at least 10% of the voting stock of the Corporation, and 15% in any other case, of the gross amount of the dividend. The Corporation will be required to withhold any such tax from the dividend, and remit the tax directly to CRA for the account of the Investor.

United States Federal Income Tax Consequences

The following is a general discussion of all material United States federal income tax consequences, under current law, generally applicable to a U.S. Holder (as hereinafter defined) of common shares of the Corporation. This discussion does not address individual consequences to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. (See "Canadian Federal Income Tax Considerations above").

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published Internal Revenue Service ("IRS") rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advise to any holder or prospective holder of common shares of the Corporation and no opinion or representation with respect to the United States federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of commo n shares of the Corporation are

<PAGE>

urged to consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Corporation.

As used herein, a "U.S. Holder" means a holder of common shares of the Corporation who is a citizen or individual resident of the United States, a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof or a trust whose income is taxable in the United States irrespective of source. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to specific provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, nonresident alien individuals, persons or entities that have a "functional currency" other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or a conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Corporation are required to include in gross income for United States federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such dividends on the date of receipt (based on the exchange rate on such date) to the extent that the Corporation has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder's federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder's federal taxable income by those who itemize deductions. (See more detailed discussion at "Foreign Tax Credit" below). To the extent that distributions exceed current or accumulated earnings and profits of the Corporation, they will be treated first as a return of capital up to the U.S. Holder's adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.

Dividends paid on the common shares of the Corporation will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Corporation (unless the Corporation qualifies as a "foreign personal holding company" or a "passive foreign investment company," as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Corporation. The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.

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Under current temporary Treasury Regulations, dividends paid on the Corporation's common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends paid, and the proceeds of a sale of the Corporation's common shares, in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 31% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder's U.S. federal income tax liability, provided the required information is furnished to the IRS.

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Corporation may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder's United States income tax liability that the U.S. Holder's foreign sources income bears to his or its worldwide taxable income. In the determination of the application of this limit ation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes of income such as "passive income," "high withholding tax interest," "financial services income," "shipping income," and certain other classifications of income. Dividends distributed by the Corporation will generally constitute "passive income" or, in the case of certain U.S. Holders, "financial services income" for these purposes. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific, and U.S. Holders of common shares of the Corporation should consult their own tax advisors regarding their individual circumstances.

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Corporation equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder's tax basis in the common shares of the Corporation. Preferential tax rates apply to long-term capital gains of U.S. Holders who are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if the common shares of the Corporation are held for more than one year. Deductions for net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capit al gains until such net capital loss is thereby exhausted.

In the following circumstances, the above sections of this discussion may not describe the United States federal income tax consequences resulting from the holding and disposition of common shares:

If 50% or more of the combined voting power or total value of the Corporation's outstanding shares are held, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and the Corporation is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Corporation may be treated as a "foreign investment company" as defined in Section 1246 of the Code,

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causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares to be treated as ordinary income rather than capital gain.

If more than 50% of the voting power of all classes of shares or the total value of the shares of the Corporation is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of shares of the Corporation ("United States shareholder"), the Corporation could be treated as a "controlled foreign corporation" under Subpart F of the Code. This classification would effect many complex results one of which is the inclusion of certain income of a CFC which is subject to current U.S. tax. The United States generally taxes a United States shareholder of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such U.S. shareholders are generally treated as having received a current distribution out of the CFC's Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC's earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation who is or was a United States shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Corporation attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to United States shareholders of the CFC. This rule generally will be effective for taxable years of United States shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States shareholders. Special rules apply to United States shareholders who are subject to the special taxation rule s under Section 1291 discussed above with respect to a PFIC. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to U.S. Holders of common shares of the Corporation, a more detailed review of these rules is outside of the scope of this discussion.

Dividends and Paying Agents

Not applicable.

Statement by Experts

Not applicable.

Documents on Display

Exhibits attached to this Form 20-F are also available for review at our head office located at 1096 West 10th Avenue, Vancouver, British Columbia V6H 1H8 or you may request them by calling Jennifer Melbourne at 604-733-5400. Copies of our financial statements and other continuous disclosure documents required under the British ColumbiaSecurities Act are available for viewing on the internet at www.SEDAR.com. Copies of our financial statements and other continuous disclosure documents are also available for viewing at www.sec.gov.

Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES ANDDELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Exchange Act, we have carried out an evaluation of the effectiveness of the design and operation of our corporation's disclosure controls and procedures as of December 31, 2005, being the date of our most recently completed fiscal year. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective as at the end of the period covered by this annual report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our corporation's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal controls over financial reporting that occurred during our most recent annual period that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 16. [reserved]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Corporation does not currently have an audit committee financial expert on its Audit Committee. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time would be prohibitive. The Board believes the members of our Audit Committee are capable of analysing and evaluating our financial statements and internal controls and procedures for financial reporting. The Board believes that the services of a financial expert are not warranted at this time.

<PAGE>

ITEM 16B. CODE OF BUSINESS CONDUCT AND ETHICS

The Corporation has adopted a code of business conduct and ethics that applies to all directors, officers and managers of the Corporation. A copy of the Code of Conduct and Ethics is available for review at our head office located at 1096 West 10th Avenue, Vancouver, British Columbia, V6H 1H8 or you may request a copy without charge by calling Jennifer Melbourne at 604-733-5400.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

BDO Dunwoody LLP has served as our independent public accountants for the fiscal period ended December 31, 2005 and 2004, for which audited financial statements appear in this Annual Report. The following table represents the aggregate fees for professional services and other services rendered by BDO Dunwoody LLP in 2005 and 2004.

	Year Ended December 31, 2005	Year Ended December 31, 2004
Audit Fees	$75,000	$75,000
Audit-Related Fees	$-	$-
Tax Fees	$-	$-
All Other Fees	$-	$-

Audit fees were the aggregate fees charged by BDO Dunwoody LLP for the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. Audit related fees category comprises fees billed for the audit of any employee benefit plans and pension schemes, agreed upon procedure engagements and other attestation services subject to regulatory requirements, certifications of accounting-related internal controls, as well as advisory services associated with our financial reporting. Tax fees are fees for professional services rendered by BDO Dunwoody LLP for tax compliance, tax advice on actual or contemplated transactions, tax consulting associated with international transfer prices, value added taxes and excise taxes.

Management of the Corporation may from time to time, although it has not done so to date, recommend to and request approval from the Audit Committee for non-audit services to be provided by the Company's auditors. The Audit Committee would consider such requests at committee meetings, and if acceptable to a majority of the Audit Committee members, pre-approve such non-audit services by a resolution authorizing management to engage the Company's auditors for such non-audit services, with set maximum dollar amounts for each itemized service. During such deliberations, the Audit Committee would assess, among other factors, whether the services requested would be considered "prohibited services" as contemplated by the U.S. Securities and Exchange Commission, and whether the services requested and the fees related to such services could impair the independence of the auditors.

Only the audit services rendered for the year ended December 31, 2005 and 2004 were pre-approved by the Audit Committee.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

<PAGE>

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

The following financial statements are attached:

(1) Auditors' Report of BDO Dunwoody llp dated March 24, 2006 with respect to the December 31, 2005 financial statements;

(2) Consolidated Balance Sheet for December 31, 2005, and 2004;

(3) Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003, and for the period from inception (September 12, 1990) to December 31, 2005;

(4) Consolidated Statement of Cash Flows for the years ended December 31, 2005, 2004 and 2003, and for the period from inception (September 12, 1990) to December 31, 2005;

(6) Consolidated Statements of Stockholders' Equity;

(7) Notes to the Consolidated Financial Statements.

ITEM 18. FINANCIAL STATEMENTS

The Corporation has elected to provide financial statements pursuant to Item 17.

ITEM 19. EXHIBITS

The following exhibits are attached to this Form 20-F:

Exhibit	Document Description
1.1	Restated Articles of Incorporation (Incorporated by reference to Exhibits 3.08, 3.09 and 3.10 of our Form 20-F filed on May 23, 2003, Form 20-F/A filed on June 25, 2004 and Form 20-F filed on July 9, 2004)
4.1	Management Agreement among Canadian Hi-Tech, RAR Investments and Roger A. Rached dated August 1, 1992 (Incorporated by reference to Exhibit 10.26 of our Form F-1 filed on May 22, 1997)
4.2	Canadian License Agreement among RAR Consultants, Canadian Hi-Tech and Roger A. Rached dated March 16, 1993 (Incorporated by reference to our Exhibit 10.05 of our Form F-1 filed on May 22, 1997)
4.3	International License Agreement among RAR Consultants, IHI International and Roger A. Rached dated October 4, 1994 (Incorporated by reference to Exhibit 10.29 of our Form F-1 filed on May 22, 1997)
4.4	Amendment to the International License Agreement dated May 9, 2003 (Incorporated by reference to Exhibit 4.14 of our Form 20-F filed on May 23, 2003, Form 20-F/A filed on June 25, 2004 and Form 20-F filed on July 9, 2004)
4.5	Letter Agreement dated May 9, 2003 between the Corporation and Earthquake Resistance Structures Inc. (Incorporated by reference to Exhibit 4.15 of our Form 20-F filed on May 23, 2003 and Form 20-F/A filed on June 25, 2004)
4.6	Letter Agreement dated May 9, 2003 between the Corporation and Garmeco (Incorporated by reference to Exhibit 4.15 of our Form 20-F filed on May 23, 2003 and Form 20-F/A filed on June 25, 2004)
4.7	Share Option Plan dated for reference June 9, 2003 and amended and restated effective June 28, 2004
4.8	Amending Agreement dated November 8, 2003 between IHI International and Earthquake Resistance Structures Inc. (Incorporated by reference to Exhibit 4.1 of our Form 20-F filed on July 9, 2004)
4.9	Amending Agreement dated November 8, 2003 between IHI International and Garmeco (Incorporated by reference to Exhibit 4.2 of our Form 20-F filed on July 9, 2004)
4.10	Amendment to Interim Agreement dated November 28, 2003 between the Corporation and Hi-Tech Canada Development Inc. (Incorporated by reference to Exhibit 4.3 of our Form 20-F filed on July 9, 2004)
4.11	Amendment to the International License Agreement dated June 23, 2004 (Incorporated by reference to Exhibit 4.5 of our Form 20-F filed on July 9, 2004)
4.12	Guarantee Agreement between the Corporation and Dr. Rene Abi-Rached dated August 10, 2004 (Incorporated by reference to Exhibit 4.8 of our Form 20-F filed on June 30, 2005)
4.13	Promissory Note for $50,000 due August 27, 2006 with interest at 12% per annum (Incorporated by reference to Exhibit 4.9 of our Form 20-F filed on June 30, 2005)
4.14	Form of Subscription Agreement pursuant to which certain investors acquired our Common shares and Warrants
4.15	Shareholders' Agreement among the Corporation, Garmeco Canada, Garmeco, RAR Consultants and IHI International Construction Inc. dated as of May 1, 2006
4.16	Commercial Lease Renewal between the Corporation and 434088 B.C. Ltd. dated June 7, 2006
8.1	List of Significant Subsidiaries
11.1	Code of BusinessConduct and Ethics (Incorporated by reference to Exhibit 4.4 of our Form 20-F filed on July 9, 2004)
12.01	Certification pursuant to Rule 13a-14(A)/15d-14(A) of Roger A. Rached, Chief Executive Officer
12.02	Certification pursuant to Rule 13a-14(A)/15d-14(A) of Dr. Owen A. Anderson, Chief Financial Officer
13.01	Certification pursuant to 18 U.S.C. Section 1350 of Roger A. Rached, Chief Executive Officer.
13.02	Certification pursuant to 18 U.S.C. Section 1350 of Dr. Owen A. Anderson, Chief Executive Officer.

<PAGE>

SIGNATURE

The Corporation certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

INTERNATIONAL HI-TECH INDUSTRIES INC.

Per:

/s/ Roger A. Rached
Roger A. Rached
President and Chief Executive Officer

DATED: July 19, 2006

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

(Stated in Canadian Dollars)

<PAGE>

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 and the standards of the Public Company Accounting Oversight Board (United States). 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.

On March 24, 2006 we reported separately to the shareholders of International Hi-Tech Industries (a development stage company) on consolidated financial statements for the same period prepared in accordance with the Canadian generally accepted accounting principles, excluding Note 13, U.S. Generally Accepted Accounting Principles, included in the accompanying consolidated financial statements.

Chartered Accountants

Vancouver, Canada

March 24, 2006

<PAGE>

Comments by Auditors for U.S. Readers

on Canada-United States Reporting Difference

The reporting standards of the Public Company Accounting Oversight Board (United States) ("PCAOB") for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 1 to the financial statements. The standards of PCAOB also require the addition of an explanatory paragraph when financial statements disclosures are restated, such as those described in Notes 13 (iii) and 14, which have a material effect on the financial statements. Although we conducted our audit in accordance with both Canadian generally accepted auditing standards and the standards of the PCAOB (United States), our report to the shareholders dated March 24, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors' report when thes e are adequately disclosed in the financial statements.

Chartered Accountants

Vancouver, Canada,

March 24, 2006.

Chartered Accountants

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(Stated in Canadian Dollars)

	DECEMBER 31
	2005		2004
			(Restated Note 14)

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 14)

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:


/s/ Rene Abi-Rached		/s/ Owen A. Anderson
Director		Director

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 14)

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)

<PAGE>

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 14)

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<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(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 14)

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 14)
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 14)

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, 2003, 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)).

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 14)		(Restated Note 14)
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 14)	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

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") which, in the case of the Company, differ in certain respects from generally accepted accounting principles in the United States ("US GAAP") as explained in Note 13. Details of significant accounting policies are as follows:

a) Ability to Continue as a Going Concern

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 the C ompany 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.

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 the 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.

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.

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)

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).

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 $0.29 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

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
				(Restated)
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. U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"). Had they been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"), the following differences in the measurement of results of operations and shareholders' equity would have resulted:

i) Under Canadian GAAP, project development costs are capitalized until such time as the pre-fabrication building product and flexible design program are commercially available. In 2003, deferred project development costs previously capitalized were written-down. US GAAP requires that research and development costs be charged to the Statement of Operations in the period incurred. Accordingly, for US GAAP, all project development costs incurred to date would be charged to the Statement of Operations.

ii) Under US GAAP, the Company accounts for options granted according to Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and Statement of Financial Accounting Standard ("SFAS") No. 123 , "Accounting for Stock-Based Compensation". Under APB 25, as the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense was recognized. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and would have been determined as if the Company had accounted for its employee stock options under the fair value method of the standard.

<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. U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

The Company did not grant any stock options to employees in 2005, 2004 and 2003, consequently, there is no adjustment to the pro-forma loss in each of the years then ended and pro-forma loss per share for 2005, 2004 and 2003 which would have resulted from stock option compensation for options granted to employees.

SFAS No. 123 requires the Company to record compensation to non-employees using the fair value based method prescribed therein similar to accounting principles now in effect in Canadian GAAP. Compensation expense under US GAAP to non-employees is determined using the Black-Scholes option pricing model. For the years ended December 31, 2005, 2004 and 2003, no compensation expense was incurred under SFAS No. 123 that was not recognized under Canadian GAAP. However, stock options granted prior to 2002 would have created additional US GAAP compensation expense of $2,801,329 under SFAS No. 123 for the cumulative period from inception (September 12, 1990) to December 31, 2005.

iii) On May 15, 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or "mezzanine" equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the statement of financial position. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. SFAS No. 150 affects an entity's classification of various instruments, among them, mandatory redeemable instruments. In 2003, the Company adopted SFAS 150 and accordingly continues to classify the Class B Preferred Shares of Canadian Hi-Tech as a liability. In 2002, as a result of the amendment in escrow shares, the Class B Preferred Shares were reclassified as a liability under both Canadian and US GAAP, as described in Note 9. Under US GAAP, the liability was measured initially at its present value on the date of reclassification, using the rate implicit at inception of the subscription agreement. Adjustments to the present value of the liability on each balance sheet date were accreted to interest expense using the effective interest rate method over the life of the Class B preferred stock to the earliest redemption date, being the date of release of the escrow shares (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)

13. U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

As a result of an error in the interpretation of the terms of redemption which was noted in 2005, under US GAAP, the adjustment to liability upon reclassification from equity to liability in 2002 and the accretion of expense for each of the year since then have been restated, respectively, for the difference in fair value of the preferred shares at the time of reclassification in 2002 and the improper accretion of interest expense over the period through to August 21, 2007 rather than the earliest redemption dates for each tranch of the redeemable preferred shares based on the release of the escrow shares. For the year ended December 31, 2005, accretion expense of $190,603 (2004 - $214,753 (restated); 2003 - $178,398 (restated)) was recorded in the Statement of Operations under US GAAP. The difference of $200,432 (2004 - $(20,655); 2003 - $15,700) between accretion expense recorded under Canadian and US GAAP is due to the fact that the straight-line method was used under Canadian GAAP and t he effective interest rate method is required under US GAAP. During the year ended December 31, 2005, 6,794 of the preferred shares were redeemed. The cumulative interest expense recognized under US GAAP as at December 31, 2005 was $733,011 (2004 - $542,408 (restated))

The following table gives effect to the restatement adjustments on the Company's Consolidated Balance Sheet and Statement of Operations as at December 31, 2004 and for the years ended December 31, 2004 and 2003:

As at and for the year ended December 31, 2004
	As previously reported		Adjustment per Note (iii) above		Adjustment per Note (14)		As restated

Redeemable preferred shares	$	174,339	$	504,873	$	-	$	679,212
Shareholders equity	$	6,817,497	$	(504,873)	$	1,171,508	$	7,484,132
Adjustment to the accretion to interest expense for the present value of the preferred shares	$	114,106	$	(134,761)	$	-	$	(20,655)
Loss according to US GAAP	$	(11,370,008)	$	(134,761)	$	603,460	$	(10,901,309)
Loss per share, basic and diluted - US GAAP	$	(0.11)	$	-	$	0.01	$	(0.10)

For the year ended December 31, 2003
Adjustment to the accretion to interest expense for the present value of the preferred shares	$	150,809	$	(135,109)	$	-	$	15,700
Loss according to US GAAP	$	(5,741,027)	$	(135,109)	$	-	$	(5,876,136)
Loss per share, basic and diluted - US GAAP	$	(0.06)	$	-	$	-	$	(0.06)

<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. U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

iv) Under Canadian GAAP, no value was assigned to the warrants granted in connection with the private placement of 15,000,000 units issued during they year,(Note 9 iii)) Under US GAAP, in accordance with APB 25, as the exercise price of the Company's warrants was lower the market price of the underlying stock on the date of grant, a compensation expense was recognized:

		Warrants
		2005
Number of Warrants		15,000,000
Market price on date of grant		$0.29
Exercise price		$0.10
Intrinsic value of warrants		$ 2,850,000

The value of the warrants was charged to the Statement of Operations as a compensation expense.

Supplemental disclosure of pro forma loss and loss per share as required by SFAS 123 is as follows:

		2005
		$

Loss for the year as stated, US GAAP	$	(10,717,968)
Add: Stock based compensation recognized on warrants issued to insiders		2,850,000
Less stock-based compensation		(3,489,000)
Pro forma loss, US GAAP	$	(11,356,968)

Basic and diluted loss per share as stated	$	(0.09)
Proforma basic and diluted loss per share	$	(0.10)

The fair value of the warrants was calculated using the Black Scholes Option Pricing model based on the following assumptions: risk free interest rate - 2.91%; dividend yield - 0%; expected volatility - 125%; expected life - 2 years.

<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. U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

v) Under US GAAP, Legal Settlement, Write Down of Note Receivable and Interest and Write Down of Property, Plant and Equipment should be included in Loss from Operations.

vi) The Company is currently in the development stage and presents its financial statements in accordance with Statement of Financial Accounting Standard ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises".

vii) As discussed in the summary of significant accounting policies, the Company intends to account for its interests in joint ventures using the proportionate consolidation method for Canadian GAAP reporting. Under US GAAP, interests in joint ventures will be accounted for using the equity method.

A reconciliation from Canadian GAAP to US GAAP is as follows:

Consolidated Statement of Operations and Deficit

							From
							INCEPTION
							SEPTEMBER 12
							1990 TO
							DECEMBER 31
	2005		2004		2003		2005
			(Restated Notes (iii) and 14)		(Restated Note (iii)		(Cumulative)
Loss for the year as shown on the financial statements	$	(8,068,400)	$	(10,880,654)	$	(10,530,573)	$	(55,478,789)
Write-down of deferred project development costs (i)		-		-		4,638,737		-
Stock option compensation (ii)		-		-		-		(2,801,329)
Warrant valuation (iii)		(2,850,000)		-		-		(2,850,000)
Adjustment to the accretion to interest expense for the present value of preferred shares		200,432		(20,655)		15,700		240,428
Loss according to generally accepted accounting principles in the US	$	(10,717,968)	$	(10,901,309)	$	(5,876,136)	$	(60,889,690)
Loss per share, basic and diluted - US GAAP	$	(0.09)	$	(0.10)	$	(0.06)

Weighted average common shares outstanding - US GAAP		115,969,586		104,722,372		103,470,774

<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. U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

Consolidated Balance Sheet

	2005		2004
			(Restated Note (iii))

Redeemable preferred shares, per Canadian GAAP	$	293,989	$	582,404
Change as a result of (iii) above
Adjustment upon reclassification of preferred shares
from equity to liability	136,804		136,804
Difference in method of accretion of interest expense	(240,428)		(39,996)

Redeemable preferred shares, per US GAAP	$	190,365	$	679,212

Consolidated Statement of Shareholders' Equity

	2005		2004
			(Restated Notes (iii) and 14)

Balance, per Canadian GAAP	$	3,870,940	$	7,580,940
Change as a result of (iii) above
Adjustment upon reclassification of preferred shares
from equity to liability	(136,804)		(136,804)
Difference in method of accretion of interest expense		240,428		39,996

Balance, per US GAAP	$	3,974,564,	$	7,484,132

The consolidated assets and cash flows are the same under generally accepted cash flows in Canada and the United States.

Recent Accounting Pronouncements

a) The FASB issued FASB Interpretation No. ("FIN") 47 - "Accounting for Conditional Asset Retirement Obligations" in March 2005. FIN 47 clarifies that an entity must record a liability for a conditional asset retirement obligation if the fair value of the obligation can be reasonably estimated. This interpretation also clarifies the circumstances under which an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This Interpretation is effective no later than the end of fiscal years ending after December 15, 2005. This guidance did not have a material impact on the Company's 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)

13. U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

Recent Accounting Pronouncements (Continued)

b) In November 2005, the FASB issued Staff Position No. FAS 115-1 - "The Meeting of Other-Than-Temporary Impairment and Its Application to Certain Investments" ("FSP 115-1"). FSP 115-1 provides accounting guidance for identifying and recognizing other-than-temporary impairments of debt and equity securities, as well as cost method investments in addition to disclosure requirements. FSP 115-1 is effective for reporting periods beginning after December 15, 2005, and earlier application is permitted. The Company has determined that the adoption of FSP 115-1 does not have an impact on its result of operations or financial position.

c) In December 2004, FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004) ("SFAS 123 (revised 2004)"), "Share-Based Payment". This Statement requires that the cost resulting from all share-based transactions be recorded in the financial statements. The Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. The Statement replaces FASB Statement No. 123 "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for Stock Issued to Employees". The provisions of this Statement which will be adopted on a modified prospective basis will be effective for the Compa ny beginning with its fiscal year ending 2006. The Company has not yet determined the effect of future implementation of the adoption of SFAS 123 (revised 2004) on its results of operations or financial position.

d) 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.

<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)

14. 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 operations 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)

Deficit Accumulated During the Development Stage, as previously reported	$	(49,277,555)

Shareholders' equity, as previously reported	$	6,409,432
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)
Reclassify Non-controlling Interest Deficit Relating to Dividend to liability		568,048

Shareholders' Equity, as restated	$	7,580,940

<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)

14. 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)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	7th grade Avg

International Hi Tech Industries (IHITF) Inactive 20-F2005 FY Annual report (foreign)

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