International Hi Tech Industries 6K Current report | IHITF 1 Dec 06

EXHIBIT 99.1

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

<PAGE>

MORGAN & COMPANY

Chartered Accountants

NOTICE TO READER

We have compiled the consolidated balance sheet of International Hi-Tech Industries Inc. as at September 30, 2006 and the consolidated statements of operations and deficit, cash flows, and changes in shareholders' equity for the nine month period then ended from information provided by management. We have not audited, reviewed or otherwise attempted to verify the accuracy or completeness of such information. Readers are cautioned that these statements may not be appropriate for their purposes.

Vancouver, Canada /s/ Morgan & Company

November 22, 2006 Chartered Accountants

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INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

	SEPTEMBER 30		DECEMBER 31
	2006		2005

ASSETS

Current
Cash and cash equivalents	$	3,581,340	$	1,079,947
Receivables		120,137		103,220
Prepaid expenses		184,879		178,752
Properties held for sale (Note 2)		321,175		699,287
		4,207,531		2,061,206

Property, Plant and Equipment(Note 3)		17,235,001		16,927,473
Intangible Assets (Note 4)		1,612,448		1,843,853

	$	23,054,980	$	20,832,532

LIABILITIES

Current
Accounts payable and accrued liabilities	$	1,303,772	$	1,000,216
Deposit from related company (Note 5)		450,000		500,000
Accrued interest payable		253,066		240,541
Loans payable (Note 6)		2,853,993		1,550,968
Current portion of long term debt (Note 7)		1,554,762		1,551,539
Current portion of promissory notes payable (Note 8)		364,754		58,240
		6,780,347		4,901,504

Redeemable Preferred Shares(Note 9)		394,661		293,989
Deposits Received Related To Joint Venture Option Agreements		6,245,776		6,240,776
Long Term Debt(Note 7)		4,757,643		4,886,573
Promissory Notes Payable (Note 8)		351,497		638,750
		18,529,924		16,961,592

Contingencies(Note 1(a) and 11)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS (Continued)

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

	SEPTEMBER 30		DECEMBER 31
	2006		2005

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
129,175,065 at September 30, 2006 and 122,175,065 at December 31, 2005 (of which 4,336,990 shares were held in escrow)	$	60,747,091	$	56,987,431

Contributed Surplus		4,229,464		4,229,464
Deficit Accumulated During The Development Stage		(60,451,499)		(57,345,955)
		4,525,056		3,870,940

	$	23,054,980	$	20,832,532

Approved by the Board of Directors:


/s/ Owen Anderson		/s/ Thomas Po
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 AND DEFICIT

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

									PERIOD FROM
									INCEPTION
									SEPTEMBER 12
	THREE MONTHS ENDED				NINE MONTHS ENDED				1990 TO
	SEPTEMBER 30				SEPTEMBER 30				SEPTEMBER 30
	2006		2005		2006		2005		2006

Expenses
Audit and accounting	$	101,966	$	12,389	$	231,201	$	45,030	$	1,434,451
Corporation and capital taxes		- -		- -		- -		- -		536,023
Consulting fees		116,832		104,996		214,975		433,410		3,008,011
Depreciation and amortization		178,125		200,972		541,698		605,918		8,214,871
Directors' and officers' fees		49,880		48,000		151,100		146,072		1,619,529
Finders' fees, loan guarantee and commitment fees		200		1,700		42,700		2,041		3,700,235
Foreign exchange		(836)		-		1,165		-		1,265,690
General expense		43,501		44,871		186,354		184,055		3,156,794
Insurance		61,819		29,538		127,036		51,371		687,749
Interest		156,136		115,623		430,393		688,927		6,296,921
Investor relations		18,000		-		118,465		7,412		491,881
Legal		47,254		32,679		226,087		159,756		6,081,842
Office rent		25,500		25,683		76,500		78,415		1,065,122
Product representation costs		11,422		14,037		48,812		75,426		2,511,433
Promotion and presentation		17,982		23,609		68,882		81,005		509,281
Property taxes		59,986		30,846		130,695		57,545		1,421,394
Repairs and maintenance		13,663		11,259		57,674		45,441		876,783
Stock based compensation		- -		- -		- -		- -		3,924,464
Telephone, fax and cellular		5,079		10,046		19,545		30,692		677,057
Travel and business promotion		15,795		36,954		80,055		91,802		3,614,109
Transfer agent and filing fees		11,160		9,476		57,750		31,274		507,871
Wages and benefits		397,460		272,942		1,038,815		769,333		6,633,252
		1,330,925		1,025,620		3,849,903		3,584,925		58,234,764
Less: Interest and other income		(41,844)		(22,819)		(67,069)		(174,769)		(3,054,531)

Loss From Operations		(1,289,081)		(1,002,801)		(3,782,834)		(3,410,156)		(55,180,233)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT (Continued)

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

									PERIOD FROM
									INCEPTION
									SEPTEMBER 12
	THREE MONTHS ENDED				NINE MONTHS ENDED				1990 TO
	SEPTEMBER 30				SEPTEMBER 30				SEPTEMBER 30
	2006		2005		2006		2005		2006

Loss From Operations	$	(1,289,081)	$	(1,002,801)	$	(3,782,834)	$	(3,410,156)	$	(55,180,233)

Deferred Project Development Cost Written Down		- -		- -		- -		- -		(4,638,737)
Foreign Exchange Gain On Cancellation Of License Rights		- -		- -		- -		- -		1,035,200
Gain On Cancellation Of License Rights		- -		- -		-		- -		7,276,101
Gain On Termination Of Option		- -		- -		- -		- -		259,990
Gain On Issue Of Treasury Shares By Subsidiary Company		- -		- -		- -		- -		1,216,580
Gain On Sale Of Properties Held For Sale		82,922		- -		677,290		- -		677,290
Legal Settlement		-		-		-		-		(200,000)
Loss On Write Down Of Note Receivable And Interest		- -		- -		- -		- -		(382,936)
Write Down Of Property, Plant And Equipment		- -		- -		- -		- -		(6,833,188)

Net Loss For The Period Before Non-Controlling Interest		(1,206,159)		(1,002,801)		(3,105,544)		(3,410,156)		(56,769,933)
Non-Controlling Interest		- -		- -		- -		- -		(1,814,403)

Net Loss For The Period		(1,206,159)		(1,002,801)		(3,105,544)		(3,410,156)		(58,584,336)
Preferred Share Dividends		- -		- -		- -		- -		(1,560,392)
Net Asset Deficiency Of Legal Parent At Date Of Reverse take-over		- -		- -		- -		- -		(306,771)

Net Loss Available To Common Shareholders	$	(1,206,159)	$	(1,002,801)	$	(3,105,544)	$	(3,410,156)	$	(60,451,499)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT (Continued)

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

									PERIOD FROM
									INCEPTION
									SEPTEMBER 12
	THREE MONTHS ENDED				NINE MONTHS ENDED				1990 TO
	SEPTEMBER 30				SEPTEMBER 30				SEPTEMBER 30
	2006		2005		2006		2005		2006

Income (Loss) Per Share, Basic and diluted	$	(0.01)	$	(0.01)	$	(0.02)	$	(0.03)

Weighted Average Common Shares Outstanding		129,175,065		122,175,065		127,834,361		113,878,362

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

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INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

									PERIOD FROM
									INCEPTION
									SEPTEMBER 12
	THREE MONTHS ENDED				NINE MONTHS ENDED				1990 TO
	SEPTEMBER 30				SEPTEMBER 30				SEPTEMBER 30
	2006		2005		2006		2005		2006

Cash Flows From Operating Activities
Net loss for the period	$	(1,206,156)	$	(1,002,801)	$	(3,105,544)	$	(3,410,156)	$	(58,584,333)

Adjustments To Reconcile Loss To Net Cash Used By Operating Activities
Unrealized exchange adjustment on notes receivable		- -		- -		- -		- -		273,569
Accrued interest on notes receivable		(36,945)		- -		(36,945)		- -		(498,286)
Accrued interest on promissory notes payable		2,834		8,174		19,261		15,466		41,251
Accrued interest on other long term financing agreement		- -		- -		- -		- -		107,339
Amortization of discount on redeemable preferred shares		49,082		3,421		100,672		49,855		774,801
Interest on redeemable preferred shares		- -		- -		- -		299,310		299,310
Gain on cancellation of license rights		- -		- -		- -		- -		(7,275,501)
Realized exchange gain on cancellation of license rights		- -		- -		- -		- -		(1,035,200)
Gain on issue of treasury shares by subsidiary company		- -		- -		- -		- -		(1,216,580)
Shares issued for loan guarantee and commitment fees		- -		- -		- -		- -		1,792,315
Non-controlling portion of loss in subsidiary		- -		- -		- -		- -		1,814,403
Loss on renegotiation of asset under capital lease		- -		- -		- -		- -		3,563
Write down of deferred project development costs		- -		- -		- -		- -		4,638,737

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

									PERIOD FROM
									INCEPTION
									SEPTEMBER 12
	THREE MONTHS ENDED				NINE MONTHS ENDED				1990 TO
	SEPTEMBER 30				SEPTEMBER 30				SEPTEMBER 30
	2006		2005		2006		2005		2006

Write down of note receivable	$	- -	$	- -	$	- -	$	- -	$	382,936
Write down of property, land and equipment		- -		- -		- -		- -		6,833,188
Stock based compensation		- -		- -		- -		- -		3,924,464
Depreciation and amortization		176,944		200,972		540,517		605,918		8,213,690
(Increase) Decrease in assets
Receivables		20,119		(17,468)		20,028		104,660		(83,192)
Prepaid expenses		(16,128)		51,836		(6,127)		(4,912)		(184,881)
Increase (Decrease) in liabilities
Accounts payable and accrued liabilities		37,171		669,025		308,556		670,690		1,308,774
Accrued interest payable		4,175		4,175		12,525		12,525		253,066
Deposit		-		-		(50,000)		-		450,000
Net Cash Used In Operating Activities		(968,904)		(82,666)		(2,197,057)		(1,656,644)		(37,766,567)

Cash Flows From Investing Activities
Acquisition of property, plant and equipment		(203,258)		(122,910)		(616,640)		(288,054)		(31,114,066)
Sale of property, plant and equipment		141,400		- -		378,112		- -		378,112
Acquisition of intangible assets		- -		- -		- -		- -		(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		(61,858)		(122,910)		(238,528)		(288,054)		(40,365,370)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

									PERIOD FROM
									INCEPTION
									SEPTEMBER 12
	THREE MONTHS ENDED				NINE MONTHS ENDED				1990 TO
	SEPTEMBER 30				SEPTEMBER 30				SEPTEMBER 30
	2006		2005		2006		2005		2006

Cash Flows From Financing Activities
Shares issued for cash and share subscriptions	$	- -	$	- -	$	3,759,660	$	1,012,500	$	52,698,073
Issuance of preferred shares		- -		- -		- -		- -		6,256,703
Redemption of preferred shares		- -		- -		- -		(679,450)		(679,450)
Dividends paid		-		-		-		-		(1,560,392)
Contributed surplus		-		-		-		-		305,000
Non-controlling interest in Canadian Hi-Tech Manufacturing Ltd.		- -		- -		- -		- -		184,319
Issuance of shares by subsidiary company		- -		- -		- -		- -		1,557,500
Dividends paid by subsidiary to non-controlling shareholders		- -		- -		- -		- -		(2,339,642)
Cash deposits received related to joint venture option agreements		- -		- -		- -		- -		15,741,733
Increase in amount due to related parties		- -		- -		- -		- -		1,848,483
Repayment of amount due to related parties		- -		- -		- -		- -		(1,848,483)
Increase in loans payable		986,952		-		1,303,025		-		4,914,961
Repayment in loans payable		- -		- -		- -		- -		(2,060,968)
Repayment of advances payable		- -		- -		- -		- -		(363,021)
Increase in advances payable		- -		- -		- -		- -		363,021
Repayment of long term debt		(38,887)		(22,494)		(125,707)		(83,019)		(4,146,918)
Increase in long term debt		- -		- -		- -		- -		10,167,358
Proceeds from mortgages payable		- -		- -		- -		- -		3,105,160
Repayment of mortgages payable		- -		(65,945)		- -		(201,649)		(3,105,160)

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

									PERIOD FROM
									INCEPTION
									SEPTEMBER 12
	THREE MONTHS ENDED				NINE MONTHS ENDED				1990 TO
	SEPTEMBER 30				SEPTEMBER 30				SEPTEMBER 30
	2006		2005		2006		2005		2006

Increase in promissory notes payable	$	- -	$	225,000	$	- -	$	548,000	$	675,000
Net Cash Provided By (Used In) Financing Activities		948,065		136,561		4,936,978		596,382		81,713,277

Net Increase (Decrease) In Cash and Cash Equivalents		(82,697)		(69,015)		2,501,393		(1,348,316)		3,581,340

Cash and Cash Equivalents, Beginning Of Period		3,664,037		610,729		1,079,947		1,890,030		-

Cash and Cash Equivalents, End Of Period	$	3,581,340	$	541,714	$	3,581,340	$	541,714	$	3,581,340

Supplemental Disclosure Of Cash Flow Information
Stock based compensation	$	- -	$	- -	$	- -	$	- -	$	3,924,464
Interest paid	$	95,045	$	99,853	$	292,935	$	313,771	$	3,624,054
Taxes paid	$	-	$	-	$	-	$	-	$	-

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

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(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

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	107,175,065		55,974,931	-		-		883,564			-		(49,277,555)				7,580,940

Issuance of common stock	15,000,000		1,012,500	-		-		-			-		-				1,012,500
Stock based compensation	-		-	-		-		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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(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

Balance, December 31, 2005	122,175,065	$	56,987,431	-	$	-	$	4,229,464	$			-	$		(57,345,955)		$		3,870,940

Issuance of common stock (Note 9)	7,000,000		3,780,060	-		-		-				-			-				3,780,060
Share subscriptions receivable (Note 9)	-		(20,400)	-		-		-				-			-				(20,400)
Net loss	-		-	-		-		-				-			(3,105,544)				(3,105,544)

Balance, September 30, 2006	129,175,065	$	60,747,091	-	$	-	$	4,229,464	$			-	$		(60,451,499)		$		4,525,056

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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Ability to Continue

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

The accompanying consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has an accumulated deficit as at September 30, 2006 of $60,451,499 which includes a net loss for the nine months ended September 30, 2006 of $3,105,544. 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 othe r working capital purposes. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations.

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

b) Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries - Canadian Hi-Tech Manufacturing Ltd. (65% owned), IHI Development I Ltd. (100% owned), IHI Development II Ltd. (100% owned), IHI International Construction Inc. (73% owned), IHI Construction Ltd. (100% owned), IHI International Holdings Ltd. (50.7% owned), IHI Manufacturing Ltd. (100% owned), IHI Planning Ltd. (100% owned), and IHI Sales 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

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(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.

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. Included in cash and cash equivalents at September 30, 2006 is $150,034 held in trust pursuant to a garnishing order filed by the claimants relating to a lawsuit filed against the Company.

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 2006, 2005 and 2004.

e) Property, Plant and Equipment

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

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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(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 at full capacity rates has not yet commenced at September 30, 2006.

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 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.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(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) 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.

j) 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.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES(Continued)

j) Foreign Currency Transactions (Continued)

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

k) 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 27,200,000 (2005 - 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.

l) 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 approximates the carrying value as the implicit interest rate is similar to current market rates.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES(Continued)

m) 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.

n) 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.

o) Properties Held for Sale

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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

2. PROPERTIES HELD FOR SALE

Properties held for sale consists of one (December 31, 2005 - four) parcel of land no longer needed for corporate purposes. The remaining property is currently listed on the market and is expected to sell within the next fiscal year. One parcel was sold (at a gain of $594,368) during the period ended June 30, 2006, and two parcels were sold (at a gain of $82,922) during the period ended September 30, 2006.

3. PROPERTY, PLANT AND EQUIPMENT

	SEPTEMBER 30, 2006
			ACCUMULATED
			AMORTIZATION
			AND		NET BOOK
	COST		WRITE DOWNS		VALUE

Land	$	2,852,826	$	-	$	2,852,826
Paving		53,533		14,266		39,267
Automotive		152,703		142,219		10,484
Office furniture and equipment		336,244		285,685		50,559
Computer equipment		222,088		160,139		61,949
Other machinery and equipment		5,956,011		4,338,617		1,617,394
Building		18,897,234		6,294,712		12,602,522

	$	28,470,639	$	11,235,638	$	17,235,001

	DECEMBER 31, 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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

3. PROPERTY, PLANT AND EQUIPMENT (Continued)

Other machinery and equipment includes assets acquired under capital lease with an original cost of $842,109 (2005 - $842,109). Accumulated amortization provided on this other machinery and equipment totalled$672,147(2005 - $653,263).

In 2004, as a result of the litigation discussed in Note 11(b), the Company had been unable to complete its Hopcott Road production facility to the point where full 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 (2006 and 2005 - $Nil).

4. INTANGIBLE ASSETS

	SEPTEMBER 30, 2006
			ACCUMULATED		NET BOOK
	COST		AMORTIZATION		VALUE

Patent application costs	$	2,952,068	$	1,339,620		$	1,612,448
License rights		200,000		200,000			-

	$	3,152,068	$	1,539,620		$	1,612,448

	DECEMBER 31, 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

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

5. DEPOSIT FROM RELATED COMPANY

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. During the period ended March 31, 2006, the Company refunded $50,000 to Hi-Tech Canada Development Inc. for overpayment of initial license fee. As at September 30, 2006, the interim agreement had not been finalized and there are no specific terms of repayment.

6. LOANS PAYABLE

	SEPTEMBER 30		DECEMBER 31
	2006		2005

Unsecured and repayable on demand to a company controlled by the family of a Director with interest at 20% per annum.	$	2,766,493	$	1,463,468

Unsecured and repayable on demand at various interest rates		87,500		87,500

	$	2,853,993	$	1,550,968

7. LONG TERM DEBT

	SEPTEMBER 30		DECEMBER 31
	2006		2005

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 $1,320.	$	36,267	$	45,432

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

7. LONG TERM DEBT (Continued)

	SEPTEMBER 30		DECEMBER 31
	2006		2005
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.	$	4,275,668	$	4,363,430

Other Mortgages
Weighted average interest at 7.75% (2005 - 7.75%), 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.		925,826		954,606

Other long term financing agreements
Weighted average interest at 12.00% (2005 - 12.00%), collateralized by equipment, matured in 2004 with combined monthly payments of principal and interest of $51,326.		1,074,644		1,074,644
		6,276,138		6,392,680
		6,312,405		6,438,112
Less: Current portion		1,554,762		1,551,539

	$	4,757,643	$	4,886,573

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


	CAPITAL
	LEASES		LONG TERM		TOTAL

1-12 Months	$	13,306	$	1,541,456	$	1,554,762
13-24 Months		14,324		4,213,179		4,227,503
25-36 Months		8,637		54,659		63,296
Thereafter				466,844		466,844

	$	36,267	$	6,276,138	$	6,312,405

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

8. PROMISSORY NOTES PAYABLE

	SEPTEMBER 30		DECEMBER 31
	2006		2005

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 September 30, 2006 the prime rate was 6%.		50,000		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		475,000

Promissory note payable, is unsecured, payable on or before July 11, 2007, and accrues interest at 5% per annum.		100,000		100,000
		675,000		675,000
Total accrued interest		41,251		21,990
		716,251		696,990
Less: Current portion		364,754		58,240

	$	351,497	$	638,750

9. SHARE CAPITAL

a) Share Capital

On May 9, 2006, the Company completed a private placement for 7,000,000 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 $0.80 for a two year period. As at September 30, 2006, $3,759,660, net of share issuance costs of $419,940, was received towards this share issuance. As at September 30, 2006, share subscriptions receivable of $20,400 are outstanding.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

9. SHARE CAPITAL (Continued)

b) Escrow Shares

As at September 30, 2006, included in the Company's issued and outstanding shares, 4,336,990 (2005 - 8,673,984) 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.

c) 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. 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.

d) Stock Options

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 September 30, 2006, 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

There were no stock options granted during the nine months ended September 30, 2006.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

9. SHARE CAPITAL (Continued)

e) Share Purchase Warrants

As at September 30, 2006, 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
7,000,000	$	0.80	May 9, 2008

There were no share purchase warrants issued during the nine months ended September 30, 2006.

f) 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.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

9. SHARE CAPITAL (Continued)

f) Class B Preferred Shares of the Subsidiary (Continued)

	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

Amortization of discount		-		100,672			100,672

Balance, September 30, 2006	$	420,550	$	(25,889)		$	394,661

10. RELATED PARTY TRANSACTIONS

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

During the nine months ended September 30, 2006, the Company paid the following:

a) $54,000 (September 30, 2005 - $54,000) for management fees to a company controlled by the family of an officer.

b) $58,500 (September 30, 2005 - $58,500) for rent to a company controlled by a relative of an officer.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

10. RELATED PARTY TRANSACTIONS (Continued)

c) $97,826 (September 30, 2005 - $52,072) for directors and officers fees.

d) $72,000 (September 30, 2005 - $115,573) for consulting services to a company controlled by the family of an officer.

e) $9,898 (September 30, 2005 - $Nil) for consulting services to a company controlled by a director.

f) $99,044 (September 30, 2005 - $97,480) for professional services to a law firm in which an officer is a partner.

g) $50,000 (September 30, 2005 - $50,000) is included in promissory notes payable from a company controlled by an officer.

h) $5,575,435 (September 30, 2005 - $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.

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.

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.

<PAGE>

INTERNATIONAL HI-TECH INDUSTRIES INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(Unaudited - see Notice to Reader)

(Stated in Canadian Dollars)

11. 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, this contingency amounted to $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 seeking dismissal of said counterclaim with costs. 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.

International Hi Tech Industries (IHITF) Inactive 6-KCurrent report (foreign)