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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

FORM 10-K

[ X ]  Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934

FOR THE YEAR ENDED December 31, 2015

OR

[  ]  Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 000-53459

HYBRID COATING TECHNOLOGIES
INC.(Exact name of registrant as specified in its charter)

|NEVADA                                           | 20-3551488                          
|------------------------------------------------ | ------------------------------------
|(State of other jurisdiction of incorporation or | (IRS Employer Identification Number)
|organization)                                    |                                     

950 John Daly Blvd. Suite 260 Daly City, CA
94015(Address of principal executive offices)

(650) 491-3449(Registrant's telephone number,
including area code)

Securities registered under Section 12(b) of the Exchange Act:
None

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

Common Stock, $0.001 par value

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 ]

Indicate by check mark if the
Registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. 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 if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [  ]

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Indicate by check mark whether
the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):

|Large accelerated filer  [  ] | Accelerated filer  [  ] | Non-accelerated filer  [  ] | Smaller reporting company  [ 
  ]
|----------------------------- | ----------------------- | --------------------------- | ---------------------------------

Indicate by check mark whether
the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes  [  ]  No [ X ]

The aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $5,619,139 based on
the closing price of $0.0048 for the common stock on June 30, 2015, the
last business day of the registrants most recently completed second fiscal
quarter.

Number of shares outstanding of the registrant's class of
common stock, as of April 14, 2016was 1,563,559,058.

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TABLE OF CONTENTS

|               |                                                                                                                            | Page
|-------------- | -------------------------------------------------------------------------------------------------------------------------- | ----
|PART I         |                                                                                                                            |     
|               | Special
      Note Regarding Forward Looking Statements                                                                    | 3   
|Item
      1   | Description
      of Business                                                                                              | 4   
|Item
      1A. | Risk
      Factors                                                                                                         | 15  
|Item
      2   | Description
      of Property                                                                                              | 19  
|Item
      3.  | Legal
      Proceedings                                                                                                    | 19  
|Item
      4.  | Mine
      Safety Disclosures                                                                                              | 19  
|               |                                                                                                                            |     
|PART II        |                                                                                                                            |     
|Item
      5.  | Market
      for Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities | 20  
|Item
      6.  | Selected
      Financial Data                                                                                              | 21  
|Item
      7   | Management
      Discussion and Analysis of Financial Condition and Results of Operations                                  | 21  
|Item7A         | Quantitative
      and Qualitative Disclosures about Market Risks                                                          | 25  
|Item
      8.  | Financial
      Statements and Supplementary Data                                                                          | 26  
|Item
      9.  | Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure                           | 27  
|Item
      9A. | Controls
      And Procedures                                                                                              | 27  
|               |                                                                                                                            |     
|PART III       |                                                                                                                            |     
|Item
      10. | Directors,
      Executive Officers and Corporate Governance                                                               | 29  
|Item
      11  | Executive
      Compensation                                                                                               | 33  
|Item
      12  | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters                 | 35  
|Item
      13  | Certain
      Relationships and Related Transactions, and Director Independence                                            | 36  
|Item
      14  | Principal
      Accountant Fees and Services                                                                               | 37  
|Item
      15  | Exhibits                                                                                                                   | 38  

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report includes
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. All
statements, other than statements of historical fact, contained in this Annual
Report constitute forward-looking statements. In some cases you can identify
forward-looking statements by terms such as "may," "intend," "might," "will,"
"should," "could," "would," "expect," "believe," "estimate," "anticipate,"
"predict," "project," "potential," or the negative of these terms and similar
expressions intended to identify forward-looking statements.

Forward-looking statements are
based on assumptions and estimates and are subject to risks and uncertainties.
We have identified in this Annual Report on Form 10-K (this Annual Report)
some of the factors that may cause actual results to differ materially from
those expressed or assumed in any of our forward-looking statements. There may
be other factors not so identified. You should not place undue reliance on our
forward-looking statements. As you read this Annual Report, you should
understand that these statements are not guarantees of performance or results.
Further, any forward-looking statement speaks only as of the date on which it is
made and, except as required by law, we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which it is made or to reflect the occurrence of anticipated or unanticipated
events or circumstances. New factors emerge from time to time that may cause our
business not to develop as we expect and it is not possible for us to predict
all of them. Factors that may cause actual results to differ materially from
those expressed or implied by our forward-looking statements include, but are
not limited to, those described under the heading "Description of Business and
Risk Factors" under Item 1, as well as the following:

Hybrid Coating Technologies
Inc.s anticipated cash needs and estimates regarding its capital expenditures,
as well as its capital requirements and need for additional financing;

Hybrid Coating Technologies
Inc.s ability to maintain its production capacity, staff complement and
manufacturing performance in a cost-effective way;

Hybrid Coating Technologies
Inc.s ability to identify and retain personnel for the continued manufacturing
and sale of the Nanotech Products;

Hybrid Coating Technologies
Inc.s ability to successfully commercialize its products including the Green
Polyurethane products and to develop and commercialize new products and
services;

Hybrid Coating Technologies
Inc.s ability to maintain current strategic relationships and develop
relationships with new strategic partners;

Hybrid Coating Technologies
Inc.s ability to maintain its relationship with its current manufacturing
partners;

Hybrid Coating Technologies
Inc.s ability to maintain its rights pursuant to the Licensing Agreement:

Hybrid Coating Technologies
Inc.s competitive position and its expectations regarding competition from
other paint manufacturers and suppliers; and

Anticipated trends and challenges
in Hybrid Coating Technologies Inc.s business and the markets in which it
operates.

-3-

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PART I

ITEM 1. DESCRIPTION OF OUR BUSINESS

Our Business

On August 30, 2010, Hybrid Coating Technologies Inc. (the
Company) consummated an August 16, 2010 Stock Purchase Agreement (the Stock
Purchase Agreement) with Nanotech Industries International Inc., (Nanotech) a
Nevada corporation located in Daly City, California. A previous January 31, 2010
agreement with Nanotech Industries Inc. (NTI), a related party of Nanotech,
was terminated on August 16, 2010 prior to its effectiveness.

Under the terms of the Stock Purchase Agreement, the Company
agreed to acquire all of the issued and outstanding shares of capital stock of
Nanotech (Nanotech Shares) from the holders of the Nanotech Shares (Nanotech
Shareholders). In consideration for the purchase of the Nanotech Shares from
the Nanotech Shareholders (the  Nanotech Acquisition), the Company issued an
aggregate of 3,381,003 shares (the Shares) of the Companys common stock,
$0.001 par value per share (Common Stock), to the Nanotech Shareholders. In
addition, certain shareholders of the Company agreed to have 1,028,000 of their
shares cancelled as part of the transaction. This transaction was closed on
August 30, 2010.

Upon completion of all required regulatory filings, the Company
appointed the senior management of Nanotech to the board of the Company.

As a result of the Nanotech Acquisition, Nanotech is now a
wholly owned subsidiary of the Company. The Company intends to pursue the
business of its Nanotech subsidiary and assume and execute Nanotech's business
plan as its sole business. (See Incorporation and Business of Nanotechbelow).

The products manufactured and sold by the Company (Nanotech
Products) comprise both:

|(1) | coatings and raw binder ingredients comprised of Green
      Polyurethane Monolithic Floor Coating and Green Polyurethane Binder and
      hereinafter referred to as Coating Products.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                            
|(2) | sealants and adhesives comprised of Green Polyurethane
      and hereinafter referred to as Sealant Products.                                                                           

The Company was granted the right to manufacture and sell the
Nanotech Products pursuant to an agreement (Licensing Agreement) entered into
between the Company and Nanotech Industries Inc. (NTI), the holder of the
proprietary rights to the license and intellectual property required for the
manufacturing of the Nanotech Products. The Nanotech Products will target the
coatings, adhesives, sealants and elastomers (C.A.S.E.) market in North
America, Europe and Russian Territory (including the Russian Federation,
Belorussia, Kazakhstan Republic) with an option to sell in Asia and the rest of
the world pursuant to the terms of the Licensing Agreement.

NTI and the Company are related parties by virtue of common
ownership and control. NTI is privately-held.

The Company and the Registrant, as referred to herein,
includes Hybrid Coating Technologies Inc. and/or its wholly owned subsidiary,
Nanotech.

-4-

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Incorporation and Business of Nanotech

The Company was incorporated under the laws of the State of
Nevada on July 8, 2010. On July 12, 2010, the Company entered into the Licensing
Agreement (Initial Licensing Agreement) for the manufacturing and sale of the
Coating Products, an alternative, non-isocyanate polyurethane, including
coatings and raw binder ingredients comprised of Green Polyurethane Monolithic
Floor Coating and Green Polyurethane Binder. The Nanotech Coating Products will
be sold to the coatings and adhesives market in North America, with options to
sell to Europe, South America, Asia and the rest of the world.

Initial Licensing AgreementNote 1

The terms of the Initial Licensing Agreement are as
follows:

|(i)   | The Company was granted, effective June 12, 2010,
      manufacturing and sale rights (North American Licensing Rights) for the
      Coating Products on an exclusive basis for a 36-month period (Exclusivity
      Period) for the territory of North America. In consideration for the
      North America Licensing Rights, Nanotech paid NTI (Licensor) a one-time
      licensing fee of $500,000 and a royalty of 5% of future gross Coating
      Products sales.                                                                                       
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(ii)  | Within the Exclusivity Period, the Company shall have the
      option (American- European Option) to acquire perpetual and exclusive
      licensing rights for all of North America, South America and Europe
      (Perpetual American-European Licensing Rights). Should the Company wish
      to exercise the American-European Option, the Company shall issue to NTI
      an aggregate number of shares of common stock of the Company which shall
      give NTI, immediately upon such issuance of shares, a 52.5% ownership
      stake in the Company.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(iii) | Should the Company exercise the American-European Option,
      the Company shall then have an additional option to obtain perpetual and
      exclusive Licensing Rights for all of Asia and the rest of the world
      (Asia Option). Should the Company exercise the Asia Option, the Company
      shall issue to NTI an aggregate number of shares of common stock of the
      Company which shall give NTI, immediately upon such issuance of shares, an
      additional 10% ownership stake in the Company.                                                

Note 1: The Initial Licensing Agreement was originally filed in
a Current Report on Form 8-K on August 30, 2010 and the amended version (as
described above) was refiled in a Current Report on Form 8-K on October 18,
2011. In the original filing the Licensing Rights included not only the Coating
Products but Sealant Products as well. Also, for the Asia option the territory
was for Asia only and later changed to Asia and the rest of the world.

Subsequent Licensing Agreements and Amendments

|(i) | On March 17, 2011, the Company and NTI amended the
      agreement to now include the territory of the Customs Union of Belorussia,
      Kazakhstan Republic and Russian Federation (the Russian Territory), on
      an exclusive basis for a period of ten years from the date of the signing
      of this amendment. In exchange for the right to manufacture and sell in
      the Russian Territory, the Company shall pay to the Licensor an ongoing
      royalty of 7.5% of gross Coating Products sales in the Russian Territory,
      and a one-time royalty fee of $150,000 (paid as of December 31,
    2011).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5-

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|(ii) | On July 7, 2011, a second amendment was made to the
      agreement granting the Company an option (the Option) for a period of
      six months from the signing of this amendment to manufacture and sell
      Coating Products in the territory of the European Continent on an
      exclusive basis for a period of five years from the date the option is
      exercised, after which time the European Right shall continue perpetually
      on a non-exclusive basis. In exchange for this Option, the Company shall
      pay to the Licensor a one-time royalty fee of $1,250,000 payable within 24
      months of the exercise of the Option. On November 29, 2011, the Company
      exercised the Option, the payment for which is being financed by NTI. The
      Company recorded the royalty fee of $1,250,000 as a related liability in
      Note Payable-related party.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | On October 18, 2011, the Company and NTI entered into a
      second licensing agreement (Sealant Agreement) granting the Company an
      option (Sealant Option) to be exercised within six months of the signing
      of the Sealant Agreement, for the manufacturing and sale of the Sealant
      Products, for the following :
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1. | The Company shall issue to NTI a one-time licensing fee,
      an aggregate number of shares (Sealant Shares) of the Companys
      restricted common stock which shall give NTI, immediately upon issuance of
      such shares, an incremental 15% (fifteen percent) ownership stake in the
      Company.                                         
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                         
| | 2. | The Company shall pay to NTI a royalty of 7.5% of gross
      revenue from the Sale of the Sealant Products for the duration of this
      Agreement. The royalty shall be paid on a quarterly basis 65 calendar days
      after the end of each quarter and shall be based on the gross revenue as
      stated in the Companys quarterly statements.

(iv)      On December 6, 2011, the
Company notified NTI of its intent to exercise the Sealant Option. To date, the
Company has not issued the Sealant Shares and the Sealant Option has expired.
The Company intends to renegotiate the Sealant Option once the Company has
determined it has commercial viability.

(v)       On June 28, 2013, the
Company and NTI entered into a third licensing agreement whereby NTI granted the
Company an extension of thirty-six months on the Exclusivity Period (as defined
in the Licensing Agreement), which has been extended to July 12, 2016.

(vi)       On December 13, 2013,
the Company and NTI entered into a fourth licensing agreement agreeing to modify
the definition of Licensor Products to include polyurethane foam for the textile
industry in addition to environmentally safe coatings.

(vii)       On March 31, 2014,
the Company and NTI entered into a fifth licensing agreement agreeing to modify
the definition of Licensor Products to include synthetic leather, sealants and
adhesives (Added Applications). In consideration for the Added Applications,
the Company shall pay the Licensor an amount equal to US $2,000,000, to be paid
within 36 (thirty-six) months of the execution of this Fifth Amendment
Agreement. Should the Company not pay the Consideration within the deadline, the
Company shall lose all rights to the Added Applications, and the Added
Applications shall be removed from the Licensor Product definition.

(viii)       On April 9, 2014,
the Company and NTI signed a sixth amendment extending the terms of the note
from 24 months to 42 months making it payable by May 29, 2015.

(ix)       On May 6, 2014, the
Company and NTI signed a seventh amendment modifying the Products definition to
include spray foam insulation for consideration of $500,000 payable within
twelve months of execution of this amendment.

(x)       On August 19, 2014, the
Company and NTI signed an eight amendment expanding the definitionof the
Exclusivity Shares for various territories to include warrants at the sole
discretion of the Licensor, which warrants shall include a cashless exercise and
be exercisable at a price per share equal to the Common Stock par value and
expiring 10 years from the date of issuance and which, if so issued, shall be
issued in the form of Warrant pursuant to Regulation D, or in the form of
Warrant pursuant to Regulation S.

-6-

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(xi)       On September 10, 2014,
the Company and NTI signed a ninth amendment expanding the definitionof
the licensing fees and consideration to include payment in shares of the
Companys Common Stock and/or warrants at the sole discretion of the Company,
which shares shall have a fair market value calculated as the closing price
reported by the over-the-counter market for the previous trading day and, which
warrants shall include a cashless exercise and be exercisable at a price per
share equal to the Common Stock par value and expiring 10 years from the date of
issuance.

On September 10, 2014, the Company issued 8,113,116 shares to
NTI for proceeds of $872,160 that was applied to the debt to NTI for some of the
licenses above. NTI now owns 18% of the Company based on the issued and
outstanding shares of the Company at December 31, 2014.

On August 10, 2015, the Company signed a tenth amendment to the
Licensing Agreement with NTI whereby the parties amended the Agreement (and
subsequent Amendments) to expand the definition of Licensor product to include
polyurethane foam packaging (PFP). In exchange the company issued 420,000
Series B preferred shares valued at $102,480 due to a control premium
attributable to these shares.

Subsequent to year end, on February 12, 2016, the Company
signed an eleventh amendment to the Licensing Agreement with NTI whereby the
parties amended the Agreement (and subsequent Amendments) to extend the Extended
Exclusivity Period (as defined in the Licensing Agreement), to December 31, 2020
(2020 Extended Exclusivity Period). In consideration for the 2020 Extended
Exclusivity Period, the Company shall pay the following consideration to
NTI:

| | i)   | Issue 2,240,000 shares of Series B Preferred Stock
      (Series B Preferred Shares), to be issued at the time of execution of
      this Eleventh Amendment Agreement (Share Issuance Deadline).                                                                                                                                                                                                                                                 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ii)  | Issue purchase warrants to purchase 31,300,000 shares of
      Series B Preferred Stock (90-Day Warrants), to be issued 90 days
      following the execution of this Agreement (90-Day Deadline). The 90-Day
      Warrants shall be exercisable at any time from the date of issuance at a
      price per share equal to the par value of the Series B Preferred Stock and
      shall expire ten years from the date of issuance.             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iii) | Issue purchase warrants to purchase 126,000,000 shares of
      Series B Preferred Stock (12-Month Warrants), to be issued 12 months
      following the execution of this Agreement (12-Month Deadline). The
      12-Month Warrants shall be exercisable at any time from the date of
      issuance at a price per share equal to the par value of the Series B
      Preferred Stock and shall expire ten years from the date of
    issuance.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | (The 90-Day Warrants and the 12-Month Warrants
      collectively referred to as the Warrants).                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iv)  | Pay the Licensor an amount equal to US $1,500,000 (one
      million five hundred thousand USD) (One Time Fee), to be paid within 12
      (twelve) months of the execution of this Eleventh Amendment Agreement
      (Fee Deadline).                                                                                                                                                                                                            

Should NTI not meet any of: (i) the Share Issuance Deadline; or
(ii) the 90-Day Deadline; or (iii) the 12-Month Deadline; or (iv) the Fee
Deadline (individually referred to as Unmet Deadline) and should such Unmet
Deadline not be extended by the Parties, the Company shall continue to have the
right to the Manufacturing and Sale for the Territory, on a non-exclusive basis
for the duration of the Agreement.

Further information concerning the historical business of
Nanotech, the business acquired by the Company in the Acquisition, is set forth
below.

-7-

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Overview

The Company is an early stage company and has only just begun
to implement its business plan. The likelihood of success of the Company must be
considered in light of the expenses, complications and delays frequently
encountered in connection with the establishment and expansion of new business
and the competitive environment in which the Company will operate. The Company's
long-term viability, profitability and growth will depend upon successful
commercialization of the Nanotech Products and the development and
commercialization of new products and services relative to its business plan. As
an early stage company, the Company has little or no relevant operating history
upon which an evaluation of its performance can be made. Such performance must
be considered in light of the risks, expenses and difficulties frequently
encountered in establishing new products, services and markets.

Business Model

The Companys business model is based on a two-tier strategy,
which includes direct sales and licensing. The Companys ultimate goal is to
license its proprietary Green Polyurethane formulation to national and/or
global coatings formulators and then focus on rolling out the commercialization
of other Green Polyurethane applications such as adhesives and sealants. In
order to achieve this, the Company is proving the validity of its products
through direct sales and is therefore targeting large distributors and multiple
client bases. The Company intends to focus within the Coatings, Adhesives,
Sealants and Elastomers (C.A.S.E.) segment specifically for large industrial and
commercial coatings applications where Green Polyurethane has a natural
competitive advantage over other polyurethane ("PU") and epoxy coatings due to
its superior chemical resistance and environmentally safe properties with
reduced health risks. Some of the target applications for Green Polyurethane
products include:

| |  | Industrial and commercial buildings;                                                              
| | - | --------------------------------------------------------------------------------------------------
| |  | Civil applications for tunnels and bridges;                                                       
| |  | Private and public garages;                                                                       
| |  | Chemical and food processing plants;                                                              
| |  | Warehouses;                                                                                       
| |  | Monolithic floorings for civil, industrial and
      military engineering;                        
| |  | Marine and Aeronautic applications;                                                               
| |  | Industrial equipment for dairy and liquid
      fertilizer processing plants and delivery systems;
| |  | Military facilities and equipment; and                                                            
| |  | Protective coatings inside industrial and
      commercial pipes.                                 

In addition to the above, the Companys business plan includes
plans to:

| |  | Increase the number of contractors and
      applicators contacted;                                         
| | - | ------------------------------------------------------------------------------------------------------------
| |  | Contact paint formulators and offer Green
      Polyurethane Binder for their proprietary formulations; and
| |  | Establish distribution channels utilizing
      existing distribution hubs.                                 

Competitive Strengths

The Company believes that its competitive strengths include the
following:

Product Advantage.Green Polyurethane is the first ever
chemical platform based on modified hybrid polyurethane that is produced using
pending patented proprietary methods which completely eliminate the use of toxic
isocyanates resulting in a substitute for conventional polyurethane. This
results in a product that is hundreds of times less toxic than conventional
polyurethane and which has superior chemical and mechanical properties.

-8-

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2 Times Wear Resistance & Excellent Adhesion

| | Wear resistance is 25-30 (mgs./1000 cycles) or
      2 times better than most premium polyurethane coatings
|- | -----------------------------------------------------------------------------------------------------------
| | Adhesiveness - 10-30% higher (depends on
      substrate)                                                  

High Gloss, Self-Priming - Achieve Any Thickness in One Coat

| | Green Polyurethanes 100% solids, specific curing
      formulation can be applied with only one layer at any thickness in
      specific environments (some substrates in poor condition may need a
      primer) compared to conventional polyurethane brands which normally
      require 2 or 3 layers
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Does not require careful drying of substrates
      (compared to conventional polyurethane coatings)                                                                                                                                                                                                       

Increased Resistance to Chemical Degradation & Corrosion

| | Maintains an extended period of corrosion
      protection, more reliability due to its non-porous coating structure, and
      better durability than conventional coatings          
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Assures more effective protection against
      aggressive media                                                                                                                      
| | Unlike conventional polyurethanes, Green
      Polyurethane is indifferent to moisture and does not require special
      moisture controlled conditions in the manufacturing process

Safe & Easy curing in Cold, Hot or Sunny Conditions

| | Hardens at ambient temperatures                                                
|- | -------------------------------------------------------------------------------
| | UV and low temperature curing applications
      available (36-77 oF) (2-25 oC)

Increased Hydrolytic Stability

Maintains stability against chemical decomposition upon contact
with water through an intramolecular hydrogen bond formed during its curing,
thereby improving hydrolytic stability well above that of conventional
polyurethanes making it virtually water proof.

Wider Range of Applications

| | There are circumstances where traditional
      polyurethanes cannot be used due to their decomposition toxicity during a
      fire event (reversion to isocyanate components).
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Tested Product and Technology.The Green Polyurethane
technology has been tested, is proven, is commercial ready and currently in use.
The Green Polyurethane technology has undergone rigorous testing by the Polymer
Institute, GmbH, a well-recognized analytical firm for qualifying materials for
use in the flooring industry and Assured Testing Services of Pennsylvania.

Testing by the Polymer Institute and Assured Testing Services
confirmed Green Polyurethanes claims in regard to its structural and chemical
properties and its suitability for use in the flooring industry. In addition,
floor coating samples were rigorously tested and were found to perform
successfully in accordance with The American Society for Testing and
Materials.

-9-

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Cost Savings.The Company can offer substantial savings
to clients in the flooring installation industry due to the unique combination
of multiple properties in one coating of Green Polyurethane paint. Typically,
concrete floors are painted using a primer, base and topcoat, resulting in the
need for three different types of coatings for one application, which can be
time consuming and costly. By using the Green Polyurethane formulation the
number of layers can be reduced to only one or two, as Green Polyurethane does
not require a primer, has excellent stand-alone adhesion and, in most cases,
would not require a top coat due to its excellent mechanical properties. In
addition, its zero isocyanate, approximate zero volatile organic compound (VOC)
safety features, allows it to be applied without the interruption of business
due to public exposure, creating an additional 30-60% savings on application
costs for customers.

Management Team.The Companys management team possesses
a diverse set of industry skills and operating experience and a record of
success in the scientific R&D, nanotechnology, management, marketing, sales
and finance industries.

Growth Strategy

The Companys business growth model includes a two-pronged
strategy of direct sales and licensing. The Companys ultimate goal is to
license its proprietary formulation to national or global coatings formulators.
In order to achieve this it is proving the validity of its products through
direct sales.

The Company has developed marketing tools, brochures,
one-sheets, and a user-friendly website to market its products directly to
contractors and applicators of high end coatings and paint. The Company has also
participated in high visibility trade shows to highlight the unique qualities of
Green Polyurethane. From these trade shows, internet and direct marketing
campaigns, the Company has attracted hundreds of prospective clients. Flooring
applications done for some of these clients in Montreal, San Jose, Bergen
County, New Jersey and New York have allowed the Company to prove that its
product can live up to the high standards and safety features advertised.

The Companys marketing and direct coating sales/application
efforts have attracted over 50 established regional and global coatings
distributors and formulators who are either testing samples of Green
Polyurethane, applying for final pilot samples of the material prior to
ordering commercial quantities or negotiating licensing contracts.

The $3.5 billion European Union (EU) polyurethane coatings
market (JCT CoatingsTech | November 1, 2007 | Challener, Cynthia) is of
particular interest to the Company because of the high demand and the overhaul
of the EUs chemical regulatory system. REACH (Registration, Evaluation &
Authorization and Restriction of Chemicals) regulations were drafted in 1998 and
finally adopted and put into force in June 2007. A major shift in this system
will be placing a greater burden of proof on the industry that chemicals are
safe. Substances of very high concern must be authorized under REACH and their
use may be subject to restrictions. Isocyanates used in making polyurethane are
highly toxic and require expensive worker safety and handling procedures. A
general movement towards greener products combined with the REACH regulations
has accelerated projected growth in the EU market for less toxic
alternatives.

In addition to the above, the Company plans to:

| |  | Increase the number of contractors and
      applicators contacted;                                     
| | - | --------------------------------------------------------------------------------------------------------
| |  | Contact paint formulators and offer Green
      Polyurethane® Binder for their proprietary formulations;
| |  | Establish distribution channels utilizing
      existing distribution hubs; and                         
| |  | Sub-license technology in certain geographic
      areas                                                

The Company intends to work with GBK Gmbh Global Regulatory
Compliance , a global regulatory compliance consultancy firm, first in the EU
marketplace and then in other markets to educate targeted government agencies
responsible for setting standards for hazardous chemicals used in coatings.

-10-

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Educating Regulatory Authorities.The Companyintends to educate regulatory agencies of the existence of an alternative to
hazardous isocyanate-based polyurethane. The US Environmental Protection Agency
(EPA) has shown strong interest in Green Polyurethane and has supported the
efforts to manufacture and distribute Green Polyurethane products in the US and
have suggested linking the Green Polyurethane technology to the EPAs new
website for spray polyurethane foam.

Maintain and Increase Cost and Operational Advantages.The Companys strategy is to avoid large capital investments in
manufacturing and instead rent facilities and equipment from its strategic
partners. Management estimates that the Company can outsource the manufacture of
up to 20,000 tons per year.

Subsidiaries

Nanotech Industries International, Inc. (Nanotech) is a
wholly owned subsidiary of Hybrid Coating Technologies Inc. (collectively the
Company) and is the source of the Companys operations.

Legislation and Government Incentives

Current global trends toward more environmentally sound
products and new legislative restrictions on the use of hazardous materials and
their chemical by-products pose formidable obstacles to polyurethane
manufacturers. The EU has already begun to take action against isocyanates by
passing recent legislation that banned the addition of any new manufacturing
capacities of isocyanates. Governmental health agencies and workers unions
throughout Europe are beginning to actively speak out against the dangers of
isocyanates in the workplace in order to protect and lobby for workers safety.
On September 2007 the president of FATIPEC (Federation of the Paints, Varnishes,
Lacquers and Printing Inks Industries Technologists' Associations of Continental
Europe) along with the Oil & Color Chemists' Association reported that new
EU safety regulations have been put into place which includes a tenfold lowering
of the concentration limits of isocyanates in all paints.

In addition, the EPA has recently developed a new Action Plan
causing any company that produces products with free isocyanates to report any
health related incidents related to the isocyanate exposure of its workers and
any consumers using its products.

These measures are similar to recent EU actions, which preceded
the banning of any Do-It-Yourself (DIY) consumer products with free isocyanates.
These new regulations will afford the Company the opportunity to gain new
ground.

Manufacturing

Overview

The Company intends to establish full commercial-scale
manufacturing for both of its products at Adhpro Adhesives in Magog, Quebec and
Simpson Coatings in California through non-exclusive toll manufacturing
agreements.

The Companys strategy is to avoid large capital investments in
manufacturing and to outsource the manufacturing of the Company products to
third-party manufacturers. At current capacity, the Company can manufacture
20,000 tons per year.

Third Party Manufacturing Partners

Adhpro Adhesives Inc.

Adhpro is an industrial premium quality adhesives manufacturer
based out of Magog, Quebec Canada. Adhpros products are manufactured from the
highest quality raw material to meet customers exact needs. Established since
1990, Adhpro is a young company that is expanding its skills from coast to
coast.

-11-

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Simpson Coatings Group Inc.

Simpson Coatings Group Inc. is a manufacturer of a wide variety
of paints and lacquers for over fifty years based out of San Francisco,
California. Simpson Coatings is a leader and respected principal in nearly every
major coating paint category and a broadening list of specification products
selling to firms of every description. The company is also a member of the
National Paint and Coatings Association, Inc. and through this membership is
kept current with all the latest specifications and their amendments.

Due to its long history, qualifications and production capacity
Simpson Coatings is positioned as the primary source of production for the
United States and its president is a Board member of Nanotech Industries, Inc.
(NTI).

Research and Development

The Company does not foresee spending any capital on research
and development. The Company has a renewable Licensing Agreement with NTI to
sell the Nanotech Products. Any and all research and development for the
Nanotech Products is conducted by NTI.

Intellectual Property Protection

Several formulations of Green Polyurethane technology are
patent and know-how protected through control of the manufacturing process. The
underlying patents of Green Polyurethane (often referred to as HNIPU or NIPU)
have been filed with the U.S Registrar of Patents and are held by NTI and cover
the composition of and method for producing Green Polyurethane.

|Name of Patent                                                                                                                                | Filed in  
|--------------------------------------------------------------------------------------------------------------------------------------------- | ----------
|                                                                                                                                              | USA       
|                                                                                                                                              | (No. &    
|                                                                                                                                              | Date)     
|Liquid oligomer composition containing
      hydroxylamine adducts and method of manufacturing thereof                                        | 12/315,580
|                                                                                                                                              | 04/12/2008
|Nanostructured Hybrid Oligomer Composition                                                                                                    | 12/381,626
|                                                                                                                                              | 03/13/2009
|Epoxy-Amine Composition Modified with
      Hydroxyalkyl Urethane                                                                             | 12/383,589
|                                                                                                                                              | 03/26/2009
|Method of producing hybrid polyhydroxyurethane
      network on the base of carbonated- epoxydated unsaturated fatty acid
      triglycerides | 09/20/2010

In addition, with respect to proprietary knowledge that is not
patentable and processes for which patents are difficult to enforce, the Company
relies on trade secret protection and confidentiality agreements to safeguard
its interests. Many elements of the manufacturing process used by the Company
may involve proprietary knowledge, technology or data that is not covered by
patents or patent applications, including technical processes, equipment
designs, algorithms and procedures.

-12-

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Facilities and Employees

Hybrid Coating Technologies Inc.s principal office is located
in Daly City, California, U.S.A.

As of December 31, 2015, Hybrid Coating Technologies Inc. had 3
employees.

Competition

To date, the Company is unaware of any other non isocyanate
polyurethane product and as such does not have any direct competition. However,
it still must compete against major companies manufacturing and supplying toxic
PU based paints and coatings. Large members of this market are BASF, Sherwin
Williams, PPG, Benjamin Moore, AKZO Nobel, Rust-Oleum and Sika AG. The Companys
products, however, offer these competitors a cost-effective and attractive green
alternative to their existing coating formulations and this is why almost all of
the top 10 formulators in the world have sought out the Company to learn about
Green Polyurethane.

Environmental Matters

The Company is not aware of any pending or threatened
environmental investigation, proceeding or action by foreign, federal, state or
local agencies, or third parties involving its current operations.

Description of the Industry

According to the Center for the Polyurethanes, the industry is
generally broken up into the following segments:

| |  | C.A.S.E. (Binders, Coatings, Adhesives,
      Sealants and Elastomers)             
| | - | -----------------------------------------------------------------------------------
| |  | Thermoplastics (highly elastic, flexible and
      abrasion resistant polyurethane)
| |  | Rigid Foam (used as packaging material,
      building insulation, etc.)           
| |  | Flexible Foam (in bedding, furniture, car
      interiors, and running shoes)      

The total available market for the Company within the
polyurethane and coatings industries is currently estimated at $136 billion and
comprised of three segments as follows:

| | Polyurethane According to plastemart.com, a
      well-known online authority in the coatings market, As per Research and
      Markets, the global market for polyurethanes was estimated at 13,650.00
      kilo tons in 2010 and is expected to reach 17,946.20 kilo tons by 2016,
      growing at a CAGR of 4.7% from 2011 to 2016. In terms of revenue, the
      market was estimated to be worth US$33 billion in 2010 and is expected to
      reach US$55 billion by 2016, growing at a CAGR of 6.8% from 2011 to 2016.                                         
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Global Paints & Coatings According to
      Datamonitors 2010 paints & coatings Global Industry Guide, the
      global paints & coatings market grew by 8.6% in 2010 to reach a value
      of $103 billion with a volume of 35MM Tons. In 2015, the global paints
      & coatings market is forecast to have a value of $142 billion, an
      increase of 37.3% since 2010. This market comprises three segments:
      Decorative, Industrial and Automotive, Specialty and Other. HCTs focus is
      on Specialty and Other, which comprises 23% of the market.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Nano Coatings- The market for nanocoatings was
      $2.1 billion in 2009 and projected to reach $3.3 billion in 2010 and $17.9
      billion in 2015 with a five-year CAGR of 39.5% (BCC research, Jan. 2010).                                                                                                                                                                                                                                                                                                                                                              

-13-

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Total Serviceable Market (TSM)

The total serviceable market is currently estimated at $32
billion as follows:

| | Polyurethane Out of the total $33BB
      global paints & coatings market, 25% or $8.25 billion accounts for
      binders, coatings & adhesives, available for the Company to service.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                         
| | Global Paints & Coatings Out of
      the total $103 billion polyurethane market 23% or $23.7 billion accounts
      for specialty and other, available for the Company to service.  
|  |                                                                                                                                                                                         
| | NanoCoatings- Out of the total $3
      billion nanocoatings market, the Company anticipates servicing 5% or $150
      million.                                                        

The only polyurethane markets for which it would not be
economical to use Green Polyurethane are certain foams, which are produced at
very low costs for furniture. However, Green Polyurethane can still be used for
other polyurethane based foam products on a competitive basis. Green
Polyurethane could also replace up to 20% of the high-end epoxy
flooring/coating market.

2015 Progress and 2016 Outlook and Beyond

| | The Company received the prestigious Presidential Green
      Chemistry Award, awarded by the US EPA and the American Chemical Society.                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                           
| | The Company entered into a distribution agreement in the
      US during the fourth quarter of 2015.                                                                                                                                      
|  |                                                                                                                                                                                                                                           
| | The Company received its first commercial order for
      $160,000 from its US distributor which shipped in the first quarter of
      2016.                                                                                              
|  |                                                                                                                                                                                                                                           
| | The Company entered into a definitive joint development
      agreement with a Fortune 500 company for the development and
      commercialization of a product based on the Companys technology during
      the fourth quarter of 2015.
|  |                                                                                                                                                                                                                                           
| | The Company is presently in discussions with several
      large industry players to potentially enter into joint development
      agreements.                                                                                           
|  |                                                                                                                                                                                                                                           
| | The Company is continuing to develop products in various
      verticals of the polyurethane industry including its spray foam insulation
      product.                                                                                  

-14-

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ITEM 1A. RISK FACTORS

Risks Related to Our Business, Products and the Green
Polyurethane Industry

Risks Related to Hybrid Coating Technologies Inc.s Business
Operations

We have a limited operating history.

The Company was incorporated on July 8, 2010 and has limited or
no operating history. As such historical operating results may not provide a
meaningful basis for evaluating the business, financial performance and
prospects. You should consider the Companys business, operations and prospects
in light of the risks, expenses and challenges faced as an early-stage
company.

Our business, and therefore our results of operations and
financial condition, may be adversely affected by the current disruption in the
global credit markets and instability of financial systems.

The recent disruption in the global credit markets, the
re-pricing of credit risk and the deterioration of the financial and real estate
markets generally, particularly in the U.S. and Europe, have all contributed to
a reduction in consumer spending and a decline in the overall U.S. and world
economy. Although the recent disruptions were initially in the housing,
financial and insurance sectors, this deterioration has further expanded to the
general economy and various sectors. Tight credit, increased unemployment and
reduced consumer confidence have had negative effects on demand in the consumer
market and consequently for our product and service offerings. In addition, some
economists are predicting that the U.S. economy, and possibly the global
economy, has entered into a prolonged recession or even a depression as a result
of the foregoing factors. Such a prolonged downturn in the U.S. or global
economy could have a material adverse effect on our business in a number of
ways, including lower product demand and lower sales, which could have a
material adverse effect on our liquidity, results of operations and financial
condition.

The intellectual property used by the Company has limited
protection.

The process of seeking patent, industrial design and trademark
protection can be time consuming and expensive and there can be no assurance
that patents, industrial design registrations or trademark registrations will
issue from future applications or that the existing intellectual property rights
used by the Company or any new patents, industrial design registrations or
trademark registrations that may be issued will be sufficient in scope or
strength to provide meaningful protection or any commercial advantage. There can
be no assurance that any pending or future patent, industrial design or
trademark applications will be granted in respect of the technology used by The
Company or that any existing, pending or future patents, industrial design
registrations or trademark registrations will not be challenged, invalidated,
ignored, circumvented or otherwise rendered unenforceable.

The Companys future success depends on its ability to
increase its client base and distribution channels

We will initially sell the Nanotech Products primarily to
end-users within North America. If we are unable to successfully increase our
client base and expand our distribution channels, our revenues and future
prospects may be materially harmed. As we seek to grow our sales by entering new
markets, our ability to increase market share and sales will depend
substantially on our ability to expand our distribution channels by identifying,
developing and maintaining relationships with manufacturers and distributors. We
may be unable to enter into relationships with resellers in the markets we
target or on terms and conditions favorable to us, which could prevent us from
entering these markets at all or in accordance with our current plans. Our
ability to enter into and maintain relationships with resellers will be
influenced by factors beyond our control, including the relationships between
these resellers and our competitors and market acceptance of our products.

-15-

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Our dependence on third party manufacturers for the
manufacturing of all the Nanotech Products could prevent us from delivering our
products to our customers within required timeframes, which could result in
order cancellations and loss of market share.

We obtain all of the Nanotech Products using third party
manufacturers and assemblers and using materials and components procured from a
limited number of third-party suppliers. If we fail to develop or maintain our
relationships with these or other suppliers, we may be unable to manufacture our
products or our products may be available only at a higher cost or after a long
delay, which could prevent us from delivering our products to our customers
within required time frames which may, in turn, result in order cancellations
and loss of market share. The failure of a supplier to supply materials and
components in a timely manner, or to supply materials and components that meet
our quality, quantity and cost requirements could impair our ability to
manufacture our products or increase their component costs, particularly if we
are unable to obtain substitute sources of these materials and components on a
timely basis or on terms acceptable to us.

Highly Competitive Industry

Many of the companies with which the Company will compete have
significantly greater financial and other resources than the Company.
Additionally, other companies which at present are not in competition with the
Company may also enter into this industry, thereby directly competing with the
Company.

Uncertain Acceptance and Maintenance of Company Brand

The Company believes that the establishment and maintenance of
a brand identified with the Companys services is critical to attracting and
expanding its customer base. While the Company is confident that its services
and brand name(s) will provide an excellent foundation for developing brand
awareness, no assurance can be given that such branding efforts will be
successful. Promotion of brand awareness among users will depend, among other
things, on the Companys success in its marketing efforts and the usability of
its services, none of which can be assured.

Significant Growth Places a Strain on Resources

If the Company is unable to manage growth effectively, business
could be adversely affected. The Company expects to experience significant
growth, both internally and through possible acquisitions and partnerships. This
anticipated future growth may place a significant strain on its resources. As
part of this growth, the Company will need to expand on its operational and
financial systems, procedures and controls.

The Company may require additional capital in the future
and no assurance can be given that such capital will be available at all or
available on acceptable terms.

The Company remains highly dependent upon funding from
non-operational sources. The Companys consolidated financial statements have
been presented on the basis that it is a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business. The Company has incurred net losses of approximately $29,354,000 since
inception, and has a working capital deficit of $6,462,971 as of December 31,
2015. These conditions raise substantial doubt about the Companys ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of these uncertainties.

There are no assurances that the Company will be able to either
(1) achieve a level of revenues adequate to generate sufficient cash flow from
operations; or (2) obtain additional financing through either private placement,
public offerings and/or bank financing necessary to support the Company's
working capital requirements. To the extent that funds generated from operations
and any private placements, public offerings and/or bank financing are
insufficient, the Company will have to raise additional working capital. No
assurance can be given that additional financing will be available, or if
available, will be on terms acceptable to the Company. If adequate working
capital is not available the Company may be required to curtail or cease its
operations.

-16-

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The Company has no history of significant profit and no
assured foreseeable earnings.

The Company has no history of significant profit. The Company
expects to continue to incur losses in the very near future, and there can be no
assurance that it will ever be profitable as it expects operating expenses to
increase as its client base and distribution channels are expanded. The
Companys ability to reach and sustain profitability depends on a number of
factors including, but not limited to, the availability of financing and the
continued availability of third party manufacturers.

The Companys business depends substantially on the
continuing efforts of its executive officers, and its business may be severely
disrupted if the Company loses their services. In addition, if the Company is
unable to attract, train and retain technical personnel, the Companys business
may be materially and adversely affected.

The Companys future success depends substantially on the
continued services of its executive officers. If one or more of the Companys
executive officers are unable or unwilling to continue being employed by us, the
Company may not be able to replace them readily, if at all. Therefore, the
Companys business may be severely disrupted, and it may incur additional
expenses to recruit and retain new officers.

Recruiting and retaining capable personnel is vital to the
Companys success. If the Company is unable to retain and attract qualified
employees, the Companys business may be materially and adversely affected.

Our ability to increase market share and sales depends on
our ability to successfully expand our distribution channels.

We will sell the Company Products to companies within North
America. If we are unable to successfully expand our distribution channels and
client base significantly, our revenues and future prospects will be materially
harmed. As we seek to grow our sales by entering existing and new markets in
some of which we have little experience selling coatings, adhesive and sealant
products, our ability to increase market share and sales will depend
substantially on our ability to expand our distribution channels by identifying,
developing and maintaining relationships with resellers both within and outside
of North America. We may be unable to enter into relationships with resellers in
the markets we target or on terms and conditions favorable to us, which could
prevent us from entering these markets or entering these markets in accordance
with our plans.

The Company is delinquent in its payroll tax remittances.

The Company is delinquent on its state and federal payroll tax
remittances. The State of California has issued a Notice of State Tax Lien
against the property and rights owned by the Company covering interest and
penalties for non-payment of payroll remittances.

Risks Related to the Common Stock

The Company may conduct further offerings in the future,
in which case your shareholdings will be diluted.

Since inception, both the Registrant and the Company have
relied on equity sales of Common Stock and issuances of convertible debt and
warrants convertible or exercisable into shares of Common Stock to fund
operations. The Registrant may conduct further equity and/or convertible debt
offerings in the future to finance current projects or to finance subsequent
projects that it decides to undertake. If Common Stock is issued in return for
additional funds, or upon conversion or exercise of outstanding convertible
debentures or warrants, the price per share could be lower than that paid by
existing common stockholders. The Registrant anticipates continuing to rely on
equity sales of Common Stock and issuances of convertible debt and/or warrants
convertible or exercisable into shares of Common Stock in order to fund its
business operations. If the Registrant issues additional shares of Common Stock,
your percentage interest in the Registrant will be lower. This condition, often
referred to as dilution, could result in a reduction in the per share value of
your shares of Common Stock.

-17-

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The Company may exercise its American-European Option and
additionally its Asia Option in the Licensing Agreement which will result in
your shareholdings being significantly diluted.

On December 6, 2011, the Company notified NTI of its intent to
exercise the Sealant Option. To date, the Company has not issued the Sealant
Shares and the Sealant Option has expired. The Company intends to renegotiate
the Sealant Option with NTI in the future.

Should the Company exercise the American-European Option or
also exercise the Asia Option, (as defined in the Licensing Agreement), this
will result in a significant issuance of Common Stock in return for Perpetual
Licensing Rights (as defined in the Licensing Agreement). This share issuance
will also result in a change of control and NTI will own 52.5% of the Companys
outstanding Common Stock in return for the exercise of the American-European
Option (and an additional 10% of the Companys outstanding Common Stock in the
event the Company also exercises the Asia Option). As a result, NTI will have
substantial influence over all matters requiring stockholder approval, including
the election of directors and the approval of significant corporate transactions
such as mergers, tender offers and the sale of all or substantially all of the
assets. The interests of NTI could conflict with or differ from your interests
as a holder of common shares. For example, the concentration of ownership held
by NTI could delay, defer or prevent a change of control of the Company or
impede a merger, takeover or other business combination which you may view
favorably.

The Registrant does not anticipate paying dividends in
the future.

The Registrants current policy is to retain earnings to
finance the development of new lines of products and to otherwise reinvest in
our business. Therefore, the Registrant does not anticipate paying cash
dividends in the foreseeable future. The Registrants dividend policy will be
reviewed from time to time by the Board of Directors in the context of its
earnings, financial condition and other relevant factors. Until the Registrant
pays dividends, which it may never do, its shareholders will not be able to
receive a return on shares of Common Stock unless they sell them.

-18-

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ITEM 2. DESCRIPTION OF PROPERTY

We do not own any real property or any rights to acquire any
real property. Our head office is located at 950 John Daly Blvd. Suite 260, Daly
City, CA 94015. The lease is on a month-to-month basis at $3,750 per month.

ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company is
a party or to which any of our property is subject and to the best of our
knowledge, no such actions against us are contemplated or threatened.

ITEM 4. MINE SAFETY DISCLOSURES

No applicable.

-19-

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Common Stock is quoted on the OTC Bulletin Board. Our
shares were first traded on the OTC Bulletin Board on July 10, 2009, under the
name Allora Minerals, Inc., (OTCBB: ALRL). On August 12, 2009, the change of
the Registrants name to Epod Solar Inc. was approved by the NASD, and we were
issued the new trading symbol EPDS. On July 27, 2011, the Company changed its
name to Hybrid Coating Technologies Inc., and on September 7, 2011, that change
was approved by the Nevada Secretary of State and the Company was issued a new
trading symbol HCTI.ob. The following table indicates the high and low bid
prices of our common stock obtained during the periods indicated:

|               |   | For the Year
      Ended |  |   | For the Year
      Ended | 
|-------------- | - | ------------------------ |  | - | ------------------------ | 
|               |   | December
      31, 2015  |  |   | December 31,
      2014  | 
|               |   | High                     |  |   | Low                      | 
|               |   |                          |  |   |                          | 
|First Quarter  | $ | 0.093                    |  | $ | 0.0251                   | 
|               |   |                          |  |   |                          | 
|Second Quarter | $ | 0.048                    |  | $ | 0.0035                   | 
|               |   |                          |  |   |                          | 
|Third Quarter  | $ | 0.018                    |  | $ | 0.0018                   | 
|               |   |                          |  |   |                          | 
|Fourth Quarter | $ | 0.0108                   |  | $ | 0.0008                   | 

The range of high and low price quotes of our common stock as
set out in the table above is as quoted on the OTC Bulletin Board. The market
quotations provided reflect inter-dealer prices, without retail markup,
mark-down or commission and may not represent actual transactions.

The number of holders of record of our shares of our common
stock as of December 31, 2015 was 320 shareholders.

Penny Stock Rules

The United States Securities and Exchange Commission (SEC)
has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally equity securities with
a price of less than $5.00, other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system; provided, that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which: (a) contains a description of the nature and level of risk in the
market for penny stocks in both public offerings and secondary trading; (b)
contains a description of the broker's or dealer's duties to the customer and of
the rights and remedies available to the customer with respect to a violation of
such duties or other requirements of securities laws; (c) contains a brief,
clear, narrative description of a dealer market, including bid and ask prices
for penny stocks and significance of the spread between the bid and ask price;
(d) contains a toll-free telephone number for inquiries on disciplinary actions;
(e) defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and (f) contains such other information and in such
form as the SEC shall require by rule or regulation.

The broker-dealer also must, prior to effecting any transaction
in a penny stock, provide the customer with: (a) bid and offer quotations for
the penny stock; (b) the compensation of the broker-dealer and its salesperson
in the transaction; (c) the number of shares to which such bid and ask prices
apply, or other comparable information relating to the depth and liquidity of
the market for such stock; and (d) monthly account statements showing the market
value of each penny stock held in the customer's account. In addition, the penny
stock rules require that, prior to a transaction in a penny stock that is not
otherwise exempt from those rules, the broker-dealer must: (a) make a special
written determination that the penny stock is a suitable investment for the
purchaser; and (b) receive from the purchaser his or her written acknowledgement
of receipt of the determination and a written agreement to the transaction.

-20-

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These disclosure requirements may have the effect of reducing
the trading activity in the secondary market for our common stock and therefore
stockholders may have difficulty selling those securities.

Dividend Policy

We have never declared or paid any cash dividends on our common
stock. We currently intend to retain future earnings, if any, to finance the
expansion of our business. As a result, we do not anticipate paying any cash
dividends in the foreseeable future.

Sale of Unregistered Securities

On August 30, 2010, the Company closed on the acquisition from
Nanotech, a corporation formed pursuant to the laws of Nevada of all of the
issued and outstanding shares of capital stock of Nanotech held by the holders
of the Nanotech Shares. The purchase price for the Nanotech Acquisition
consisted of 3,381,003 shares of common stock, $0.001 par value per share of the
Registrant, issued to Nanotech Shareholders. In addition, certain shareholders
of the Company agreed to have 1,028,000 of their shares cancelled as part of the
transaction.

ITEM 6. SELECTED FINANCIAL DATA

N/A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS

This Management's Discussion and Analysis (MD&A) is
designed to assist investors in understanding the nature and the importance of
the changes and trends, as well as the risks and uncertainties associated with
the Company's operations and financial position. Some sections of this MD&A
contain forward-looking statements that, because of their nature, necessarily
involve a number of known and unknown risks and uncertainties, including
statements regarding our capital needs, business strategy and expectations. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. In some cases, forward-looking
statements can be identified by terminology such as may, will, should,
expect, plan, intend, anticipate, believe, estimate, predict,
potential or continue, the negative of such terms or other comparable
terminology. The Company's actual and future results could therefore differ
materially from those indicated or underlying these forward-looking statements.
In evaluating these statements, you should consider various factors, including
the risks discussed below, and, from time to time, in other reports filed by the
Company with the SEC. See Risk Factors and Special Note Regarding Forward
Looking Statements.

Although the Company deems the expectations reflected in these
forward-looking statements to be reasonable, the Company cannot provide any
guarantee as to the materialization of the expectations reflected in these
forward-looking statements.

Basis of Presentation

This MD&A on the Company's operating results and cash flows
for the fiscal years ended December 31, 2015 and 2014 as well as its financial
position at December 31, 2015 and 2014, should be read in conjunction with the
consolidated financial statements and accompanying notes contained in this
report.

-21-

---

Company Overview

Headquartered in Daly City, California, Hybrid Coating
Technologies Inc.s (formerly Epod Solar Inc.) (HCT) core business is that of
its wholly-owned subsidiary, Nanotech Industries International Inc.
(Nanotech). This business is the manufacturing and sale of alternative
non-toxic (isocyanate-free) polyurethane, Green Polyurethane. The products
manufactured and sold by Nanotech (Nanotech Products) include coatings and raw
binder ingredients (Green Polyurethane® Monolithic Floor Coating and Green
Polyurethane Binder). Nanotech was granted the right to manufacture and sell
the Nanotech Products pursuant to an agreement (Licensing Agreement) entered
into between Nanotech and NTI (Nanotech Industries Inc.) the holder of the
proprietary rights to the license and intellectual property required for the
manufacturing of the Nanotech Products. The Nanotech Products will target the
coatings, adhesives, sealants and elastomers (C.A.S.E.) market in North
America, with options to sell in Europe, South America and Asia, pursuant to the
terms of the Licensing Agreement. (see Note 4 to consolidated financial
statements and Item 1 Description of Business) .

Off-Balance Sheet Arrangements

N/A

Going Concern

The Companys consolidated financial statements have been
presented on the basis that it is a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business. The Company has incurred net losses of $29,354,360 since inception and
has a working capital deficit of $6,462,971 as of December 31, 2015. These
conditions raise substantial doubt about the Companys ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of these uncertainties.

There are no assurances that the Company will be able to either
(1) achieve a level of revenues adequate to generate sufficient cash flow from
operations; or (2) obtain additional financing through either private placement,
public offerings and/or bank financing necessary to support the Company's
working capital requirements. To the extent that funds generated from operations
and any private placements, public offerings and/or bank financing are
insufficient, the Company will have to raise additional working capital. No
assurance can be given that additional financing will be available, or if
available, will be on terms acceptable to the Company. If adequate working
capital is not available the Company may be required to curtail its
operations.

Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued
accounting pronouncements to have a significant impact on the Companys results
of operations, financial position or cash flows.

-22-

---

Operating Results for the Fiscal Year Ended December 31,
2015 and 2014

Results of Operations

We have had no significant operating revenues for the year
ended December 31, 2015, save for samples sales of $5,815. Our activities to
date have been financed from the proceeds of share subscriptions, proceeds from
convertible debentures and notes issued and from loans from related and other
parties and trade payables. During the year ended December 31, 2015, revenues
from our operations were $5,815 compared to $29,370 for the year ended December
31, 2014.

For the year ended December 31, 2015, we incurred a total net
loss of $6,731,297 including non-cash charges of $325,327 from stock-based
compensation, intangible asset amortization of $1,105,932, amortization of debt
discounts of $677,439, interest expense of $2,017,673, loss on settlement of
payables of $1,826,684, loss on extinguishment of debt of $174,475, and a gain
in the fair value of the derivative liability of $302,596. The Company also
incurred other general and administrative expenses of $1,921,756, gain on
foreign currency transactions of $11,422, and cost of sales of $4,610.

General and administrative expenses totaled $1,921,756 for the
year ended December 31, 2015, as compared to $2,947,597 for the year ended
December 31, 2014, representing a 35% decrease from the prior year. Included in
general and administrative expenses are the following:

|                                        |   | Year ended December 31 |  |   |           |  |  |        |  
|--------------------------------------- | - | ---------------------- |  | - | --------- |  |  | ------ | -
|                                        |   | 2015                   |  |   | 2014      |  |  | %      |  
|                                        |   |                        |  |   |           |  |  | change |  
|Professional fees  third party         | $ | 144,753                |  | $ | 101,051   |  |  | 43%    |  
|Professional fees  related parties     |   | 972,565                |  |   | 832,340   |  |  | 17%    |  
|Lawsuit settlement                      |   | 50,000                 |  |   | -         |  |  | 100%   |  
|Payroll                                 |   | 43,191                 |  |   | 89,492    |  |  | (52%   | )
|Stock-based compensation (non-cash)     |   | 325,327                |  |   | 1,677,655 |  |  | (81%   | )
|Rent, supplies and general office costs |   | 149,703                |  |   | 127,720   |  |  | 17%    |  
|Travel and trade shows                  |   | 236,217                |  |   | 119,339   |  |  | 98%    |  
|                                        |   |                        |  |   |           |  |  |        |  
|Total                                   | $ | 1,921,756              |  | $ | 2,947,597 |  |  | (35%   | )

General and Administration expenses analysis

Professional fees were $1,117,318 (of which $972,565 were with
related parties) for the year ended December 31, 2015 compared to $933,391 (of
which $832,340 were with related parties) for the year ended December 31, 2014.
The Company incurred $50,000 in a settlement related to the lawsuit filed by
William Alessi in December 2015. The Company continues to use consultants for
financing, sales and marketing purposes with a slight increase in the current
year as a result. Payroll was $43,190 for the year ended December 31, 2015
compared to $89,492 for the year ended December 31, 2014. Payroll decreased due
to having only one employee on the payroll in 2015 as compared to two employees
for most of 2014. Senior management were remunerated through stock-based
compensation. Stock-based compensation was $325,327 for the year ended December
31, 2015 compared to $1,677,656 for the year ended December 31, 2014.
Stock-based compensation decreased by 81% in 2015 due to fewer payments to
management and other consultants for services through the issuance of shares.
Rent and general office costs was $149,703 in 2015 a 17% increase from $127,720
for the prior year due to minor increases in administrative costs. Travel and
trade shows was $236,217 for the year ended December 31, 2015 more than doubling
from $119,339 due to attending more shows and visiting potential customers and
business partners as the Company approaches commercialization of their
products.

-23-

---

Amortization and depreciation was $1,105,932 for the year ended
December 31, 2015 compared to $808,735 in the year ended December 31, 2015. A
new license was acquired in 2015 which resulted in higher amortization in the
year ended December 31, 2015 compared to December 31, 2014.

During the year ended December 31, 2015, we recorded a gain of
$302,596 on the change in fair value of derivative liabilities related to our
convertible notes payable, compared to a loss of $930,345 during the year ended
December 31, 2014. The change in derivative liability was primarily a result of
the decrease in our stock price during the year ended December 31, 2015.

During the year ended December 31, 2015, we recorded $2,017,673
in interest expense compared to $862,664 during the year ended December 31,
2014. Interest expense was significantly higher than in the prior years period
due to the Company obtaining approximately $600,000 in convertible notes and
their respective discounts.

During the year ended December 31, 2015, we recorded a loss on
the extinguishment of debt of $174,475 and a loss on settlement of payables in
the amount of $1,826,684 totalling $2,001,259 compared to $2,174,408 (loss on
extinguishment of debt) during the year ended December 31, 2014. The losses were
a result of paying off accounts payable-related parties and other debt through
the issuance of shares at a lower value than the fair value of the shares.

Liquidity and Capital Resources

We had $23,893 cash at December 31, 2015 and no cash or cash
equivalents at December 31, 2014. The Company had a working capital deficit of
$6,462,971 as of December 31, 2015. We do not have sufficient cash on hand to
fund operations. We believe that we will need approximately $1,100,000 to fund
our operations over the next 12 months.

The ability of the Company to continue its operations is
dependent on the successful execution of management's plans, which include the
expectation of raising debt or equity based capital, with some additional
funding from other traditional financing sources, including term notes, until
such time that funds provided by operations are sufficient to fund working
capital requirements. The Company may need to incur additional liabilities with
related parties to sustain the Companys existence. The Company is highly
dependent on loans from related parties to continue operations. There is no
assurance we will be able to continue operating as a going concern.

In 2014, the Company received approximately $1,544,000
(approximately $1,286,000 from related parties) in short-term loans and repaid
approximately $1,148,000 (of which $727,000 was repaid to shareholders and
$421,000 was repaid to related parties).

In 2015, the Company received approximately $2,865,000
(approximately $2,039,000 from related parties) in short-term loans and repaid
approximately $2,310,000 (of which $1,681,000 was repaid to shareholders and
$439,000 was repaid to related parties).

Principal Cash Flows for the Fiscal Year Ended December
31, 2015

Operating activities used cash flows of $513,632. This
increase in use of cash relates primarily to increased general and
administrative expenses incurred during 2015 that were settled in cash as
opposed to stock-based compensation.

Investing activities used cash flows of $12,000 due to
the issuance of an equipment loan during 2015. The Company had no cash used in
investing activities during 2014.

Financing activities provided cash flows of $549,525,
primarily as a result of receipt of funds of $2,039,136 in shareholder loans,
$229,000 in loans payable and $596,450 of proceeds from convertible notes. In
addition, the Company repaid $439,000 of the note payable - related party,
$1,681,137 on loans payable  shareholders, and $189,872 in convertible notes.
During 2014, the Company had cash provided by financing activities of $394,127,
primarily as a result of receipt of funds of $1,285,974 in shareholder loans and
$258,000 of proceeds from convertible debt, offset by cash payments of $727,218
in shareholder loans and $420,800 of note payable - related party.

-24-

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISKS Convertible Debt

The fair market value of our 10% senior secured convertible
debentures is subject to interest rate risk, market price risk and other factors
due to the convertible feature of the debentures. The fair market value of the
debentures will generally increase as interest rates fall and decrease as
interest rates rise. In addition, the fair market value of the debentures will
generally increase as the market price of our common stock increases and
decrease as the market price falls. The interest and market value changes affect
the fair market value of the debentures but do not impact our financial
position, cash flows or results of operations due to the fixed nature of the
debt obligations.

-25-

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

Hybrid Coatings Technology Inc.

Consolidated Financial Statements December 31, 2015 and
2014

-26-

---

Hybrid Coatings Technology Inc.

Consolidated Financial Statements

|Contents                                                         |    
|---------------------------------------------------------------- | ---
|                                                                 |    
|Report of Independent Registered Public
      Accounting Firm    | F-1
|                                                                 |    
|Consolidated Balance Sheets                                      | F-2
|                                                                 |    
|Consolidated Statements of Operations                            | F-3
|                                                                 |    
|Consolidated Statement of Changes in
      Stockholders Deficit | F-4
|                                                                 |    
|Consolidated Statements of Cash Flows                            | F-7
|                                                                 |    
|Notes to Consolidated Financial Statements                       | F-9

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Hybrid Coating Technologies
Inc. Daly City, CA

We have audited the accompanying consolidated balance sheets of
Hybrid Coating Technologies, Inc. as of December 31, 2015 and 2014, and the
related consolidated statements of operations, stockholders deficit and cash
flows for the years then ended. Hybrid Coating Technologies Inc.s management is
responsible for these consolidated financial statements. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Hybrid Coating Technologies Inc. as of December 31, 2015 and 2014, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been
prepared assuming that Hybrid Coating Technologies Inc. will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, Hybrid
Coating Technologies Inc. has suffered recurring losses from operations and has
a net working capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Managements plans in regard to these matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/ GBH CPAs, PC

GBH CPAs, PC www.gbhcpas.com Houston, Texas April
14, 2016

F-1

---

Hybrid Coatings Technology Inc.Consolidated
Balance SheetsAs of December 31, 2015 and 2014

|                                                                                                                                                              |   | December 31, |   |   | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|ASSETS                                                                                                                                                        |   | 2015         |   |   | 2014         |  
|Current assets:                                                                                                                                               |   |              |   |   |              |  
|Cash and cash equivalents                                                                                                                                     | $ | 23,893       |   | $ | -            |  
|Total current assets                                                                                                                                          |   | 23,893       |   |   | -            |  
|Equipment loan receivable                                                                                                                                     |   | 12,000       |   |   | -            |  
|Intangible assets, net of
      accumulated amortization                                                                                                      |   | 1,132,753    |   |   | 2,136,205    |  
|                                                                                                                                                              |   |              |   |   |              |  
|TOTAL ASSETS                                                                                                                                                  | $ | 1,168,646    |   | $ | 2,136,205    |  
|                                                                                                                                                              |   |              |   |   |              |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                         |   |              |   |   |              |  
|Current liabilities:                                                                                                                                          |   |              |   |   |              |  
|Bank indebtedness                                                                                                                                             | $ | -            |   | $ | 5,552        |  
|Accounts payable and accrued
      liabilities                                                                                                                |   | 866,103      |   |   | 667,296      |  
|Accounts payable and accrued liabilities -
      related parties                                                                                              |   | 324,865      |   |   | 348,731      |  
|Deferred revenue                                                                                                                                              |   | 177,442      |   |   | 20,000       |  
|Stock payable                                                                                                                                                 |   | 15,000       |   |   | 15,000       |  
|Senior secured convertible
      debentures                                                                                                                   |   | 200,000      |   |   | 200,000      |  
|Convertible debentures, net of unamortized
      discount of $76,975 and $160,748, respectively                                                               |   | 60,424       |   |   | 119,363      |  
|Loans payable                                                                                                                                                 |   | 1,206,500    |   |   | 977,500      |  
|Loans payable - shareholders                                                                                                                                  |   | 2,197,082    |   |   | 1,944,504    |  
|Notes payable - related party                                                                                                                                 |   | 1,300,491    |   |   | 1,889,491    |  
|Derivative liabilities                                                                                                                                        |   | 138,957      |   |   | -            |  
|Total current liabilities                                                                                                                                     |   | 6,486,864    |   |   | 6,187,437    |  
|Convertible debentures, long-term portion                                                                                                                     |   | 1,344,242    |   |   | 1,342,696    |  
|Derivative liabilities                                                                                                                                        |   | -            |   |   | 181,723      |  
|Total liabilities                                                                                                                                             |   | 7,831,106    |   |   | 7,711,856    |  
|                                                                                                                                                              |   |              |   |   |              |  
|Commitments and contingencies                                                                                                                                 |   |              |   |   |              |  
|                                                                                                                                                              |   |              |   |   |              |  
|STOCKHOLDERS DEFICIT                                                                                                                                         |   |              |   |   |              |  
|Series A preferred stock,
      $0.001 par value, 1,000,000 shares authorized, 0 shares issued                                                                |   | -            |   |   | -            |  
|Series B preferred stock, $0.001 par value,
      4,000,000 shares authorized, 460,000 shares issued                                                          |   | 460          |   |   | -            |  
|Common stock, $0.001 par
      value, 1,600,000,000 shares authorized, 1,188,559,058 shares and
      44,126,829 shares issued and outstanding , respectively |   | 1,188,559    |   |   | 44,127       |  
|Additional paid-in capital                                                                                                                                    |   | 21,502,881   |   |   | 17,003,285   |  
|Accumulated deficit                                                                                                                                           |   | (29,354,360  | ) |   | (22,623,063  | )
|Total stockholders deficit                                                                                                                                   |   | (6,662,460   | ) |   | (5,575,651   | )
|TOTAL LIABILITIES AND
      STOCKHOLDERS DEFICIT                                                                                                             | $ | 1,168,646    |   | $ | 2,136,205    |  

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

F-2

---

HybridCoatingsTechnologyInc.ConsolidatedStatementsofOperationsFor the Years EndedDecember31, 2015 and 2014

|                                                                   |   | Year Ended        |   |   | Year Ended        |  
|------------------------------------------------------------------ | - | ----------------- | - | - | ----------------- | -
|                                                                   |   | December 31, 2015 |   |   | December 31, 2014 |  
|Revenues                                                           | $ | 5,815             |   | $ | 29,370            |  
|Cost of sales                                                      |   | 4,610             |   |   | 1,994             |  
|Gross margin                                                       |   | 1,205             |   |   | 27,376            |  
|Operating expenses                                                 |   |                   |   |   |                   |  
|General and
      administrative                                   |   | 1,921,756         |   |   | 2,947,597         |  
|Amortization of intangible assets                                  |   | 1,105,932         |   |   | 808,735           |  
|Loss on settlement of
      payables                               |   | 1,826,684         |   |   | -                 |  
|Total operating expenses                                           |   | 4,854,372         |   |   | 3,756,332         |  
|Loss from operations                                               |   | (4,853,167        | ) |   | (3,728,956        | )
|Loss on extinguishment of debt                                     |   | (174,475          | ) |   | (2,174,408        | )
|Change in fair value of
      derivative liability                 |   | 302,596           |   |   | 930,345           |  
|Gain on foreign currency transactions                              |   | 11,422            |   |   | 1,396             |  
|Interest expense                                                   |   | (2,017,673        | ) |   | (862,664          | )
|Net loss                                                           | $ | (6,731,297        | ) | $ | (5,834,287        | )
|Net loss per common share -
      basic and diluted                | $ | (0.02             | ) | $ | (0.24             | )
|Weighted average number of common shares -
      basic and diluted |   | 298,799,307       |   |   | 23,937,853        |  

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

F-3

---

HybridCoatingsTechnologyInc.StatementofChangesinStockholdersDeficitFor the
Years EndedDecember31, 2015 and 2014

|                                                                                                    |  | Series B        |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|--------------------------------------------------------------------------------------------------- |  | --------------- |  | - | ------------ |  |  | ---------- |  | - | ----------- |  | - | --------------- | - | - | ----------- | -
|                                                                                                    |  | Preferred Stock |  |   | Common Stock |  |  | Additional |  |   | Accumulated |  |   |                 |  
|                                                                                                    |  | Shares          |  |   | Amount       |  |  | Shares     |  |   | Amount      |  |   | Paid-In Capital |   |   | Deficit     |  
|Balance, December 31, 2013                                                                          |  | -               |  | $ | -            |  |  | 11,167,513 |  | $ | 11,168      |  | $ | 10,712,971      |   | $ | (16,788,776 | )
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Issuance of shares for
      payment on accounts payable and accrued liabilities related parties    |  | -               |  |   | -            |  |  | 18,695,000 |  |   | 18,695      |  |   | 3,135,955       |   |   | -           |  
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Issuance of shares for
      services rendered                                                      |  | -               |  |   | -            |  |  | 3,507,804  |  |   | 3,508       |  |   | 490,629         |   |   | -           |  
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Issuance of warrants for
      services rendered                                                    |  | -               |  |   | -            |  |  | -          |  |   | -           |  |   | 691,863         |   |   | -           |  
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Exercise of warrants                                                                                |  | -               |  |   | -            |  |  | 325,000    |  |   | 325         |  |   | -               |   |   | -           |  
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Valuation of vested warrants
      issued                                                           |  | -               |  |   | -            |  |  | -          |  |   | -           |  |   | 491,656         |   |   | -           |  
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Issuance of shares to
      related-party landlord for payment of accounts payable and prepaid rent |  | -               |  |   | -            |  |  | 418,604    |  |   | 419         |  |   | 45,627          |   |   | -           |  
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Issuance of shares for
      cash-free exercise of warrants                                         |  | -               |  |   | -            |  |  | 872,711    |  |   | 873         |  |   | (873            | ) |   | -           |  
|                                                                                                    |  |                 |  |   |              |  |  |            |  |   |             |  |   |                 |   |   |             |  
|Imputed interest on note
      payable-related party                                                |  | -               |  |   | -            |  |  | -          |  |   | -           |  |   | 241,856         |   |   | -           |  

F-4

---

|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|---------------------------------------------------------------------------------------------------- |  | - |  |  | - |  |  | ----------- |  | - | ------- |  | - | ---------- | - | - | ----------- | - | - | ---------- | -
|Issuance of shares for
      payment on note payable-related party                                   |  | - |  |  | - |  |  | 8,113,116   |  |   | 8,113   |  |   | 884,330    |   |   | -           |   |   | 892,443    |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of shares for
      interest payment on Senior Secured Convertible Debentures               |  | - |  |  | - |  |  | 100,000     |  |   | 100     |  |   | 29,700     |   |   | -           |   |   | 29,800     |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of shares for
      interest payment on shareholder loan and loan payable                   |  | - |  |  | - |  |  | 340,312     |  |   | 340     |  |   | 55,517     |   |   | -           |   |   | 55,858     |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of shares for
      interest payment on convertible debentures                              |  | - |  |  | - |  |  | 432,454     |  |   | 432     |  |   | 131,618    |   |   | -           |   |   | 132,050    |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of shares as payment
      for payroll liabilities included in accounts payable             |  | - |  |  | - |  |  | 154,315     |  |   | 154     |  |   | 92,436     |   |   | -           |   |   | 92,590     |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Net loss                                                                                             |  |   |  |  | - |  |  | -           |  |   | -       |  |   | -          |   |   | (5,834,287  | ) |   | (5,834,287 | )
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Balance, December 31, 2014                                                                           |  |   |  |  |   |  |  | 44,126,829  |  | $ | 44,127  |  | $ | 17,003,285 |   | $ | (22,623,063 | ) | $ | (5,575,651 | )
|                                                                                                     |  | - |  |  | - |  |  | -           |  |   |         |  |   |            |   |   |             |   |   |            |  
|Stock-based compensation                                                                             |  |   |  |  |   |  |  | 7,336,733   |  |   | 7,337   |  |   | 317,990    |   |   | -           |   |   | 325,327    |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of shares for
      payment on accounts payable and accrued liabilities - related parties   |  | - |  |  | - |  |  | 491,150,000 |  |   | 491,150 |  |   | 1,260,984  |   |   | -           |   |   | 1,752,134  |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of warrants for
      payment on accounts payable and accrued liabilities - related parties |  | - |  |  | - |  |  | -           |  |   | -       |  |   | 1,106,410  |   |   | -           |   |   | 1,106,410  |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of warrants for
      payment of interest                                                   |  | - |  |  | - |  |  | -           |  |   | -       |  |   | 15,600     |   |   | -           |   |   | 15,600     |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Issuance of shares for
      conversion of debt                                                      |  | - |  |  | - |  |  | 641,564,526 |  |   | 641,564 |  |   | 492,026    |   |   | -           |   |   | 1,133,590  |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Exercise of warrants                                                                                 |  | - |  |  | - |  |  | 910,064     |  |   | 910     |  |   | (410       | ) |   | -           |   |   | 500        |  
|                                                                                                     |  |   |  |  |   |  |  |             |  |   |         |  |   |            |   |   |             |   |   |            |  
|Exchange of debt                                                                                     |  | - |  |  | - |  |  | -           |  |   | -       |  |   | 36,103     |   |   | -           |   |   | 36,103     |  

F-5

---

|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|----------------------------------------------------------------------- |  | ------- |  | - | --- |  |  | ------------- | - | - | --------- | - | - | ---------- |  | - | ----------- | - | - | ---------- | -
|Settlement of derivative
      liability on conversion of debt          |  | -       |  |   | -   |  |  | -             |   |   | -         |   |   | 754,873    |  |   | -           |   |   | 754,873    |  
|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|Imputed interest on note
      payable-related party                    |  | -       |  |   | -   |  |  | -             |   |   | -         |   |   | 135,421    |  |   | -           |   |   | 135,421    |  
|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|Cancellation of shares and
      issuance of warrants                   |  | -       |  |   | -   |  |  | (1,950,000    | ) |   | (1,950    | ) |   | 1,950      |  |   | -           |   |   | -          |  
|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|Issuance of shares for
      payment of interest                        |  | -       |  |   | -   |  |  | 5,420,906     |   |   | 5,421     |   |   | 126,629    |  |   | -           |   |   | 132,050    |  
|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|Issuance of preferred shares for settlement
      of debt               |  | 40,000  |  |   | 40  |  |  | -             |   |   | -         |   |   | 149,960    |  |   | -           |   |   | 150,000    |  
|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|Issuance of preferred shares for acquisition
      of intangible assets |  | 420,000 |  |   | 420 |  |  | -             |   |   | -         |   |   | 102,060    |  |   | -           |   |   | 102,480    |  
|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|Net loss                                                                |  | -       |  |   | -   |  |  | -             |   |   | -         |   |   | -          |  |   | (6,731,297  | ) |   | (6,731,297 | )
|                                                                        |  |         |  |   |     |  |  |               |   |   |           |   |   |            |  |   |             |   |   |            |  
|Balance, December 31, 2015                                              |  | 460,000 |  | $ | 460 |  |  | 1,188,559,058 |   | $ | 1,188,559 |   | $ | 21,502,881 |  | $ | (29,354,360 | ) | $ | (6,662,460 | )

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

F-6

---

Hybrid Coatings Technology Inc.Consolidated
Statements of Cash FlowsFor the Years Ended December 31, 2015 and
2014

|                                                                                  |   | Year Ended        |   |   | Year Ended        |  
|--------------------------------------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                                                                  |   | December 31, 2015 |   |   | December 31, 2014 |  
|CASH FLOWS FROM OPERATING
      ACTIVITIES                                        |   |                   |   |   |                   |  
|Net loss                                                                          | $ | (6,731,297        | ) | $ | (5,834,287        | )
|Adjustments to reconcile net
      loss to net cash used in operating activities: |   |                   |   |   |                   |  
|Stock-based compensation                                                          |   | 325,327           |   |   | 1,677,656         |  
|Interest paid through
      the issuance of shares                                |   | -                 |   |   | 23,255            |  
|Amortization of debt discounts                                                    |   | 677,439           |   |   | 112,156           |  
|Amortization of
      intangible assets                                           |   | 1,105,932         |   |   | 808,735           |  
|Loss on settlement of payables                                                    |   | 1,826,684         |   |   | -                 |  
|Loss on extinguishment
      of debt                                              |   | 174,475           |   |   | 2,174,408         |  
|Derivative liability in excess of face
      value of debt                        |   | 607,230           |   |   | 69,419            |  
|Change in fair value of
      derivative liability                                |   | (302,596          | ) |   | (930,345          | )
|Gain on foreign currency transactions                                             |   | (11,422           | ) |   | (1,396            | )
|Interest imputed on
      notes payable - related party                           |   | 135,421           |   |   | 241,856           |  
|Changes in operating assets and liabilities:                                      |   |                   |   |   |                   |  
|Prepaid expenses and
      other current assets                                   |   | -                 |   |   | 11,250            |  
|Accounts payable and accrued
      liabilities                                    |   | 1,436,344         |   |   | 363,109           |  
|Accounts payable and
      accrued liabilities - related parties                  |   | 85,389            |   |   | 890,057           |  
|Deferred revenue                                                                  |   | 157,442           |   |   | -                 |  
|Net cash used in operating
      activities                                       |   | (513,632          | ) |   | (394,127          | )
|                                                                                  |   |                   |   |   |                   |  
|CASH FLOWS FROM INVESTING
      ACTIVITIES                                        |   |                   |   |   |                   |  
|                                                                                  |   |                   |   |   |                   |  
|Issuance of loan receivable
      for equipment                                   |   | (12,000           | ) |   | -                 |  
|Net cash used in investing activities                                             |   | (12,000           | ) |   | -                 |  
|                                                                                  |   |                   |   |   |                   |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |   |                   |   |   |                   |  
|                                                                                  |   |                   |   |   |                   |  
|Bank overdraft                                                                    |   | (5,552            | ) |   | (2,154            | )
|Proceeds from exercise of
      warrants                                          |   | 500               |   |   | 325               |  
|Proceeds from convertible notes net of
      issuance costs                       |   | 596,450           |   |   | 258,000           |  
|Proceeds from loans payable                                                       |   | 229,000           |   |   | -                 |  
|Proceeds from loans payable - shareholders                                        |   | 2,039,136         |   |   | 1,285,974         |  
|Repayments from loans payable
      - shareholders                                |   | (1,681,137        | ) |   | (727,218          | )
|Repayments of convertible notes                                                   |   | (189,872          | ) |   | -                 |  
|Repayments of notes payable -
      related party                                 |   | (439,000          | ) |   | (420,800          | )
|Net cash provided by financing activities                                         |   | 549,525           |   |   | 394,127           |  
|                                                                                  |   |                   |   |   |                   |  
|INCREASE (DECREASE) IN CASH                                                       |   | 23,893            |   |   | -                 |  
|                                                                                  |   |                   |   |   |                   |  
|CASH, BEGINNING OF THE YEAR                                                       |   | -                 |   |   | -                 |  
|CASH, ENDING OF THE YEAR                                                          | $ | 23,893            |   | $ | -                 |  

F-7

---

Hybrid Coatings Technology Inc. Consolidated
Statements of Cash FlowsFor the Years Ended December 31, 2015 and
2014

|Supplemental disclosure of cash flow
      information                                                               |   |           |  |   |           | 
|-------------------------------------------------------------------------------------------------------------------- | - | --------- |  | - | --------- | 
|Cash paid during the period
      for:                                                                               |   |           |  |   |           | 
|Interest                                                                                                             | $ | 50,343    |  | $ | 52,733    | 
|Income taxes                                                                                                         | $ | -         |  | $ | -         | 
|                                                                                                                     |   |           |  |   |           | 
|Non cash investing and
      financing activities:                                                                   |   |           |  |   |           | 
|                                                                                                                     |   |           |  |   |           | 
|Acquisition of intangible
      assets through issuance of note payable                                              | $ | -         |  | $ | 2,500,000 | 
|Acquisition of intangible assets through
      issuance of preferred stock                                           | $ | 102,480   |  | $ | -         | 
|Reclassification of accounts
      payable related party to loans payable stockholders                               | $ | -         |  | $ | 25,000    | 
|Reclassification of accounts payable related
      party to loans payable stockholders                               | $ | -         |  | $ | 25,560    | 
|Preferred stock issued for
      payment of note-payable-related party                                               | $ | 150,000   |  | $ | -         | 
|Common stock issued and payable for accounts
      payable                                                           | $ | -         |  | $ | 92,590    | 
|Common stock issued and
      payable for interest accrual                                                           | $ | -         |  | $ | 32,603    | 
|Common stock issued for settlement of
      accounts payable - related party                                         | $ | 1,752,134 |  | $ | 1,046,571 | 
|Warrants and common stock
      issued and payable for principal and interest accrual on Convertible
      Debenture | $ | 147,650   |  | $ | 55,692    | 
|Common stock issued for Senior Secured
      Convertible Debenture                                                   | $ | -         |  | $ | 29,800    | 
|Common stock issued for
      payment of note payable - related party                                                | $ | -         |  | $ | 872,160   | 
|Cashless exercise of warrants                                                                                        | $ | 410       |  | $ | 873       | 
|Common stock issued for debt                                                                                         | $ | 1,133,590 |  | $ | -         | 
|Warrants and common stock issued for
      settlement of liabilities                                                 | $ | 1,106,410 |  | $ | -         | 
|Exchange of debt with
      stockholders for common stock                                                            | $ | 36,103    |  | $ | -         | 
|Derivative debt discount                                                                                             | $ | 931,659   |  | $ | -         | 
|Reduction of derivative
      liability on redemption of debt                                                        | $ | 754,873   |  | $ | -         | 
|Warrants issued for cancellation of stock                                                                            | $ | 1,950     |  | $ | -         | 

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

F-8

---

Hybrid Coatings Technology Inc.Notes to
Consolidated Financial Statements December 31, 2015 and 2014

NOTE 1  NATURE OF BUSINESS AND GOING CONCERN

Nature of Business Overview

Hybrid Coating Technologies Inc. (the Company, HCT) was
incorporated in the State of Nevada on July 8, 2010. Our operations are now
focused on the manufacturing and sale of Green Polyurethane, including Green
Polyurethane Monolithic Floor Coating and Green Polyurethane Binder, an
alternative non-toxic (isocyanate-free) polyurethane.

Going Concern

The Company remains highly dependent upon funding from
non-operational sources, principally related parties. The Companys consolidated
financial statements have been presented on the basis that it is a going
concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has incurred net
losses of approximately $29,354,000 since inception, and has a working capital
deficit of $6,731,297 as of December 31, 2015. These conditions raise
substantial doubt about the Companys ability to continue as a going concern.
The consolidated financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
outcome of these uncertainties.

There are no assurances that the Company will be able to either
(1) achieve a level of revenues adequate to generate sufficient cash flow from
operations; or (2) obtain additional financing through either private placement,
public offerings and/or bank financing necessary to support the Company's
working capital requirements. To the extent that funds generated from operations
and any private placements, public offerings and/or bank financing are
insufficient, the Company will have to raise additional working capital. No
assurance can be given that additional financing will be available, or if
available, will be on terms acceptable to the Company. If adequate working
capital is not available, the Company may be required to curtail or cease its
operations.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation  The financial
statements of the Company have been prepared in accordance with generally
accepted accounting principles in the United States of America and are presented
in US dollars. The Companys fiscal year end is December 31.

Principles of Consolidation  The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Nanotech International, Inc. (Nanotech). All
significant inter-company balances and transactions have been eliminated in the
consolidated financial statements.

Use of EstimatesThe preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reported period. Actual results could differ
from those estimates.

Cash and Cash EquivalentsThe Company
maintains various cash balances in two financial institutions located in Daly
City, California. These balances are fully insured by the Federal Deposit
Insurance Corporation, which insures up to $250,000. On occasion, balances may
temporarily exceed such coverage. The Company considers all highly liquid debt
instruments, which could include commercial paper and certificates of deposits,
with an original maturity of three months or less to be cash equivalents.
Investments with maturities greater than three months and less than on year are
classified as short term investments.

Loan ReceivableLoan receivable consists
of an equipment loan entered into during 2015. The Company has classified this
as a long-term asset in the balance sheet because the loan is due in 10 years.
The Company evaluates these accounts receivable for collectability considering
the results of operations of these related entities and when necessary records
allowances for expected unrecoverable amounts. To date, no allowances have been
recorded.

Intangible AssetsIntangible assets are
comprised of license agreements with Nanotech Industries, Inc. which are
amortized on a straight-line basis over the assets respective life, ranging
from 24 months to 120 months.

F-9

---

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Impairment of Long-Lived Assets–Long-lived assets to be held and used are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of such asset may not
be recoverable. The determination of recoverability of long-lived assets is based on an estimate of undiscounted future cash flows resulting from the use of the asset or its disposition. Measurement of an impairment loss for long-lived assets that
management expects to hold and use is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or net realizable value.

Revenue Recognition–Revenue is recognized when persuasive evidence of an arrangement exists, goods are delivered, sales price is determinable, and collection is reasonably assured.

Sales to one customer comprised 78% of the Company’s total sales for the year ended December 31, 2015. Sales to one customer comprised 87% of the Company’s total sales for the year ended December 31, 2014. As current period revenues are
not significant, the loss of customers would not have a material effect on the Company.

Income Taxes–Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently payable plus deferred taxes. Deferred income taxes are provided for the
estimated income tax effect of temporary differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets are also provided for certain tax loss carryforwards and tax credit carryforwards. A valuation
allowance is established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As long as the Company is categorized as a development stage company, the net amount of
any potential deferred tax assets will be off-set by such valuation allowance. Deferred income taxes are measured using the enacted tax rates that are assumed will be in effect when the asset and liability basis differences reverse and/or when the
tax loss carryforwards and tax credit carryforwards are utilized.

A tax benefit from an uncertain position is recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater
than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of December 31, 2015 and 2014, the Company had not recorded any tax benefits from uncertain tax
positions.

Fair Value–ASC 820 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or
liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the
extent that inputs are available without undue cost and effort.

As of December 31, 2015 and 2014, the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.

F-10

---

The following table sets forth a reconciliation of changes in
the fair value of financial assets and liabilities classified as Level 3 in the
fair value hierarchy:

|                                                                                                                          |   | Significant Unobservable
      Inputs |  
|------------------------------------------------------------------------------------------------------------------------- | - | ------------------------------------- | -
|                                                                                                                          |   | (Level 3)                             |  
|                                                                                                                          |   | Year Ended December 31,               |  
|                                                                                                                          |   | 2015                                  |  
|Beginning balance                                                                                                         | $ | 181,723                               |  
|Change in fair value of derivative liabilities                                                                            |   | (302,596                              | )
|Settlements                                                                                                               |   | (754,873                              | )
|Additions                                                                                                                 |   | 1,014,703                             |  
|Ending balance                                                                                                            | $ | 138,957                               |  
|                                                                                                                          |   |                                       |  
|Change in unrealized gains included in
      earnings
relating to derivatives
still held as of December 31, 2015 and 2014 | $ | 302,596                               |  

Stock-Based CompensationFor stock and
stock options awarded in return for services rendered, the expense is measured
at the grant-date fair value of the award and recognized as compensation expense
on a straight-line basis over the service period, which is the vesting period.
The Company estimates forfeitures that it expects will occur and records expense
based upon the number of awards expected to vest.

Earnings (Loss) per ShareBasic net loss
per share amounts are computed by dividing the net loss by the weighted average
number of common shares outstanding over the reporting period. In periods in
which the Company reports a net loss, dilutive securities are excluded from the
calculation of diluted net loss per share amounts as the effect would be
anti-dilutive.

For the years ended December 31, 2015 and 2014, the following
share equivalents related to convertible debt and warrants to purchase shares of
common stock were excluded from the computation of diluted net loss per share,
as the inclusion of such shares would be anti-dilutive:

|                            |  | Year Ended December 31, | 
|--------------------------- |  | ----------------------- | 
|Common Shares Issuable for: |  | 2015                    | 
|Convertible debt            |  | 294,478,048             | 
|Stock warrants              |  | 27,146,592              | 
|                            |  | 321,624,640             | 

Recently Issued Accounting PronouncementsThe Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow.

In May 2014, the Financial Accounting Standards Board issued
Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers
(ASU 2014-09), which supersedes nearly all existing revenue recognition
guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues
when promised goods or services are transferred to customers in an amount that
reflects the consideration to which an entity expects to be entitled for those
goods or services. ASU 2014-09 defines a five step process to achieve this core
principle and, in doing so, more judgment and estimates may be required within
the revenue recognition process than are required under existing GAAP. The
standard is effective for annual periods beginning after December 15, 2016, and
interim periods therein, using either of the following transition methods: (i) a
full retrospective approach reflecting the application of the standard in each
prior reporting period with the option to elect certain practical expedients; or
(ii) a retrospective approach with the cumulative effect of initially adopting
ASU 2014-09 recognized at the date of adoption (which includes additional
footnote disclosures). The Company is currently evaluating the impact of its
pending adoption of ASU 2014-09 on its consolidated financial statements and
have not yet determined the method by which the Company will adopt the standard
in 2017.

In August 2014, the FASB issued ASU 2014-15, Disclosure of
Uncertainties about an Entitys Ability to Continue as a Going Concern. The new
standard requires management to assess the companys ability to continue as a
going concern. Disclosures are required if there is substantial doubt as to the
companys continuation as a going concern within one year after the issue date
of financial statements. The standard provides guidance for making the
assessment, including consideration of managements plans which may alleviate
doubt regarding the companys ability to continue as a going concern. ASU
2014-15 is effective for years beginning after December 15, 2016. We expect to
adopt the standard in the first quarter of 2017 and do not expect the adoption
of this pronouncement to have a material impact on our consolidated financial
statements.

F-11

---

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 amends previous guidance to require that debt issuance costs related to a
recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by
the amendments in this ASU. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have
not been previously issued. The Company expects that the affected amounts on its balance sheets will be reclassified within the balance sheets upon adoption of this ASU to conform to this standard. The Company expects to adopt this ASU during the
first quarter of 2016 and does not expect that the adoption of this ASU will have a material impact on its financial statements.

Subsequent Events– The Company has evaluated all transactions occurring between December 31, 2015 through the date of issuance of the consolidated financial statements for disclosure consideration.

NOTE 3 – EQUIPMENT LOAN RECEIVABLE

On October 5, 2015, the Company entered into an equipment loan agreement with a manufacturer whereby the Company agreed to loan $17,000 to the manufacturer with a maturity of 10 years at an interest rate of 0.1 % per annum. At December 31, 2015,
$12,000 had been loaned. The Company loaned an additional $5,000 in January 2016.

NOTE 4 – INTANGIBLE ASSETS

From July 12, 2010 through December 13, 2013, the Company entered into a licensing agreement (the “Licensing Agreement”), a second licensing agreement (the “Second Agreement”), and four amendments to the Licensing Agreement
with Nanotech Industries, Inc., (“NTI” or “Licensor”, a privately-held entity deemed a related party by virtue of common ownership and control), for the rights to manufacture and distribute environmentally safe coatings
(“Coating Products”), the manufacturing and sale of environmentally safe adhesives and sealants (“Sealant Option”), and expanded to include polyurethane foam for the textile industry, using NTI’s technology.

As per the Licensing Agreement, the Company had a three-year exclusivity for all of North America, in exchange for a licensing fee of $500,000 and 5% royalty on Gross Coating Product sales within North America, and has the option to obtain
rights for the rest of the world on an exclusive perpetual basis, in exchange for the issuance of stock to equal 62.5% of the Company’s total shares. If this option is exercised, NTI would obtain voting control of the Company. On March 17,
2011, the Company expanded the territory under the Licensing Agreement to include the Customs union of Belorussia, Kazakhstan Republic and Russian Federation (the “Russian Territory”), on an exclusive basis for a period of ten years, in
exchange for a royalty of 7.5% and a one-time fee of $150,000. On July 7, 2011, the Company further expanded the territory under the Licensing Agreement to include the European Continent (“European Rights”) on an exclusive basis for
a period of five years, in exchange for a one-time fee of $1,250,000, of which $567,549 had been paid, with the remainder accrued in notes payable – related party as of December 31, 2015 and 2014. On June 28, 2013, a third amendment
was made to the Licensing Agreement extending this exclusivity period by 36 months to July 12, 2016. On February 12, 2016, the eleventh amendment was made to the Licensing Agreement extending this exclusivity period to December 31, 2020.

On October 18, 2011, the Company expanded the Licensing Agreement to include the option to manufacturing and sale of environmentally safe adhesives and sealants, in exchange for consideration of a one-time fee of an incremental 15% ownership stake
in the Company and a royalty of 7.5% of gross revenue from the sale of Sealant Products. As of December 31, 2015 and 2014, the Company has not issued the shares and the option has expired.

On November 22, 2011, the Company sold the Canadian portion of its North American Rights for $150,000 to a related party; Hybrid Coatings Canada Inc., a company whose CEO is a shareholder of, and consultant to, the Company. The proceeds of the
sale were recorded as a reduction of the carrying value of the asset, with no gain or loss.

At December 31, 2015 and 2014, management determined, through independent valuation, that the fair value of the Licensing Agreement exceeded the carrying value and no impairment adjustment was deemed necessary. The amount of amortization of the
North American Rights for the years ended December 31, 2015 and 2014 was $0 and $36,463, respectively. The Company recognized amortization of the Russian Territory rights for the years ended December 31, 2015 and 2014 of $4,800 for both
years. The Company recognized amortization of the European Rights of $140,760 for the years ended December 31, 2015 and 2014.

F-12

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NOTE 4  INTANGIBLE ASSETS (contd)

On March 31, 2014, the Company and NTI entered into a fifth
amendment to the Licensing Agreement, whereby the license to sell and
manufacture Licensors products has been expanded to include synthetic leather,
sealants and adhesives (Added Applications). In consideration for the Added
Applications, the Company shall pay the Licensor an amount equal to US
$2,000,000 to be paid within 36 months of the execution of this Fifth Amendment
Agreement (Deadline), included in note payable - related party at December 31,
2015 and 2014. Should the Company not pay the consideration within the Deadline,
the Company shall lose all rights to the Added Applications. To date the company
has not paid any consideration pertaining to the Added Applications.

On April 9, 2014, the Company signed a sixth amendment to the
Licensing Agreement with NTI extending the terms of the note from 24 months to
42 months making it payable by May 29, 2015.

On May 6, 2014, the Company signed a seventh amendment to the
Licensing Agreement with NTI whereby the license to sell and manufacture
Licensors products has been expanded to include spray foam insulation (SFI
Application). In consideration for the SFI Application:

| | 1) | The Company shall pay the Licensor an amount equal to US
      $500,000 by May 6, 2015. Should the Company not pay the consideration
      within the Deadline, the Company shall lose all rights to the SFI
      Application.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 2) | The Company shall issue to NTI an aggregate number of
      shares of common stock which shall give NTI , immediately upon such
      issuance of shares an additional 15% ownership stake in the Company (15%
      Share Issuance, Exclusivity Shares), to be issued to the Licensor
      within 24 months of the execution of this Seventh Amendment Agreement
      (Issuance Deadline). Should the 15% Share Issuance not be issued within
      the Issuance Deadline, the Company shall lose the exclusivity to the
      manufacturing and sale for the SFI Application and shall solely retain
      such rights to the SFI Application on a non-exclusive
  basis.

On August 19, 2014, the Company signed an eighth amendment to
the Licensing Agreement with NTI whereby the parties amended the agreement to
expand the definition of the Exclusivity Shares for various territories the
whole as set forth below, to include warrants at the sole discretion of the
Licensor, which warrants shall include a cashless exercise and be exercisable at
a price per share equal to the common stock par value and expiring 10 years from
the date of issuance.

On September 10, 2014, the Company signed a ninth amendment to
the Licensing Agreement with NTI whereby the parties amended the Licensing
Agreement (and subsequent Amendments) to expand the definition of certain
licensing fees and consideration, to include payment in shares of the Companys
common stock and/or warrants at the sole discretion of the Company, which shares
shall have a fair market value calculated as the closing price reported by the
over-the-counter market for the previous trading day and, which warrants shall
include a cashless exercise and be exercisable at a price per share equal to the
common stock par value and expiring 10 years from the date of issuance.

Also on September 10, 2014, the Company issued 8,113,116 shares
valued at $892,443 based on the market price on the date of grant as payment for
the Spray Foam Insulation License and European License, the Company applied
$500,000 against the amounts owing for the SFI Application purchase and $372,160
for European License, and the remaining $20,283 as a loss on settlement of debt.

On August 10, 2015 the Company signed a tenth amendment to the
Licensing Agreement with NTI whereby the parties amended the Licensing Agreement
(and subsequent Amendments) to expand the definition of Licensor product to
include polyurethane foam packaging (PFP). In exchange the company issued
420,000 Series B preferred shares valued at $102,480.

As of December 31, 2015, NTI owned 18% of the Company.

On February 12, 2016, the Company signed an eleventh amendment
to the Licensing Agreement with NTI whereby the parties amended the Licensing
Agreement (and subsequent Amendments) to extend the exclusivity period, to
December 31, 2020 (2020 Extended Exclusivity Period). In consideration for the
2020 Extended Exclusivity Period, the Company shall pay the following
consideration to NTI:

NOTE 4  INTANGIBLE ASSETS (contd)

| | i) | Issue 2,240,000 shares of Series B Preferred Stock
      (Series B Preferred Shares), to be issued at the time of execution of
      the Eleventh Amendment Agreement (Share Issuance
  Deadline).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13

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| | ii)  | Issue purchase warrants to purchase 31,300,000 shares of
      Series B Preferred Stock (90-Day Warrants), to be issued 90 days
      following the execution of the amendment (90-Day Deadline). The 90-Day
      Warrants shall be exercisable at any time from the date of issuance at a
      price per share equal to the par value of the Series B Preferred Stock of
      $313,000 and shall expire ten years from the date of issuance.  
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iii) | Issue purchase warrants to purchase 126,000,000 shares of
      Series B Preferred Stock (12-Month Warrants), to be issued 12 months
      following the execution of this Agreement (12-Month Deadline). The
      12-Month Warrants shall be exercisable at any time from the date of
      issuance at a price per share equal to the par value of the Series B
      Preferred Stock and shall expire ten years from the date of
    issuance.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | (The 90-Day Warrants and the 12-Month Warrants
      collectively referred to as the Warrants).                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iv)  | Pay the Licensor an amount equal to US $1,500,000, to be
      paid within twelve months of the execution of this Eleventh Amendment
      Agreement (Fee Deadline).                                                                                                                                                                                                                                                                                

Should the Company not meet any of: (i) the Share Issuance
Deadline; or (ii) the 90-Day Deadline; or (iii) the 12-Month Deadline; or (iv)
the Fee Deadline (individually referred to as Unmet Deadline) and should such
Unmet Deadline not be extended by the Parties, the Company shall continue to
have the right to the Manufacturing and Sale for the Territory, on a
non-exclusive basis for the duration of the Agreement. The Company will assess
the valuation of the Series B Preferred Stock and warrants during the first
quarter of 2016.

Intangible assets activity is as follows for the years ended
December 31, 2015 and 2014:

|                                        |   | 2015       |   |   | 2014      |  
|--------------------------------------- | - | ---------- | - | - | --------- | -
|                                        |   |            |   |   |           |  
|Net intangible asset, beginning of year | $ | 2,136,205  |   | $ | 444,940   |  
|Purchases                               |   | 102,480    |   |   | 2,500,000 |  
|Less: current
      amortization        |   | (1,105,932 | ) |   | (808,735  | )
|Net intangible asset, end of year       | $ | 1,132,753  |   | $ | 2,136,205 |  

The balance of intangible assets is as follows as of December
31, 2015 and 2014:

|                               |   | 2015       |   |   | 2014       |  
|------------------------------ | - | ---------- | - | - | ---------- | -
|Intangible assets              | $ | 4,502,480  |   | $ | 4,400,000  |  
|Less, accumulated amortization |   | (3,369,727 | ) |   | (2,263,795 | )
|Intangible assets, net         | $ | 1,132,753  |   | $ | 2,136,205  |  

F-14

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NOTE 4  INTANGIBLE ASSETS (contd)

A summary of the licenses acquired to date from NTI is as
follows:

|      | License Rights
      Overview                                                | Licensed Region                                               | Term (date) of
      License | Original Cost | Carrying Value
      at December 31, 2015 | Carrying Value at
      December 31, 2014
|----- | ---------------------------------------------------------------------------- | ------------------------------------------------------------- | ---------------------------- | ------------- | ----------------------------------------- | -----------------------------------------
|A     | Coating Products                                                             | North America                                                 | 12-Jun-10 6 years            | $500,000      | $0                                        | $0                                       
|B     | Coating Products                                                             | Russian Territory                                             | 17-Mar-11 10 years           | $150,000      | $24,800                                   | $29,600                                  
|C     | Coating Products                                                             | European Continent                                            | 07-Jul-11 5 years            | $1,250,000    | $129,020                                  | $269,780                                 
|D     | Spray Foam Insulation                                                        | North America, European
      Continent and Russian Territory | 06-May-14 2 years            | $500,000      | $86,865                                   | $336,825                                 
|E     | Added Applications including
      synthetic leather, sealants and adhesives | North America, European
      Continent and Russian Territory | 31-Mar-14 3 years            | $2,000,000    | $833,333                                  | $1,500,000                               
|F     | Polyurethane Foam Packaging                                                  | North America                                                 | 10-July -16                  | $102,480      | $58,735                                   | $0                                       
|TOTAL |                                                                              |                                                               |                              | $4,502,480    | $1,132,753                                | $2,136,205                               

NOTE 5  LOANS PAYABLE

Loans payable include a loan from a non-related party that was
issued for $75,000 on November 16, 2010 and was repayable on May 16, 2011 with a
10% premium. This $7,500 10% premium was fully amortized and on April 29, 2011,
the lender converted $55,000 of this debt to convertible debentures. The balance
at December 31, 2015 and 2014 was $27,500, and the loan is currently in default.
The Company has not received any notices from the loan holder with respect to
the defaults.

In 2014, 2013, 2012, and 2011, the Company entered into various
loan agreements totaling $977,500 at interest rates ranging from 15% - 25%. In
addition in 2013, the Company issued 110,000 warrants attached to these loans.
These loans are all currently in default. The creditors have not called these
loans.

In 2015, lenders advanced $229,000 in non-interest bearing
demand loans.

The Company recorded $0 and $5,455 of interest expense related
to amortization of the debt discounts during the years ended December 31, 2015
and 2014, respectively. During the years ended December 31, 2015 and 2014, total
interest expense related to loans payable was $172,775 and $174,102,
respectively, and the total interest paid was $50,343 and $40,266, respectively,
and accrued interest at December 31, 2015 and 2014 was $396,510 and $249,285,
respectively.

F-15

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NOTE 6  LOANS PAYABLE  SHAREHOLDERS

During 2013, 2012 and 2011, the Company entered into various
loan agreements and arrangements for loans with certain shareholders. The loans
all had different maturity dates ranging from 2011 to 2015 and interest rates
that range from 2% to 18%. The Company was in default on loans totalling
$943,019 as of December 31, 2014. The shareholders have not called these
loans.

During the year ended December 31, 2015, a shareholder-creditor
transferred $100,000 of its outstanding balance owed by the Company to a third
party. The Company and the third party agreed to amend the loan agreement to
allow the third party to convert the principal balance into shares of the
Companys stock. The third party converted the principal balance of $100,000
into 6,252,324 shares of the Companys common stock. The shares had a fair value
of $258,141 and the Company recorded a loss on debt extinguishment of $158,141.

During the year ended December 31, 2015, the Company received
$1,816,236 in shareholder advances and repaid $1,452,237. During the year ended
December 31, 2014, the Company received $1,311,534 in shareholders advances and
repaid $726,573. The Company had an outstanding balance of $2,197,082 and
$1,944,504 as of December 31, 2015 and 2014, respectively.

The debt discount during the year ended December 31, 2015 was
$0. However, the Company recorded $21,980 of interest expense related to the
amortization of the debt discount on loans payable to shareholders during the
year ended December 31, 2014. During the years ended December 31, 2015 and 2014,
total interest expense related to these loans payable to shareholders was
$120,839 and $104,569, respectively, and the total interest paid was $4,371 and
$12,467, respectively.

NOTE 7  CONVERTIBLE DEBENTURES

On April 29, 2011, the Company issued convertible debentures
for proceeds of $1,201,000 (the April 29 debenture) and on February 21, 2012,
issued an additional $119,500 (the Feb 21 debenture and together the
Debentures) with a maturity of 36 months and a coupon rate of 10% per annum
payable in cash or capital stock at the Companys discretion. The Debentures
were amended on November 20, 2013. The Debentures are held by third parties and
by non-controlling shareholders, and are convertible as follows:

April 29, 2011 convertible debentures

-by dividing the conversion amount by a conversion factor of
1.4 yielding Units of the Company where each Unit (at a price of $1.40 per
Unit), is comprised of 1 share of common stock and 2 warrants to purchase a
share of common stock each of the Company with an exercise price equal to the
conversion price and a maturity at April 29, 2014 extended to April 29, 2016 per
the amendment on November 20, 2013. Warrants are exercisable at the option of
the holder at any time prior to maturity, and expire 36 months from the date of
issuance.

February 21, 2012 convertible debentures:

-by dividing the conversion amount by a conversion factor of
1.45 yielding Units of the Company where each Unit (at a price of $1.45 per
Unit), is comprised of 1 share of common stock and 2 warrants to purchase a
share of common stock each of the Company with an exercise price equal to the
conversion price and a maturity at February 21, 2015 extended to February 21,
2017 per the amendment on November 20, 2013. Warrants are exercisable at the
option of the holder at any time prior to maturity, and expire 36 months from
the date of issuance.

Both debentures carry an anti-dilution provision. The
conversion price applicable to the debentures is subject to reset in the event
of a Dilutive Issuance (as defined in the debenture agreement) by the Company. A
Dilutive Issuance excludes shares or options issued to employees, officers,
directors or consultants pursuant to stock option plans approved by the Board of
Directors.

The Company recorded a corresponding discount of $46,721 and
$558,248 against the carrying value of the convertible debentures during the
years ended December 31, 2012 and 2011, respectively. The discounts are
amortized using the effective interest method over the term of the debt.

NOTE 7  CONVERTIBLE DEBENTURES (contd)

During the year ended December 31, 2015, the Company issued
5,420,906 shares of common stock valued at $132,050 to pay for accrued interest.
At December 31, 2015, approximately $82,000 (2014 - $95,000) in interest has
been accrued.

On November 12, 2014, the Company issued convertible debentures
for $25,000, a maturity of 24 months and a coupon rate of 10% per annum payable
in cash or capital stock at the Companys discretion. The debentures are held by
third parties and by non-controlling shareholders. The conversion price is
calculated as 45% of the average trading price for the five days prior to the
conversion, however, the conversion price can never be lower than $0.08 per
share nor can it exceed $0.30 per share.

F-16

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During the year ended December 31, 2015, the Company incurred interest expense related to these convertible debentures of $58,193 and amortized debt discount of $675,893. During the year ended December 31, 2014, the Company incurred interest
expense related to these convertible debentures of $15,400 and amortized debt discount of $44,507.

NOTE 8 – SENIOR SECURED CONVERTIBLE DEBENTURES

On August 16, 2010, the Company entered into a securities purchase agreement with a third party for the subscription of senior secured convertible debentures (“SSCD”) for an amount of $400,000. The debentures have a maturity date of
August 16, 2012 with a coupon of 10% and convert into shares of common stock of the Company at a price of $0.75 per share. The notes are secured by all assets of the Company. The subscriber also received 533,336 Series A warrants with a maturity
of 1 year and an exercise price of $1.25 per share and 133,360 Series B warrants with a maturity of 3 years and an exercise price of $1.50 per share. The debentures and Series A warrants carry registration rights whereby upon the
consummation of the reverse merger with Nanotech, the shares underlying the debentures and Series A warrants will be registered as soon as is practicable. All prices and warrants issued have been adjusted for the post-acquisition of Nanotech by HCT.
As of December 31, 2015, these warrants have expired.

During the year ended December 31, 2011, $200,000 of the debt was repaid through the issuance of a Convertible Debenture due April 29, 2014. The balance due at December 31, 2015 and 2014 remained at $200,000. The Company is in default of
payment of the debentures which matured on August 16, 2012. No notices have been issued by the debenture holder.

Interest of $20,000 was accrued during the year ended December 31, 2015 (2014 - $20,000), for an outstanding balance of $68,159 (2014 - $48,159) that has been accrued.

The obligations of the Company under the SSCD will rank senior to all outstanding and future indebtedness of the Company and shall be secured by a first priority, perfected security interest in all the assets of the Company.

NOTE 9 – CONVERTIBLE NOTES

On July 23, 2014, the Company entered into an agreement with a lender to lend a principal sum up to $250,000 including an original issue discount (“OID”) of $25,000. Upon signing, the lender was required to pay $111,111 with
the OID prorated based on the actual consideration paid. The lender may pay additional amounts at its own discretion. The OID on the $111,111 investment was $11,111 and was recorded as debt discount. In March 2015, the Company borrowed an
additional $62,223 with and OID of $12,223 and in November 2015 the Company borrowed another $43,556 with and OID of $8,556 from the investor. If the Company pays the lender within 90 days then there is 0% interest, and if the
Company pays after 90 days then there is a one-time interest charge of 12% applied to the outstanding balance. The maturity date is 2 years from the date of each borrowing and the outstanding balance and any interest is due and payable. The note is
convertible into common shares of the Company. The conversion price is 60% of the lowest trade price of the 25 trading days prior to the conversion.

In the case that conversion shares are not deliverable, an additional 10% penalty will apply; and if the shares are ineligible for deposit into the Depository Trust Company system and only eligible for Xclearing deposit, an additional 5% penalty
shall apply; and in the case of both, an additional cumulative 15% penalty shall apply.

F-17

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NOTE 9 – CONVERTIBLE NOTES (cont’d)

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $153,702, a debt discount of $100,000 and recognized the difference as additional interest during the year ended
December 31, 2014. The Company recorded a derivative liability of $95,613 on the amount borrowed in March 2015 with $50,000 being recorded as a debt discount and recognized the difference as additional interest expense and recognized another
derivative liability on the amount borrowed in November 2015 of $39,443 with a corresponding amount being recorded as a debt discount.

The Company repaid the original borrowing of $111,111 and accrued interest of $13,333 in January 2015. The Company amortized the remaining debt discount of $86,605 on the original borrowing as interest expense on the date the note was
repaid. During the year ended December 31, 2015, the Company amortized $151,653 of the debt discount as interest expense and the lender converted $62,223 of debt for 49,230,318 common shares.

On October 3, 2014, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $115,000. Upon signing, the Company received $108,000 in cash and paid fees of $7,000 recorded as debt
issuance costs. The
maturity date was April 3, 2015 and the interest rate is 12% per annum. The note and any accrued unpaid interest are convertible into common shares of the Company. The conversion price is 60% of the lowest trade price of the 20 trading days prior to
the conversion. The Note has redemption premiums, if the Note is repaid prior to maturity, of 130% up until the 160th day and 150% thereafter up until maturity.

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $73,357 and a debt discount was recorded. During the year ended December 31, 2015, the Company fully amortized the
debt issuance costs on the note as interest expense. The Company has repaid the loan through the conversion of $36,239 for 4,919,344 common shares. The balance owed of $78,761 was paid through a cash payment of $130,629 with the
remainder applied against accrued interest of $7,140 and $44,728 recorded as additional interest expense and prepayment penalties.

On November 13, 2014, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $54,000. Upon signing, the Company received $50,000 in cash and paid fees of $4,000, recorded as a debt issuance
costs. The maturity date was August 17, 2015 and the interest rate is 8% per annum. If the note is unpaid by maturity the interest rate becomes 22% per annum thereafter. The note and any accrued unpaid interest are convertible into common shares of
the Company 180 days after the issuance of this note. The conversion price is 61% of the lowest trade price of the 10 trading days prior to the conversion.

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $65,717 of which $50,000 was recorded as debt issuance costs, and $15,717 as additional interest expense.
During the year ended December 31, 2015, the Company amortized all $54,000 of the debt issuance costs as interest expense and recorded accrued interest of $2,191. The lender converted all $54,000 of debt and accrued interest of
$2,191 for 15,775,222 common shares.

On January 7, 2015, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $65,000. The Company received $50,000 in cash and paid fees of $15,000, recorded as a debt issuance costs. The maturity
date of the note was September 30, 2015 and the interest rate from the date of borrowing is 18% per annum. If the convertible note is unpaid by maturity the interest rate becomes 22% per annum thereafter. The convertible note and any accrued unpaid
interest is convertible into common shares of the Company 180 days after the issuance of this note. The conversion price is 50% of the lowest closing bid price of the 20 trading days prior to the conversion. The convertible note has redemption
premiums if the convertible note is repaid prior to 180 days of 120% of the principal and accrued interest.

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $111,083 of which $50,000 was recorded as debt issuance costs, and $61,083 as additional interest expense.
During the year ended December 31, 2015, the Company amortized all $65,000 of the debt issuance costs as interest expense and the lender converted all $65,000 of debt and $9,086 of interest for 68,142,510 common shares.

On January 13, 2015, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $52,500. Upon signing, the Company received $50,000 in cash and paid fees of $2,500, recorded as a debt
issuance costs. The
maturity date of the convertible note is January 13, 2016 and the interest rate from the date of borrowing is 8% per annum. If the note is unpaid by maturity the interest rate becomes 24% per annum thereafter. The note and any accrued unpaid
interest are convertible into common shares of the Company 180 days after the issuance of this Note. The conversion price is 60% of the lowest closing bid price of the 20 trading days prior to the conversion. The note has redemption premiums if the
note is repaid prior to 180 days of 110% to 135% based on the number of days after the issuance that the note is repaid.

F-18

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NOTE 9- CONVERTIBLE NOTES (contd)

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $109,533
of which $50,000 was recorded as debt issuance costs, and $59,533 as additional
interest expense. During the year ended December 31, 2015, the Company amortized
$52,500 of debt issuance costs as interest expense and recorded accrued interest
of $2,302.The lender converted the $52,500 debt and $2,302 in accrued interest
in exchange for 30,093,910 common shares.

On January 16, 2015, the Company entered into an agreement with
a lender whereby the lender lent a principal sum of $54,000. Upon signing, the
Company received $50,000 in cash and paid fees of $4,000, recorded as a debt
issuance costs. The maturity date is October 20, 2015 and the interest rate from
the date of borrowing is 8% per annum. If the note is unpaid by maturity the
interest rate becomes 22% per annum thereafter. The note and any accrued unpaid
interest is convertible into common shares of the Company 180 days after the
issuance of this note. The conversion price is 61% of the lowest trade price of
the 10 trading days prior to the conversion. The note has redemption premiums if
the note is repaid prior to 180 days of 135% of the outstanding principal and
accrued interest balances.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $82,026
of which $50,000 being recorded as debt issuance costs, and $32,026 as
additional interest expense. During the year ended December 31, 2015, the
Company amortized $54,000 of the debt issuance costs as interest expense and
recorded accrued interest of $2,349. The lender converted the $54,000 debt and
$2,349 in accrued interest in exchange for 19,849,893 common shares.

On January 21, 2015, the Company entered into an agreement with
a lender whereby the lender loaned a principal sum of $35,000. Upon signing, the
Company received $33,000 in cash and paid fees of $2,000, recorded as a debt
issuance costs. The maturity date is January 21, 2016 and the interest rate from
the date of borrowing is 8% per annum. If the note is unpaid by maturity the
interest rate becomes 22% per annum thereafter. The note and any accrued unpaid
interest are convertible into common shares of the Company 180 days after the
issuance of this note. The conversion price is 60% of the lowest closing bid
price of the 20 trading days prior to the conversion. The note has redemption
premiums if the note is repaid prior to 180 days of 135% of the outstanding
principal and accrued interest balances.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $65,569
of which $33,000 was recorded as debt issuance costs, and $32,569 as additional
interest expense. During the year ended December 31, 2015, the Company fully
amortized $35,000 of the debt issuance costs as interest expense. The lender
converted $35,000 of debt and $1,249 in interest expense in exchange for
19,746,921 common shares.

On January 28, 2015, the Company entered into an agreement with
a lender whereby the lender agreed to lend a principal sum of up to $220,000.
Upon closing, the Company received $35,000 in cash. The Company paid an OID of
$3,500 and an interest payable on issuance $3,850. The maturity date of the note
is January 28, 2016 and the interest rate from the date of borrowing is 10% per
annum which was recorded at issuance. If the note is unpaid by maturity the
interest rate becomes 20% per annum thereafter. The note and any accrued unpaid
interest are convertible into common shares of the Company 180 days after the
issuance of this note. The conversion price is 60% of the lowest trading price
of the 25 trading days prior to the conversion. The note has redemption premiums
if the note is repaid prior to 180 days of 135% of the outstanding principal and
accrued interest balances.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $80,513
of which $35,000 being recorded as debt issuance costs, and $45,513 as
additional interest expense. During the year ended December 31, 2015, the
Company amortized the $42,350 of the debt issuance costs as interest expense.
The lender converted the $42,350 of debt in exchange for 27,015,086 common
shares.

On February 5, 2015, the Company entered into an agreement with
a lender whereby the lender agreed to lend a principal sum of up to $250,000
with OID of 12% of all amounts borrowed. Upon closing, the Company received
$25,000 in cash and paid fees of $2,174, recorded as a debt discount. The
maturity date is February 5, 2017. The note does not bear interest, however, if
the note is unpaid by maturity the interest rate becomes 24% per annum
thereafter. The note and any accrued unpaid interest are convertible into common
shares of the Company 180 days after the issuance of this note. The conversion
price is 60% of the lowest trading price of the 25 trading days prior to the
conversion. The note has redemption premiums if the note is repaid prior to 180
days of 135% of the outstanding principal and accrued interest balances.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $50,952
of which $25,000 was recorded as debt issuance costs, and $25,952 as additional
interest expense. During the year ended December 31, 2015, the Company was
required to pay a penalty of $10,000 which was recorded as interest expense and
fully amortized $27,174 of the debt issuance costs as interest expense. The
lender converted $27,174 of debt and $13,937 of accrued interest in exchange for
40,282,727 common shares.

On March 6, 2015, the Company entered into an agreement with a
lender whereby the lender agreed to lend a principal sum of up to $100,000. Upon
closing, the Company received $25,000 in cash and recorded an OID $2,778 as debt
issuance costs. The maturity date is March 6, 2017. The note has a one-time interest
fee from the date of each borrowing of 12% per annum and was recorded at
issuance as debt discount in the amount of $3,333. If the note is unpaid by
maturity the interest rate becomes 24% per annum thereafter. The note and any
accrued unpaid interest are convertible into common shares of the Company 180
days after the issuance of this note. The conversion price is 60% of the lowest
closing bid price of the 20 trading days prior to the conversion. The note has
redemption premiums if the note is repaid prior to 180 days of 135% of the
outstanding principal and accrued interest balances.

F-19

---

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $50,880 of which $25,000 was recorded as debt issuance costs, and $25,880 as additional interest expense.
During the year ended December 31, 2015, the Company was required to pay a penalty of $10,000 which was recorded as interest expense and fully amortized $31,111 of the debt issuance costs as interest expense. The lender converted $31,100
of debt and $10,000 of accrued interest in exchange for 41,861,110 common shares.

On March 26, 2015, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $22,500. Upon signing, the Company received $18,750 in cash and paid fees of $3,750, recorded as a debt issuance costs.
The maturity date is March 26, 2016 and the interest rate from the date of borrowing is 8% per annum. If the note is unpaid by maturity the interest rate becomes 24% per annum thereafter. The note and any accrued unpaid interest are convertible into
common shares of the Company 180 days after the issuance of this note. The conversion price is 60% of the lowest trading price of the 20 trading days prior to the conversion. The note has redemption premiums if the note is repaid prior to 180 days
of 135% of the outstanding principal and accrued interest balances.

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $56,832 of which $18,750 was recorded as debt issuance costs, and $39,882 as additional interest expense.
During the year ended December 31, 2015, the Company fully amortized $22,500 of the debt issuance costs as interest expense. The lender converted $22,500 of debt and $1,042 of interest expense in exchange for 17,927,820 common shares.

On March 9, 2015, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $33,000. Upon signing, the Company received $30,000 in cash and paid fees of $3,000, recorded as a debt issuance costs.
The maturity date is December 11, 2015 and the interest rate from the date of borrowing is 8% per annum. If the note is unpaid by maturity the interest rate becomes 22% per annum thereafter. The note and any accrued unpaid interest are convertible
into common shares of the Company 180 days after the issuance of this note. The conversion price is 61% of the average of the three lowest trading prices of the 10 trading days prior to the conversion.

F-20

---

NOTE 9- CONVERTIBLE NOTES (contd)

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $9,812
with a corresponding amount recorded as debt issuance costs. During the year
ended December 31, 2015, the Company fully amortized $12,812 of the debt
issuance costs as interest expense. The lender converted $33,000 of debt and an
additional $22,245 in interest and penalties recorded as interest expense in
exchange for 22,222,414 common shares.

On March 31, 2015, the Company entered into an agreement with a
lender whereby the lender loaned a principal sum of $40,000. Upon signing, the
Company received $36,500 in cash and paid fees of $3,500, recorded as a debt
issuance costs. The maturity date is March 31, 2016 and the interest rate from
the date of borrowing is 10% per annum. If the note is unpaid by maturity the
interest rate becomes 24% per annum thereafter. The note and any accrued unpaid
interest are convertible into common shares of the Company 180 days after the
issuance of this note. The conversion price is 60% of the lowest trading prices
of the 40 trading days prior to the conversion.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $36,500
of which $34,762 was recorded as debt issuance costs and $1,738 as additional
interest expense. During the year ended December 31, 2015, the Company fully
amortized $40,000 of the debt issuance costs as interest expense. The lender
converted $40,000 of debt and an additional $2,254 in interest expense in
exchange for 42,412,491 common shares.

On May 8, 2015, the Company entered into an agreement with a
lender whereby the lender loaned a principal sum of $25,000. Upon signing, the
Company received $17,000 in cash and paid fees of $8,000, recorded as a debt
issuance costs. The maturity date is May 8, 2016 and the interest rate from the
date of borrowing is 8% per annum. If the note is unpaid by maturity the
interest rate becomes 24% per annum thereafter. The note and any accrued unpaid
interest are convertible into common shares of the Company 180 days after the
issuance of this note. The conversion price is 60% of the lowest trading prices
of the 15 trading days prior to the conversion.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $19,944
of which $17,000 was recorded as debt discount and $2,944 as additional interest
expense. During the year ended December 31, 2015, the Company amortized $16,189
of the debt discount as interest expense and recorded accrued interest of
$1,208. The lender converted $24,200 of debt in exchange for 47,367,424 common
shares.

On May 21, 2015, the Company entered into an agreement with a
lender whereby the lender loaned a principal sum of $38,000. Upon signing, the
Company received $35,000 in cash and paid fees of $3,000, recorded as a debt
issuance costs. The maturity date is February 26, 2016 and the interest rate
from the date of borrowing is 8% per annum. If the note is unpaid by maturity
the interest rate becomes 22% per annum thereafter. The note and any accrued
unpaid interest are convertible into common shares of the Company 180 days after
the issuance of this note. The conversion price is 61% of the average of the
three lowest trading prices of the 10 trading days prior to the conversion.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $25,808
with a corresponding amount recorded as debt issuance costs. During the year
ended December 31, 2015, the Company amortized $31,068 of the debt issuance
costs as interest expense. The lender converted $38,000 of debt and an
additional $1,520 in interest and $38,000 in penalties recorded as interest
expense in exchange for 87,028,097 common shares.

On June 9, 2015, the Company entered into an agreement with a
lender whereby the lender loaned a principal sum of $25,000. Upon signing, the
Company received $19,700 in cash and paid fees of $5,300, recorded as a debt
issuance costs. The maturity date is June 9, 2016 and the interest rate from the
date of borrowing is 8% per annum. If the note is unpaid by maturity the
interest rate becomes 24% per annum thereafter. The note and any accrued unpaid
interest are convertible into common shares of the Company at any time after the
issuance of this note. The conversion price is 60% of the lowest trading prices
of the 20 trading days prior to the conversion.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $21,461
of which $21,461was recorded as debt issuance costs and $1,761 as additional
interest expense. During the year ended December 31, 2015, the Company amortized
$21,461 of the debt issuance costs as interest expense. The lender converted
$25,000 of debt and an additional $1,034 in interest expense in exchange for
50,514,902 common shares.

On July 1, 2015 the Company entered into an agreement with a
lender whereby the lender received this convertible debt in exchange for the
assumption of promissory notes held by a related party for a principal sum of
$12,000. On exchange, the Company recorded the $12,000 debt along with a loss on
the settlement of the old debt of $13,409. The maturity date is July 1, 2016 and
the interest rate from the date of borrowing is 10% per annum. The note and any
accrued unpaid interest are convertible into common shares of the Company at any
time after the issuance of this note. The conversion price is 50% of the lowest
trading prices of the 30 trading days prior to the conversion.

The Company determined that the conversion option was a
derivative. Accordingly, the Company recorded a derivative liability of $13,409
with a $12,000 recorded as debt issuance costs and $1,409 recorded as interest
expense. During the year ended December 31, 2015, the Company amortized $12,000
of the debt issuance costs as interest expense. The lender converted all $12,000
of debt in exchange for 8,275,862 common shares.

F-21

---

On July 15, 2015 the Company entered into an agreement with a lender whereby the lender received this convertible debt in exchange for the assumption of promissory notes held by a related party for a principal sum of $20,000. On exchange, the
Company recorded the $20,000 debt along with a loss on the settlement of the old debt of $22,694. The maturity date is July 15, 2016 and the interest rate from the date of borrowing is 10% per annum. The note and any accrued unpaid interest
are convertible into common shares of the Company at any time after the issuance of this note. The conversion price is 50% of the lowest trading prices of the 30 trading days prior to the conversion.

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $22,694 with a $20,000 recorded as debt issuance costs and $2,694 recorded as interest expense. During the
year ended December 31, 2015, the Company amortized $20,000 of the debt issuance costs as interest expense. The lender converted all $20,000 of debt in exchange for 18,544,444 common shares.

On July 16, 2015, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $52,500. Upon signing, the Company received $50,000 in cash and paid fees of $2,500, recorded as a debt issuance costs.
The maturity date is July 16, 2016 and the interest rate from the date of borrowing is 8% per annum. If the note is unpaid by maturity the interest rate becomes 24% per annum thereafter. The note and any accrued unpaid interest are convertible into
common shares of the Company at any time after the issuance of this note. The conversion price is 60% of the lowest trading prices of the 20 trading days prior to the conversion.

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $48,775 of which $51,275 was recorded as debt issuance costs. During the year ended December 31, 2015, the
Company amortized $23,536 of the debt issuance costs as interest expense and recorded accrued interest of $1,934.

On October 29, 2015, the Company entered into an agreement with a lender whereby the lender loaned a principal sum of $40,000. Upon signing, the Company received $36,500 in cash and paid fees of $3,500, recorded as a debt issuance costs.
The maturity date is October 29, 2016 and the interest rate from the date of borrowing is 10% per annum. If the note is unpaid by maturity the interest rate becomes 24% per annum thereafter. The note and any accrued unpaid interest are convertible
into common shares of the Company at any time after the issuance of this note. The conversion price is 60% of the lowest trading prices of the 20 trading days prior to the conversion.

The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $42,156 of which $40,000 was recorded as debt issuance costs and $2,156 recorded as interest expense. During
the year ended December 31, 2015, the Company amortized $6,885 of the debt issuance costs as interest expense and recorded accrued interest of $690.

NOTE 10 – DERIVATIVE LIABILITIES

The embedded conversion features in the convertible debentures and attached warrants are accounted for as derivative liabilities. The warrants contain full ratchet reset features (subject to adjustment for dilutive share issuances) and should be
valued as derivative liabilities.

The valuation of the derivative liability attached to the Debentures arrived at through the use of multinomial lattice models based on a probability weighted discounted cash flow model. These models are based on future projections of the various
potential outcomes. The features in the note that were analyzed and incorporated into the model included the conversion feature with the reset provisions and the call/redemption options. Based on these features, there are six primary events that can
occur: payments are made in cash; payments are made with stock; the holder converts upon receiving a change notice; the holder converts the note; the Issuer redeems the note; or the company defaults on the note.

The model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. interest rates, stock price, conversion price,
etc.). Projections were then made on these underlying factors which led to a set of potential scenarios. Probabilities were assigned to each of these scenarios over the remaining term of the note based on management projections. This led to a cash
flow projection over the life of the note and a probability associated with that cash flow. A discounted weighted average cash flow over the various scenarios was completed, and it was compared to the discounted cash flow of the note without the
embedded features, thus determining a value for the derivative liability. For the year ended December 31, 2015, the Company recorded derivative liabilities for issuance of convertible notes payable initial fair value of $931,659.

The Company recorded unrealized gains of $250,146 and $930,345 for the years ended December 31, 2015 and December 31, 2014 respectively.  The fair value of the derivative liability was $135,594 and $181,723 as of December 31, 2015
and 2014, respectively.

F-22

---

Derivative ValuesFair ValueValuation
    
    
    December 31,
    
    
    
    
    
    
    
    
    Increase
    
    
    December 31,Date
    
    
    2014
    
    
    Additions
    
    
    Conversions
    
    
    (Decrease)
    
    
    2015April 29, 2011 debenture
    
    $
    13,405
    
    $
    -
    
    $
    -
    
    $
    (10,042
    )
    $
    3,363Feb 21, 2012 debenture
    
    
    9,000
    
    
    -
    
    
    -
    
    
    (9,000
    )
    
    -Oct 10, 2014 note
    
    
    73,472
    
    
    -
    
    
    (109,896
    )
    
    36,424
    
    
    -Nov 12, 2014 debenture
    
    
    2,750
    
    
    -
    
    
    -
    
    
    (2,750
    )
    
    -Nov 13, 2014 debenture
    
    
    83,096
    
    
    -
    
    
    (41,094
    )
    
    (42,002
    )
    
    -2015 convertible notes
    
    
    -
    
    
    1,014,703
    
    
    (603,883
    )
    
    (275,226
    )
    
    135,594Total
    
    $
    181,723
    
    $
    1,014,703
    
    $
    (754,873
    )
    $
    (302,596
    )
    $
    138,957


Derivative ValuesFair ValueValuation
    
    
    December 31,
    
    
    
    
    
    
    
    
    Increase
    
    
    December 31,Date
    
    
    2013
    
    
    Additions
    
    
    Conversions
    
    
    (Decrease)
    
    
    2014April 29, 2011 debenture
    
    $
    741,433
    
    $
    -
    
    $
    -
    
    $
    (728,028
    )
    $
    13,405Feb 21, 2012 debenture
    
    
    75,055
    
    
    -
    
    
    -
    
    
    (66,055
    )
    
    9,000July 23, 2014 note
    
    
    -
    
    
    153,702
    
    
    -
    
    
    (153,702
    )
    
    -Oct 10, 2014 note
    
    
    -
    
    
    73,357
    
    
    -
    
    
    115
    
    
    73,472Nov 12, 2014 debenture
    
    
    -
    
    
    2,804
    
    
    -
    
    
    (54
    )
    
    2,750Nov 13, 2014 debenture
    
    
    -
    
    
    65,717
    
    
    -
    
    
    17,379
    
    
    83,096Total
    
    $
    816,488
    
    $
    295,580
    
    $
    -
    
    $
    (930,345
    )
    $
    181,723


NOTE 11  STOCKHOLDERS DEFICIT

On April 17, 2015, the shareholders approved an increase in the
number of authorized common stock from 150 million to 650 million common shares,
and on August 12, 2015 the shareholders approved another increase in the number
of authorized common stock from 650 million to 1.6 billion common shares and an
increase from 1 million to 4 million of the number of authorized Series B
preferred shares.

Preferred Stock

On December 29, 2014, the Company increased the authorized
common shares to 150 million and authorized 1,000,000 each Series A and Series B
preferred shares, par value $0.001 per share with the following features:

F-23

---

Series A preferred stock: non-voting, no liquidation or
dividend rights, redeemable and retractable at a price equal to its par value,
convertible into a number of shares of common stock as is equal to the par value
of the Series A Preferred Stock divided by the average closing price per share
of common stock of the last 5 trading days immediately prior to conversion;

Series B preferred stock: voting with 500 votes per share, no
liquidation or dividend rights, non  redeemable, no conversion privileges.

During the year ended December 31, 2015, the Company issued the
following preferred shares:

On August 10, 2015, the Company issued 420,000 Series B
preferred shares valued at $102,480 as consideration for the tenth amendment of
the Licensing Agreement.

During the year ended December 31, 2015, the Company issued
40,000 Series B preferred shares valued at $150,000 for settlement of debt.

During the year ended December 31, 2014, the Company had no
issuances of preferred shares.

Common Stock

During the year ended December 31, 2015, the Company issued the
following common shares for fair value based on the market price at the date of
the grant:

|- | 7,336,733 common shares to shareholder
      creditors and consultants as payment for services with a fair value of
      $83,974.                                                                                                                             
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | 5,420,906 common shares to convertible
      debenture holders as payment of interest for the year of $147,650.                                                                                                                                                
|- | 641,564,526 common shares to convertible notes
      holders for conversion of principal and interest of $1,133,590.                                                                                                                                           
|- | 491,150,000 common shares to a
      shareholder-creditor and a related party for payment against accounts
      payable and accrued liabilities related parties of $720,813 and recognized
      a loss on settlement of payables in the amount of $1,031,321.

During the year ended December 31, 2015, 410,064 shares of
common stock were issued for the cash-less exercise of 420,000 warrants. Upon
exercise of the warrants, another 500,000 common shares were issued for $500.

The Company cancelled 1,950,000 common shares issued in 2014 in
exchange for 1,950,000 warrants with a 5-year term and an exercise price of
$0.001 valued on the original grant date, of which $1,950 was reclassified from
common stock to additional paid-in capital in 2015.

During the year ended December 31, 2014, the Company issued the
following shares for fair value based on the market price at the date of the
grant:

|- | 3,507,804 common shares to shareholder creditors and
      consultants as payment for services with a fair value of $494,137 based on
      market prices on the dates of grant.                                              
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | 432,454 common shares to convertible debenture holders as
      payment of interest for the year of $132,050, based on market prices on
      the dates of grant.                                                             
|- | 100,000 to the Senior Secured Debenture Holder for
      payment of interest of $29,800, based on market prices on the dates of
      grant.                                                                                  
|- | 340,312 common shares to shareholder- creditors for
      accrued interest of $51,595 and recognized a loss on settlement in the
      amount of $4,263, based on market prices on the dates of grant.                        
|- | 154,315 common shares as payment for payroll liabilities
      included in accounts payable of $50,924 and recognized a loss on
      settlement in the amount of $41,666, based on market prices on the dates
      of grant.
|- | 418,604 common shares to landlord as payment of accounts
      payable and prepaid rent of $45,000 and recognized a loss on settlement in
      the amount of $1,046, based on market prices on the dates of grant.           
|- | 8,113,116 common shares for payment of note payable
      related party of $872,160 and recognized a  loss on settlement
      in the amount of $20,283, based on market prices on the dates of grant.                        

F-24

---

|- | 18,695,000 common shares to a shareholder-creditor and a
      related party for payment against accounts payable and accrued liabilities
      related parties of $1,047,500 and recognized a loss on settlement in the
      amount of $2,107,150, based on market prices on the dates of grant.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Options and Warrants

On June 15, 2011, the Companys Board of Directors established
the 2011 Stock Incentive Plan expiring on June 15, 2016 (the 2011 Plan).

Under the Plan, the Company may grant certain employees both
incentive and non-qualified options to purchase shares of common stock. The Plan
is authorized to grant options covering up to 700,000 common shares.

During the year ended December 31, 2015, the Company issued
300,000,000 warrants to a shareholder to repay accounts payable - related party
with a fair value of $480,000, 21,750,000 warrants to consultants for consulting
services at a fair value of $192,754 (recorded as stock-based compensation),
8,600,000 warrants to a shareholder to repay accounts payable-related party with
a fair value of $1,094,260 (recorded as an adjustment to accounts payable -
related party of $335,000 and loss on settlement of payables of $759,260),
300,000 warrants to shareholders for accrued interest of $15,600, 6,0000,000
options to the CEO for compensation of $48,600, 1,500,000 warrants to a
related-party landlord for $12,150 for payment to accounts payable related
party, 1,950,000 warrants to shareholder in exchange for the cancellation of
1,950,000 shares for consideration of $1,950, all with a corresponding increase
in additional paid-in capital valued using the Black-Scholes method according to
the following assumptions:

|Expected volatility     |   | 261%-288%      | 
|----------------------- | - | -------------- | 
|Exercise price          | $ | 0.00001-$0.001 | 
|Stock price             | $ | 0.0016-$0.50   | 
|Expected life           |   | 4-5 years      | 
|Risk-free interest rate |   | 1.19%-1.71%    | 
|Dividend yield          | $ | Nil            | 

During the year ended December 31, 2015, the Company recorded
$0 for amortization expense.

During the year ended December 31, 2014, warrant holders
exercised 880,000 warrants for 872,711 shares on a cashless basis with a
reduction in additional paid in capital of $873. Also, 325,000 warrants with an
exercise price of $0.001, were exercised for $300 cash and $25 as settlement of
accounts payable - related party.

During the year ended December 31, 2014, the Company issued
3,039,664 warrants to shareholders and consultants for consulting services at a
fair value of $691,863 recorded as stock-based all with a corresponding increase
in additional paid-in capital using the Black-Scholes method according to the
following assumptions. The warrants have an exercise price of $0.001 and a life
of 1 to 5 years:

|Expected volatility     |   | 166%-300%   | 
|----------------------- | - | ----------- | 
|Exercise price          | $ | 0.001       | 
|Stock price             | $ | 0.08-$0.70  | 
|Expected life           |   | 1 -5 years  | 
|Risk-free interest rate |   | 0.09%-1.80% | 
|Dividend yield          | $ | Nil         | 

During the year ended December 31, 2014, the Company recorded
$491,656 for amortization expense.

A summary of the activity in the Company's options and warrants
during the years ended December 31,

F-25

---

2015 and 2014 is presented below:

|                                                        |  | Number of   |   |   |                  |  |  | Weighted Average   | 
|------------------------------------------------------- |  | ----------- | - | - | ---------------- |  |  | ------------------ | 
|                                                        |  | Options and |   |   | Weighted Average |  |  | Remaining Contract | 
|                                                        |  | Warrants    |   |   | Exercise Price   |  |  | Term (# of years)  | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Outstanding and exercisable, at December
      31, 2013 |  | 8,266,928   |   | $ | 0.09             |  |  | 3.31               | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Granted                                                 |  | 3,039,664   |   | $ | 0.001            |  |  |                    | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Exercised                                               |  | (1,205,000  | ) | $ | 0.001            |  |  |                    | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Expired                                                 |  | (600,000    | ) | $ | 0.043            |  |  |                    | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Outstanding and exercisable, at December
      31, 2014 |  | 9,501,592   |   | $ | 0.10             |  |  | 3.13               | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Granted                                                 |  | 340,130,000 |   | $ | 0.0001           |  |  |                    | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Exercised                                               |  | (920,000    | ) | $ | 0.001            |  |  |                    | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Expired                                                 |  | (1,876,428  | ) | $ | 0.14             |  |  |                    | 
|                                                        |  |             |   |   |                  |  |  |                    | 
|Outstanding and exercisable, at December
      31, 2015 |  | 346,835,164 |   | $ | 0.002            |  |  | 4.83               | 

In addition to the regular warrants detailed in the table
above, there are issued and outstanding 533,336 Series A warrants with an
exercise price of $0.39 per share and a maturity date of February 28, 2018.

The intrinsic value of warrants outstanding at December 31,
2015 was $711,885.

Contingent Warrant Issuance

On July 20, 2012, the Companys board of directors approved the
issuance of 300,000 stock purchase warrants, with an exercise price of $0.001
per share and a five-year life, from date of issuance, to the Companys
President, Joseph Kristul, contingent on his successful negotiation of a major
sales contract. The major sales contract agreement has not yet been reached by
the Company.

NOTE 12  RELATED PARTY TRANSACTIONS

The Company entered into various related party transactions
during the years ended December 31, 2015 and 2014, as follows:

NTI License Fees

The Companys principal assets are licenses for product sales
with NTI, an entity under common control. During the year ended December 31,
2015, the Company issued 420,000 shares of Series B Preferred Stock valued at
$102,480 as consideration for its licenses with NTI. The notes payable  related
party was repaid through cash payments of $439,000 and the issuance of 40,000
shares of Series B Preferred Stock valued at $150,000. During the year ended
December 31, 2014, the Company issued $2,500,000 of notes payable  related
party as consideration for its licenses with NTI. The debt was repaid through
cash payments of $420,800 and issuances of 8,113,116 shares of common stock
valued at $872,160.

As of December 31, 2015 and 2014, the notes payable  related
party outstanding with NTI was $1,300,491 and $1,889,491, respectively.

The Company also has an option (expiring July 12, 2016) to
issue a controlling stake in the Company amounting to 52.5% to NTI for a
perpetual exclusive license to manufacture and sell Nanotech Products for all
North America, South America and Europe. If this option is exercised, the
Company will have a similar option for the territory of Asia to issue an
additional 10% ownership stake in the Company.

Fees charged by Shareholder

During the years ended December 31, 2015 and 2014, the Company
was charged $972,565 and $832,340 by an outside consultant, who is also a
shareholder-creditor and has significant influence over managements
decision-making, for professional fees of $15,000 per month, out-of-pocket
expenses of approximately $38,000, and commissions of approximately $754,000
related to financial advisory services and customer negotiations performed on
the Companys behalf. The Company paid $1,137,813 and $1,047,500 to the
consultant (through the issuance of shares and warrants) during the years ended
December 31, 2015 and 2014, respectively. The Company has an outstanding balance
payable as of December 31, 2015 and 2014 of $47,434 and $212,682, respectively.
The amounts are included in accounts payable and accrued liabilities related
parties.

F-26

---

During the year ended December 31, 2015, this consultant loaned
the Company $455,413 through loans payable  shareholders and the Company made
cash repayments to this consultant of $23,000. During the year ended December
31, 2014, this consultant loaned the Company $607,500 through loans payable 
shareholders and the Company made cash repayments to this consultant of $0.

Loans with Chief Executive Officer

During the year ended December 31, 2015, Joseph Kristul, the
Companys CEO, loaned the Company $1,252,323 through loans payable 
shareholders and the Company made cash repayments of $1,353,217. During the year
ended December 31, 2014, the Companys CEO loaned the Company $704,034 through
loans payable  shareholders and the Company made cash repayments of $691,218.

Shared Administrative Costs

The Company shares office space with NTI. Costs are allocated
among the parties based on usage. During 2015 and 2014, the allocation of such
shared costs between the Company and NTI was 80% and 20%, respectively. Rent
expense for the years ended December 31, 2015 and 2014 was $45,000.

NOTE 13  INCOME TAXES

Deferred income taxes reflect the net effect of:

(a) temporary difference between
carrying amounts of assets and liabilities for financial purposes and the
amounts used for income taxes reporting purposes, and

(b) net operating loss carryforwards.

No net provision for refundable U.S. Federal income tax has
been made in the accompanying statement of operations because no recoverable
taxes were paid previously. Similarly, no deferred tax asset attributable to the
net operating loss carryforward has been recognized, as it is not deemed more
likely than not to be realized.

The effective tax rate of the Company is reconciled to
statutory tax rates as follows for the years ended December 31, 2015 and
2014:

|                                 |  | 2015 |   |  | 2014 |  
|-------------------------------- |  | ---- | - |  | ---- | -
|US federal statutory tax rate    |  | 34%  |   |  | 34%  |  
|Change in US valuation allowance |  | (34% | ) |  | (34% | )
|Effective tax rate               |  | -    |   |  | -    |  

Deferred tax assets consist of the following as of December
31:

|                                |   | 2015       |   |   | 2014       |  
|------------------------------- | - | ---------- | - | - | ---------- | -
|Net operating loss carryforward | $ | 8,191,642  |   | $ | 6,827,735  |  
|Valuation allowance             |   | (8,191,642 | ) |   | (6,827,735 | )
|Deferred tax asset              | $ | -          |   | $ | -          |  

The Company has net operating losses carried forward of
approximately $20,512,000 which expire beginning in 2031. They may be utilized
to offset future taxable income. Future tax benefits, which may arise as a
result of these losses and resource expenditures, have not been recognized in
these financial statements.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

The Company has an option (expiring July 12, 2016) to issue a
controlling stake in the Company amounting to 52.5% to NTI, a related party, for
a perpetual exclusive license to manufacture and sell Nanotech Products for all
North America, South America and Europe. If this option is exercised, the
Company will have a similar option for the territory of Asia to issue an
additional 10% ownership stake in the Company.

F-27

---

The Company is delinquent on its state and federal payroll tax remittances. The State of California has issued a Notice of State Tax Lien against the property and rights owned by the Company covering interest and penalties for non-payment of payroll
remittances of $3,897. The Internal Revenue Service has issued a penalty against the Company for non-payment of payroll taxes of $50,158, accrued in accounts payable and accrued liabilities as of December 31, 2015.

On December 11, 2015, William Alessi (“Allessi”) filed a complaint for damages from breach of contract and other claims against the Company in the United States Direct Court, District of Nevada. Both parties mutually agreed to a
settlement payment from the Company to Alessi in the amount of $50,000, in full consideration of the complaint, accrued in accounts payable on the balance sheet as of December 31, 2015.

F-28

---

NOTE 15  SUBSEQUENT EVENTS

Subsequent to December 31, 2015, the Company issued the
following shares and warrants:

| |  | 375,000,000 shares of common stock, for the conversion of
      outstanding debt, valued on the dates of issuances in the amount of
      $866,100, based on the market price. $119,700 as payment for accounts
      payable and accrued liabilities to a related party and $764,400 was
      recorded as loss on settlement of payables.                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | warrants to purchase 1,320,000,000 shares of the
      Companys common stock to a shareholder- creditor and a related party for
      payment against accounts payable and accrued liabilities related parties
      valued at $396,000 and recognized a loss on settlement in the amount of
      $2,684,000, at a fair value of $3,080,000 with a corresponding increase in
      additional paid-in capital using the Black-Scholes method according to the
      following assumptions. The warrants have an exercise price of $0.00001 and
      a life of 1 to 5 years:

|Expected volatility     |   | 277%         | 
|----------------------- | - | ------------ | 
|Exercise price          | $ | 0.00001      | 
|Stock price             | $ | 0.021-$0.025 | 
|Expected life           |   | 5 years      | 
|Risk-free interest rate |   | 1.23%-1.46%  | 
|Dividend yield          | $ | Nil          | 

F-29

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTINGAND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

Reference is made to the disclosures below under Item 9A(T)
Controls and Procedures.

Item 9A(T). Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) which are designed to
ensure that information required to be disclosed in the reports we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms, and that such
information is accumulated and communicated to our management, including our
President and Chief Executive Officer, who also acts as our principal financial
officer, as appropriate, to allow timely decisions regarding required
disclosure.

Under the supervision and with the participation of our
management, including our President and Chief Executive Officer, who also acts
as our principal financial officer, an evaluation was performed on the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this annual report. Based on
that evaluation, our President and Chief Executive Officer, concluded that our
disclosure controls and procedures were not effective and are not designed at a
reasonable level to provide assurance that information we are required to
disclose in reports that we file or submit under the Exchange Act as of the end
of the period covered by this annual report for the purpose of gathering,
analyzing and disclosing of information within the time periods specified in the
SECs rules and forms, and that such information is accumulated and communicated
to our management, including our chief executive officer, as appropriate to
allow timely decisions regarding required disclosure. The Company has undertaken
steps to remedy this and improve the effectiveness of its disclosure controls
and procedures.

(b) Managements Report on Internal Controls

Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal
control over financial reporting is a process designed under the supervision of
our Principal Executive Officer and Principal Financial Officer to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles (GAAP) and includes those policies and
procedures that:

| | - | Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the issuer;                                                                                                                                                                                         
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | Provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that
      receipts and expenditures of the issuer are being made only in accordance
      with authorizations of management and directors of the issuer; and
| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | Provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      issuer's assets that could have a material effect on the financial
      statements.                                                                                                                                    

- 26 -

---

Due to inherent limitations, internal control over financial
reporting may not prevent or detect misstatements and, even when determined to
be effective, can only provide reasonable, not absolute, assurance with respect
to financial statement preparation and presentation. Projections of any
evaluation of effectiveness to future periods are subject to risk that controls
may become inadequate as a result of changes in conditions or deterioration in
the degree of compliance.

Under the supervision and with the participation of our
management, including our President and Chief Executive Officer, who also acts
as our principal financial officer, an evaluation was performed on the
effectiveness of the design and operation of our internal controls and
procedures over financial reporting as of December 31, 2015, covered by this
annual report, based on the criteria framework established in Internal
Control  Integrated Frameworkissued be the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that evaluation, our
President and Chief Executive Officer, concluded that our internal controls and
procedures were not effective as of the December 31, 2015, covered by this
annual report.

As of December 31, 2015, we identified material weaknesses in
certain controls related to the financial statement close and reporting process
that were not functioning effectively to properly accrue certain expenses and
classify some expenses in the financial statements. We also did not adequately
segregate, or mitigate the risks associated with, incompatible functions among
personnel to reduce the risk that a potential material misstatement of the
financial statements would occur without being detected or prevented. Management
concluded that these control deficiencies constituted a material weakness at
December 31, 2015. We are currently in the development stage, and although we
have hired qualified resources to carry out our day-to-day accounting and
financial reporting obligations, we have not yet reached the point at which we
have adequate resources to address all accounting procedures, especially the
process to close our financial records at each reporting period in a timely
manner. These control weaknesses were, in part, due to lack of adequate funding
during the period in which the financial statements were being prepared.

This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to the attestation by our
independent registered public accounting firm because smaller reporting
companies are exempt from this requirement.

(c) Changes in Internal Controls

There were no changes in our internal control over financial
reporting that occurred during the period covered by this Annual Report on Form
10-K that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

- 27 -

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
CONTROL PERSONS ANDCORPORATE GOVERNANCE; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGEACT

The address of all Directors and Executive Officers listed
above is c/o Hybrid Coating Technologies Inc., 950 John Daly Blvd. Suite 260,
Daly City, CA 94015.

Directors and Executive Officers.

The current directors and executive officers of the Registrant
are as follows:

|Name           | Age | **Position(s)**                                                 
|-------------- | --- | ----------------------------------------------------------------
|Joseph Kristul | 67  | Director, President, Treasurer
      and Chief Executive Officer
|Darin Nellis   | 46  | Secretary , Director of Sales & Marketing                       
|Alex Trossman  | 66  | Director                                                        

All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
There are no agreements with respect to the election of directors. There is no
family relationship between any of our directors or executive officers. As of
April 16, 2013, there was no known litigation pending or active against any of
our directors or executive officers. None of our directors or executive officers
has served as a general partner or executive officer of any company that has
filed, or has had filed against it, any petition for bankruptcy, either at the
time such filing was made or during the preceding two years.

Set forth below is certain biographical information for our
current directors and executive officers and certain persons whom we have
identified as key personnel, including a summary description of the principal
occupation and business experience of each of our directors and executive
officers for at least the last five years.

-28-

---

Directors and Executive Officers

Joseph Kristul,President, CEO, Treasurer and
Director

Mr. Kristul is one of the founders and principal financial
backers of Nanotech Industries. He has years of experience in international
financing with an emphasis on marketing and sales. He is the former Chairman,
CEO and co-founder of Transnational Financial Network. At Transnational Mr.
Kristul was responsible for overall company management directly overseeing
secondary marketing, finance, corporate marketing, lender relations and
strategic corporate planning. In 1995 Mr. Kristul created Transnationals
wholesale division, where he developed the company's base of loan brokers and
implemented systems and controls to manage the quality of loan products
delivered to brokers. In 1999 he took the company public and by 2005 had over
400 employees and $800 million in mortgage loan originations. Mr. Kristul
graduated with a Master of Science in Applied Mathematics and Mechanics from the
Odessa Physics and Technology University, in Odessa, Russia.

Darin Nellis,Secretary Director of Sales &
Marketing

Mr. Nellis, MBA,has twenty years of experience working
in business management and community relations for private, public and
non-profit organizations in Africa and the US. His expertise includes strategic
planning, marketing, cross-cultural education, youth mentorship and nonviolent
conflict resolution. Private sector positions include Director of Corporate
Planning and consultant in the area of finance, strategic planning and marketing
for several environmental high tech firms including the Eurasian power quality
equipment distribution company, Power Quality Holdings and the nanotechnology
commercialization company, Nanotech Industries. Non-profit and public positions
have included Community Development Officer at The United Way of Greater LA,
Loyola Marymount Peace Corps Fellow, and Community Development Agent for the
U.S. Peace Corps in Mauritania West Africa and Volunteer & Outreach
Coordinator for the American Oceans Campaign. Mr. Nellis received his BA from
UCLA in International Relations and his MBA in International Business from
Loyola Marymount University.

Alex Trossman,Director, VP of Israeli &
European Operations

Mr. Trossman is directly responsible for the daily running of
Nanotechs operations in Israel including managing the production process,
client orders & communication, product documentation and customs issues. Mr.
Trossman has nearly 30 years of experience in management and mechanical
engineering in Israel working in such positions as Assistant Chief Engineer for
Automotive Industries, Ltd.; Chief of the Engineering Department of
Rotem-Amfert-Negev, Ltd., a large fertilizer producer; Technical Manager of
Galam, Ltd., a Starch, Glucose & Fructose producer; General Manager of
Eurotech Israel, Ltd. and as a founding partner and general manager of the
Polymate Research Center.

-29-

---

Executive Employment Agreements

The Company currently has no employment agreements in place
with any of its named executive officers.

Long-Term Incentive Plans

The Company currently has no long-term incentive plans.

Compensation of Directors

The Company has not compensated our directors for service on
the board of directors.

Stock Option Plans

On June 15, 2011, the Companys Board of Directors established
the 2011 Stock Incentive Plan expiring on June 15, 2016 (the 2011 Plan).

The Companys Board of Directors has determined that it would
be in the best interests of the Company to adopt and approve a new long-term
stock incentive plan which will facilitate the continued use of long-term
equity-based incentives and rewards for the foreseeable future. The Company
expects equity-based incentives to comprise an important part of the
compensation packages needed to attract qualified executives, key employees,
directors and consultants to the Company and in providing long-term incentives
and rewards to those individuals responsible for the Companys success.
Accordingly, the Companys Board of Directors approved the 2011 Plan. Pursuant
to Section 78.320(2) of the Nevada Revised Statutes and the Companys Bylaws,
the written consent of stockholders holding at least a majority of the voting
power may adopt a corporate action by written consent in lieu of holding a
special meeting of stockholders.

-30-

---

The 2011 Plan is expected to ensure that the Company will have
a sufficient number of long-term equity-based incentives and rewards to issue to
its future employees as well as to help ensure, to the extent possible, the tax
deductibility by the Company of awards under the 2011 Plan for purposes of
Section 162(m) of the Internal Revenue Code of 1986 (the Code). The Code,
among other things, provides certain tax advantages to persons granted stock
options under a qualifying incentive stock option plan. The adoption of the
2011 Plan will allow option holders to take advantage of the favorable tax
attributes associated with such options that may be granted under the 2011 Plan.

The material terms of the 2011 Plan are summarized below.

Purpose

The purpose of the 2011 Plan is to enhance the long-term
stockholder value of the Company by offering opportunities to its directors,
officers, employees and eligible consultants and any entity that directly or
indirectly is in control of or is controlled by the Company (a Related
Company) to acquire and maintain stock ownership in the Company in order to
give these persons the opportunity to participate in the Companys growth and
success, and to encourage them to remain in the Company or a Related Company.

2011 Plan

Under the Plan, the Company may grant certain employees both
incentive and non-qualified options to purchase shares of common stock. The Plan
is authorized to grant options covering up to seven hundred thousand (700,000)
shares.

Involvement in Certain Legal Proceedings

There are no legal proceedings that have occurred during the
past five years concerning our directors or control persons which involved a
criminal conviction, a criminal proceeding, an administrative or civil
proceeding limiting one's participation in the securities or banking industries,
or a finding of securities or commodities law violations.

Code of Ethics

Due to the limited scope of our current operations, the Company
has not yet adopted a Code of Business Conduct and Ethics that applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar function. Following
completion of the Acquisition described in Item 1, we may adopt a Code of
Ethics.

-31-

---

Committees

Since our Board of Directors has not established an audit or
compensation committee comprised of independent directors, the functions that
would have been performed by such committees are performed by our Board of
Directors as a whole, nor has the Board established a corporate governance
committee or nominating committee.

We do not have a policy regarding the consideration of any
director candidates which may be recommended by our stockholders, including the
minimum qualifications for director candidates, nor has our Board of Directors
established a process for identifying and evaluating director nominees. We have
not adopted a policy regarding the handling of any potential recommendation of
director candidates by our stockholders, including the procedures to be
followed. Our Board has not considered or adopted any of these policies, as we
have never received a recommendation from any stockholder for any candidate to
serve on our Board of Directors. While there have been no nominations of
additional directors proposed, in the event such a proposal is made, all members
of our Board of Directors will participate in the consideration of director
nominees.

The Board is of the opinion that such committees and procedures
are currently not necessary, as the Company is an early exploration stage
company, has only one director and, to date, such director has been performing
the functions of such committees. When we are able to expand our Board of
Directors to include one or more independent directors, our Board of Directors
plans to form an audit committee and a corporate governance committee.

Section 16(A) Beneficial Ownership Reporting
Compliance

Section 16(a) of the Exchange Act requires or directors and
officers, and the persons who beneficially own more than ten percent (10%) of
our common stock, to file reports of ownership and changes in ownership with the
SEC. Copies of all filed reports are required to be furnished to us pursuant to
Rule 16a-3 promulgated under the Exchange Act. Based solely on the reports
received by us and on the representations of the reporting persons, we believe
that these persons have complied with all applicable Section 16(a) filing
requirements during the fiscal year ended December 31, 2015.

-32-

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ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The table below sets forth all compensation awarded to, paid to
or earned by the Registrants President, Chief Executive Officer and Chief
Financial Officer and the Companys Secretary and Director of Sales and
Marketing for the fiscal year of the Company indicated.

Nonequity
    
    
    NonqualifiedName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    
    Deferred
    
    
    AllPrincipal
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Plan
    
    
    Compensation
    
    
    OtherPosition
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    Total($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Joseph Kristul
    
    2015
    
    
    -
    
    
    -
    
    
    -
    
    
    48,600
    
    
    -
    
    
    -
    
    
    -
    
    
    48,600Director, President, Chief Executive
      Officer and Chief Financial Officer
    
    2014
    
    
    -
    
    
    -
    
    
    247,451
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    247,451Darrin Nellis
    
    2015
    
    
    -
    
    
    -
    
    
    43,434
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    43,434Secretary, Director of Sales and Marketing
    
    2014
    
    
    -
    
    
    -
    
    
    57,206
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    57,206Alex Trossman
    
    2015
    
    
    -
    
    
    -
    
    
    -
    
    
    15,500
    
    
    -
    
    
    -
    
    
    -
    
    
    15,500Dirtector , VP of Israeli and European
      Operations
    
    2014
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -


Compensation of Executive Officers

Mr. Kristul received 6,000,000 warrants for a fair value of
$48,600, Mr. Nellis received 5,246,069 shares and Mr. Trossman 5,000,000
warrants for fair value of $15,500 in 2015 included in stock-based
compensation.

Employment Agreements

The Company has not entered into any employment agreements with
our executive officers or other employees to date.

Grants of Plan-Based Awards

No plan-based awards were granted to any of our named executive
officers during the fiscal year ended December 31, 2015.

-33-

---

Outstanding Equity Awards at Fiscal Year End

As of December 31, 2015, Joseph Kristul held 480,000 warrants
expiring March 14, 2018 and 6,000,000 warrants expiring June 15, 2020, and Alex
Trossman held 5,000,000 warrants expiring on September 10, 2020.

Option Exercises and Stock Vested

No options to purchase our capital stock were exercised by any
of our named executive officers, nor was any restricted stock held by such
executive officers vested during the fiscal year ended December 31, 2015.

Pension Benefits

No named executive officers received or held pension benefits
during the fiscal year ended December 31, 2015.

Nonqualified Deferred Compensation

No nonqualified deferred compensation was offered or issued to
any named executive officer during the fiscal year ended December 31, 2015.

Potential Payments upon Termination or Change in
Control

Our executive officers are not entitled to severance payments
upon the termination of their employment agreements or following a change in
control.

-34-

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ANDMANAGEMENT

The table below provides information about the beneficial
ownership of the Common Stock as of December 31, 2015, by each of the current
directors and executive officers, by all directors and executive officers as a
group and by each person known to the Registrant who is the beneficial owner of
more than 5% of any class of the Registrants securities. Unless otherwise
noted, the persons listed below have sole voting and investment power with
respect to the shares reported.

Amount
    
    Percentage
    Percentageand Nature
    Percentage
    of
    ofName and Address
    of
    of
    Series B
    VotingTitle of
    of Beneficial
    Beneficial
    Common
    Preferred
    CapitalClass
    Owner
    Ownership
    Stock
    Stock
    (2)DIRECTORS AND OFFICERSCommon
    Joseph Kristul
    2,740,465
    0.18%
    ----
    0.01%Stock
    Director
    DirectCEO, President
    100,000(1)
    0.01%
    
    -------IndirectCommon
    Darin Nellis
    6,989,007
    0.46%
    ----
    0.24%Stock
    Secretary
    DirectCommon
    Alex Trossman
    62,500
    0.01%
    ----
    ------Stock
    Director
    DirectCommon
    All Officers and
    9,791,972
    0.65%
    -----
    0.34%Stock
    Directors as aGroup (3 persons)5% STOCKHOLDERSCommon
    Nanotech
    8,113,116
    0.54%
    
    0.28%Stock
    Industries Inc.
    DirectSeries B
    
    2,700,000
    
    100%
    47.11%Preferred
    
    DirectStockTotal:47.39%


Notes

| | (1) | Represents 100,000 shares owned by Mr. Kristuls wife,
      Maria Kristul.                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                            
| | (2) | Includes the 2,700,000 Series B Preferred Shares which in
      the aggregate carry the voting power of 47.11% of the Companys voting
      capital as of the Record Date.

-35-

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS

Transactions with Related Persons

None of the following parties has had, since the beginning of
the Companys fiscal year, any material interest, direct or indirect, in any
transaction with us or in any presently proposed transaction that has or will
materially affect the Registrant:

| |  | Any directors or executive officers;                                                                                                                                       
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Any person who beneficially owns, directly or
      indirectly, shares carrying more than 5% of the voting rights attached to
      the outstanding shares of Common Stock;
| |  | Any promoters; and                                                                                                                                                         
| |  | Any member of the immediate family (including
      spouse, parents, children, siblings and in- laws) of any of the foregoing
      persons.                               

Director Independence

Because the Common Stock is traded on the OTC Bulletin Board,
the Company is not subject to the independence requirements of any securities
exchange or the NASD regarding members of the Companys Board of Directors. The
Company intends, in the future, to use the definition of independence of a
national securities exchange or of an inter-dealer quotation system which
requires that a majority of the Board of Directors be independent. The Company
has not determined whether any of its directors are independent.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES

Audit Fees

GBH CPAs PC (GBH) served as our independent registered public
accounting firm for our fiscal year ended December 31, 2015 and 2014. The
following table shows the fees that were billed for the audit and other services
provided by the firm for the fiscal year indicated.

|                   |   | Fiscal Year Ended |  |   | Fiscal Year Ended | 
|------------------ | - | ----------------- |  | - | ----------------- | 
|                   |   | December 31, 2015 |  |   | December 31, 2014 | 
|                   |   |                   |  |   |                   | 
|Audit Fees         | $ | 66,000            |  | $ | 83,200            | 
|Audit-Related Fees |   | -                 |  |   | -                 | 
|Tax Fees           |   | -                 |  |   | -                 | 
|All Other Fees     |   | -                 |  |   | -                 | 
|Total              | $ | 66,000            |  | $ | 83,200            | 

Audit Fees  This category includes the audit of our annual
financial statements, review of financial statements included in our Quarterly
Reports on Form 10-Q and services that are normally provided by the independent
auditors in connection with engagements for those fiscal years. This category
also includes advice on audit and accounting matters that arose during, or as a
result of, the audit or the review of interim financial statements.

Audit-Related Fees  This category consists of assurance and
related services by the independent auditors that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported above under Audit Fees. The services for the fees disclosed under
this category include consultation regarding our correspondence with the SEC and
other accounting consulting.

Tax Fees  This category consists of professional services
rendered by our independent auditors for tax compliance and tax advice. The
services for the fees disclosed under this category include tax return
preparation and technical tax advice.

All Other Fees  This category consists of fees for other
miscellaneous items.

Our Board of Directors has adopted a procedure for pre-approval
of all fees charged by our independent auditors. Under the procedure, the Board
approves the engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Board of Directors, or, in the
period between meetings, by a designated member of Board of Directors. Any such
approval by the designated member is disclosed to the entire Board of Directors
at the next meeting. The audit and tax fees paid to the auditors with respect to
our fiscal year ended December 31, 2015 were pre-approved by the Board of
Directors.

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ITEM 15. EXHIBITS

|Exhibit Number | Description of Exhibits                                                                                                                        
|-------------- | -----------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                
|3.1            | Amended Articles of
      Incorporation. (1)                                                                                                   
|3.2            | Bylaws, as amended. (1)                                                                                                                        
|3.3            | Certificate of Amendment to
      Articles of Incorporation (2)                                                                                
|4.1            | Convertible Debenture Agreement dated April
      29,2011 Pursuant to Regulation D (6)                                                         
|4.2            | Convertible Debenture Agreement
      dated April 29,2011 Pursuant to Regulation S (6)                                                         
|10.1           | Stock Purchase Agreement, dated August 18,
      2010, by and among Nanotech Industries International Inc. and EPOD Solar
      Inc. (3)       
|10.2           | Licensing Agreement between
      Nanotech Industries International Inc. and Nanotech Industries Inc. dated
      July 12, 2010 (4)            
|10.3           | Amendment to the Licensing Agreement previously
      entered into on the 12thday of July, 2010 (5)                                            
|10.4           | Securities Purchase Agreement
      dated April 29,2011 Pursuant to Regulation D (6)                                                           
|10.5           | Securities Purchase Agreement dated April
      29,2011 Pursuant to Regulation S (6)                                                           
|10.6           | Warrant Agreement dated April
      29,2011 Pursuant to regulation D (6)                                                                       
|10.7           | Warrant Agreement dated April 29,2011 Pursuant
      to regulation S (6)                                                                       
|10.8           | Amendment to articles of
      incorporation to change the name of the company to Hybrid Coating
      Technologies Inc. (7)                 
|10.9           | Approval and adoption of the 2011 Stock
      Incentive Plan (7)                                                                               
|10.10          | Second Amendment to the
      Licensing Agreement previously entered into on the 12thday of
      July, 2010 (8)                               
|10.11          | Licensing Agreement between Nanotech Industries
      International Inc. and Nanotech Industries Inc. dated October 18, 2011
      (9)         
|10.12          | Convertible Debenture Agreement
      Dated February 21, 2012 (10)                                                                             
|10.13          | Third Amendment of Licensing Agreement entered
      into the 12th day of July 2010 (11)                                                       
|10.14          | Amendment Agreements to
      Convertible Debenture Agreements dated April 29,2011 and February
      21,2012(12)                              
|10.15          | Fourth Amendment of Licensing Agreement entered
      into the 12th day of July 2010 (13)                                                      
|10.16          | Fifth Amendment of Licensing
      Agreement entered into the 12th day of July 2010 (14)                                                       
|10.17          | Sixth Amendment of Licensing Agreement entered
      into the 12th day of July 2010 (15)                                                       
|10.18          | Seventh Amendment of Licensing
      Agreement entered into the 12th day of July 2010 (16)                                                     
|10.19          | Eight Amendment of Licensing Agreement entered
      into the 12th day of July 2010 (17)                                                       
|10.20          | Ninth Amendment of Licensing
      Agreement entered into the 12th day of July 2010 (18)                                                       
|10.21          | Form of 10% Convertible Debenture (Pursuant to
      Regulation D)(19)                                                                         
|10.22          | Form of 10% Convertible
      Debenture (Pursuant to Regulation S)(19)                                                                         
|10.23          | Form of Securities Purchase Agreement (Pursuant
      to Regulation D)(19)                                                                     
|10.24          | Form of Securities Purchase
      Agreement (Pursuant to Regulation S)(19)                                                                     
|31.1           | Certification of Principal Executive Officer
  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                      
|31.2           | Certification of Principal
      Executive Officer and Principal Financial Officer pursuant to Section 906
  of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference to the Registration Statement on
Form S-1 (File No. 333-153675), filed with the SEC on September 26, 2008.
(2) Incorporated by reference to the Current Report on Form 8-K filed with
the SEC on July 22, 2009. (3 Incorporated by reference to the Current Report
on Form 8-K filed with the SEC on August 30, 2010. 
(4) Incorporated as
reference to the Current Report on Form 8-K filed with the SEC on August 30,2010
(5) Incorporated as reference to the Current Report on Form 8-K filed with
the SEC on March 14,2011 (6) Incorporated as reference to the Current Report
on Form 8-K filed with the SEC on May 3,2011 (7) Incorporated as reference
to the Schedule 14C filed with the SEC on July 6,2011 (8) Incorporated as
reference to the Current Report on Form 8-K filed with the SEC on July 7,2011
(9) Incorporated as reference to the Current Report on Form 8-K filed with
the SEC on October 18,2011 (10) Incorporated as reference to the Current
Report on Form 8-K filed with the SEC on February 21,2012 (11) Incorporated
as reference to the Current Report on Form 8-K filed with the SEC on June
28,2013 (12) Incorporated as reference to the Current Report on Form 8-K
filed with the SEC on November 20,2013 (13) Incorporated as reference to the
Current Report on Form 8-K filed with the SEC on December 13,2013 (14)
Incorporated as reference to the Current Report on Form 8-K filed with the SEC
on March 31,2014 (15) Incorporated as reference to the Current Report on
Form 8-K filed with the SEC on April 9,2014 (16) Incorporated as reference
to the Current Report on Form 8-K filed with the SEC on May 8, 2014 (17)
Incorporated as reference to the Current Report on Form 8-K filed with the SEC
on August 19, 2014 (18) Incorporated as reference to the Current Report on
Form 8-K filed with the SEC on September 10, 2014 (19) Incorporated as
reference to the Current Report on Form 8-K filed with the SEC on November 28,
2014

-38-

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Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

|Date: April 14, 2015 | HYBRID COATING TECHNOLOGIES INC.
|-------------------- | --------------------------------
|                     | (Registrant)                    
|                     |                                 
|                     | By:                             
|                     |                                 
|                     |                                 
|                     |                                 
|                     |                                 

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|Signature          | Title                         | Date          
|------------------ | ----------------------------- | --------------
|                   |                               |               
|/s/ Joseph Kristul |                               | April 14, 2015
|Joseph Kristul     | President and Chief Executive |               
|                   | Officer,                      |               
|                   | (Principal executive officer  |               
|                   | principal financial and       |               
|                   | accounting officer)           |               

|/s/ Alex Trossman |          | April 14, 2015
|----------------- | -------- | --------------
|Alex Trossman     | Director |               

-39-

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