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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 ENDEDDecember 31, 2012OR

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

For the transition period from to

Commission File Number000-53459

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 260Daly 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. [   ]

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 [X]

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 $2,933,034based on
the closing price of $0.50for the common stock on June 29, 2012, 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 15, 2013was 6,577,568.

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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                                                                                                         | 14  
|Item
      2   | Description
      of Property                                                                                              | 18  
|Item
      3.  | Legal
      Proceedings                                                                                                    | 18  
|Item
      4.  | Mine
      Safety Disclosures                                                                                              | 18  
|               |                                                                                                                            |     
|PART
      II  |                                                                                                                            |     
|Item
      5.  | Market
      for Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities | 19  
|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                                                          | 24  
|Item
      8.  | Financial
      Statements and Supplementary Data                                                                          | 25  
|Item
      9.  | Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure                           | 26  
|Item
      9A. | Controls
      And Procedures                                                                                              | 26  
|               |                                                                                                                            |     
|PART
      III |                                                                                                                            |     
|Item
      10. | Directors,
      Executive Officers and Corporate Governance                                                               | 27  
|Item
      11  | Executive
      Compensation                                                                                               | 32  
|Item
      12  | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters                 | 34  
|Item
      13  | Certain
      Relationships and Related Transactions, and Director Independence                                            | 35  
|Item
      14  | Principal
      Accountant Fees and Services                                                                               | 36  
|Item
      15  | Exhibits                                                                                                                   | 37  

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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 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 prospectus, 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 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.

Subject to completion of all required regulatory filings, the
Company also intends to take such steps as may be necessary to appoint 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 the Russian Territory ( including the Russian Federation,
Belorussia, Kazakhstan Rupublic) 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 Nanotech Coating Products, alternative , nonisocyanate  polyurethane , Green PolyurethaneTM, including coatings and raw binder ingredients (Green PolyurethaneTM Monolithic Floor Coating and Green PolyurethaneTM Binder). The Nanotech Coating Products will be sold to the Coatings, Adhesives, Sealants & Elastomers (“C.A.S.E.”) market in North America, with options to sell in Europe, South America, Asia and the rest of the world.

Initial Licensing AgreementNote 1

The terms of the Initial Licensing Agreement (the 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 a one- time licensing
      fee of $500,000 and a royalty of 5% of future gross Coating Product
      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 (Coating 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 InitialAgreement was originally filed in an 8K on
August 30, 2010 and the amended version (as described above) was refiled in an
8K 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 Product sales in the Russian Territory,
      and a one-time royalty fee of $150,000 (paid as of December 31,
    2011).                                                                                                                                                                                                                                                                 
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(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 license at $1,250,000 and the related liability in
      Note Payable-related party.

-5-

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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 environmentally safe adhesives and
sealants (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 (Royalty) for the duration
      of this Agreement. The Royalty shall be paid on a quarterly basis 65
      calendar days after the end of each quarter (the Royalty Payment Period)
      and shall be based on the gross revenue as stated in the Companys
      quarterly statements.

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.

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

Overview

The Company is a development-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
a development 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.

-6-

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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 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 markets 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
- 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
- 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 PU that is produced using pending
patented proprietary methods which completely eliminate the use of toxic
isocyanates resulting in a substitute for conventional PU. This results in a
product that is 100s of times less toxic than conventional PU and which has
superior properties.

2 Times Wear Resistance & Excellent Adhesion

- Wear resistance is 25-30 (mgs./1000 cycles) or 2 times better than most
  premium PU 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)
- 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

-7-

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- UV and low temperature curing applications available (36-77 oF) (2-25 oC)

Safe & Easy curing in Cold, Hot or
Sunny Conditions

- Hardens at ambient temperatures

Increased Hydrolytic Stability

- Maintains stability against chemical decomposition upon contact with water
  through anintramolecular hydrogen bond formed during its curing, thereby
  improving hydrolytic stability well above that of conventional polyurethanes

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.

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,
however, the number of layers can be reduced to 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, ~ zero 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 our
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 including the European Coatings Show (March 2011) and World
of Concrete (February 2011 and 2012). From these shows, internet marketing
(search engine optimization) and direct marketing, 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.

-8-

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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 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 PU 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 total 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
- Sub-license technology in certain geographic areas.

The Company intends to work with GBK, 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.

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 PU manufacturers. The
European Union (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.

-9-

---

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 preceeded the banning of any Do-It-Yourself (DIY) consumer
products with free isocyanates. These new regulations will afford Nanotech 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 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.

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) ,the owner of the Green Polyurethane patents).

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 Green Polyurethane® Binder and Green Polyurethane Monolithic Floor
Coating. 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
both the method for producing and composition of Green PU..

-10-

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Name of Patent
    Filed in USA (No.
      & Date)Liquid oligomer composition containing
      hydroxylamine adducts and method of manufacturing thereof
    12/315,580 04/12/2008Nanostructured Hybrid Oligomer
      Composition
    12/381,626 03/13/2009Epoxy-Amine Composition
      Modified with Hydroxyalkyl Urethane Method of producing hybrid
      polyhydroxyurethane network on the base of carbonated-epoxydated
      unsaturated fatty acid triglycerides
    12/383,589 03/26/2009
      20.09.2010


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.

Facilities and Employees

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

As of December 31, 2012, Hybrid Coating Technologies Inc. had 5
employees.

Competition

To date, the Company is unaware of any other nonisocyanate
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.

Enviromental Matters

Hybrid Coating Technologies Inc., 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.

-11-

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Description of the Industry

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, speciality
  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).

Total Serviceable Market (TSM)

The Serviceable available market is currently estimated at $32
billion in value 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.

Total Obtainable Market (TOM)

The Company sees a potential to capture 1% market share of the
total $33 billion serviceable market worth $330 million in gross revenues.

The Global Polyurethane Market

According to 2005 industry estimates by IAL Consultants, the
global PU market is a $30-35 billion industry with approximately 30.3 million
tonnes of total production. North America currently dominates production with
8.2 million tonnes; Eastern Europe has 1.3 million tonnes of production; while
the Middle East and Africa currently produce 1.7 million tonnes. IAL Consultants
predict that China will overtake the U.S. in production by 2010. Growing from
its current production of 6.4 million tonnes, China is likely to become the
world leader in PU production as well as a significant consumer of PU based
consumer goods.

-12-

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The Company estimates that 80% of the world market for PU based
applications is a potential market for Green Polyurethane materials, in the
form of PU based foam products, excluding certain foams produced at very low
cost for furniture. Green Polyurethane could also replace up to 20% of the
high-end epoxy flooring/coating market.

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

- Flexible Foam  used in bedding, furniture, automotive interiors, carpet
  underlay and packaging
- Rigid Foam  energy-efficient and versatile insulation, which results in
  cutting fuel and construction costs while making commercial and residential
  properties safer, better utilized and more comfortable
- Thermoplastic Polyurethane (TPU)  highly elastic, flexible and resistant
  to abrasion, impact and weather. TPUs can be colored or fabricated in a wide
  variety of methods, and their use increases a products overall durability
- Coatings, Adhesives, Sealants and Elastomers  coatings make a product
  more esthetic and durable; adhesives provide strong bonding advantages;
  sealants provide tighter seals; elastomers can be molded into almost any
  shape, are lighter than metal, offer superior stress recovery and can be
  resistant to many environmental factors and the Company hold licenses for the
  coatings segment and has options to license rights for the sealants and
  adhesives segment .

The World Coatings Market

According to the research company, Datamonitor, the global
paints and coatings market generated total revenues of $71.7 billion in 2006 at
a compound annual growth rate (CAGR) of 4.5% for the five year period 2002-2006
and is projected to accelerate, with an anticipated CAGR of 5.2% for the
five-year period 2006-2011, reaching an expected market value of $92.5 billion
by the end of 2011.

Market consumption volumes increased with a CAGR of 2.6% from
2002-2006 to reach a total of 29.4 million tonnes. Market volume is expected to
rise to 35.5 million tonnes by the end of 2011, representing a CAGR of 3.9% for
the period of 2006-2011. Higher percentage value gains over volume gains are the
result of increasing improvements in the technology of paint formulation and
delivery systems which have reduced wastage. In addition, average prices have
been steadily increasing due to stronger prospects for higher quality,
environmentally friendlier products such as powder-based and rad-cure
coatings.

The Companys current target market is the Industrial and
Specialty Coatings segments, which represent a combined 54.1% of the total
global PU coatings market or in value terms $38.8 billion.

-13-

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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.

-14-

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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 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 does not currently generate sufficient revenue from
operations to cover operating expenses and is not profitable. If the Company is
not able to significantly increase operating revenue and achieve profitability,
it may require additional equity or other means of debt financing to maintain
business operations, fund expansions or complete strategic acquisitions. There
can be no assurances that The Company will be able to obtain additional
financial resources on favorable commercial terms or at all. Failure to obtain
such financial resources could affect plans for sustainability and growth, or
result in the Company being unable to satisfy obligations as they become due,
either of which could have a material adverse effect on the Companys business
and financial condition.

-15-

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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.

-16-

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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 the Licensor 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 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). On December 6, the Company
exercised its Sealant option which entitles NTI to 15% of the outstanding shares
in the Company when effective. 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.

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ITEM 2. DESCRIPTION OF PROPERTY

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

Litigation

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.

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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 endedDecember 31, 2012
      December 31, 2011High
      Low
      High
      LowFirst Quarter
      $1.55
      $0.26
      $1.72
      $0.15Second Quarter
      $1.50
      $0.18
      $1.72
      $0.95Third Quarter
      $1.01
      $0.20
      $1.55
      $1.05Fourth Quarter
      $0.83
      $0.25
      $1.55
      $1.05


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, 2012 was 164.

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.

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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.

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.

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ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company (as defined by Rule 12b-2
of the Exchange Act) and are not required to provide the information under this
item.

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.

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Basis of Presentation

This MD&A on the Companys operating results and cash flows
for the fiscal year ended December 31, 2012 as well as its financial position at
December 31, 2012, should be read in conjunction with the consolidated financial
statements and accompanying notes contained in this report.

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 Nanortech 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

During the fiscal year ended December 31, 2012, the Company had
no off-balance sheet arrangements.

Development Stage Company

The Company complies with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 915 Development Stage
Entities in its characterization of the Company as a development stage
enterprise.

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 $10,977,400 since inception.
This condition raises 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 flow

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Operating Results for the Fiscal Year Ended December 31,
2012 and 2011

Results of Operations

We have had no significant operating revenues for the period
from our inception on July 8, 2010 through our fiscal year ended December 31,
2012, save for samples sales of $71,512. Our activities to date have been
financed from the proceeds of share subscriptions, proceeds from convertible
debentures issued and from loans from related and other parties and trade
payables. During the year ended December 31, 2012, revenues from our operations
were $66,642 compared to $4,870 for the year ended December 31, 2011.

For the period from inception on July 8, 2010 through our
fiscal year ended December 31, 2012, we incurred total net expenses of
$11,048,912 including non-cash charges of $4,511,551 from stock-based
compensation, intangible asset amortization of $491,120, amortization of debt
discounts of $714,506, interest expenses of $1,715,878, loss on extinguishment
of debt of $102,467, loss on impairment of intangible assets of $631,917, a gain
in the fair value of the derivative liability of $438,428. Also incurred were
other general and administrative expenses of $2,276,603, cost of sales of
$31,700 and other interest expense of $1,011,598.

General and administrative expenses totaled $1,608,055 for the
year ended December 31, 2012, as compared to $2,104,639 for the year ended
December 31, 2011, representing a 24% decrease from the prior corresponding
period. Included in general administrative expenses for the year ended December
31 are the following:

Year Ended December 312012
      
      
      2011
      
      
      %
        changeProfessional Fees
      $
      452,559
      
      $
      649,481
      
      
      (30%
      )Payroll
      
      414,939
      
      
      388,159
      
      
      7%Stock-based compensation (non-cash)
      
      390,580
      
      
      751,337
      
      
      (48%
      )Rent and general office costs
      
      113,790
      
      
      161,353
      
      
      (29%
      )Lab fees and supplies
      
      87,809
      
      
      40,285
      
      
      118%Travel and trade shows
      
      148,378
      
      
      114,024
      
      
      30%Total
      $
      1,608,055
      
      $
      2,104,639
      
      
      (24%
      )


Amortization and depreciation was $218,580 for the year ended
December 31, 2012 compared to $194,583 in the year ended December 31, 2011. The
Company recorded an impairment of the License assets of $631,917 in the year
ended December 31, 2011. There was no impairment recorded in the year ended
December 31, 2012.

During the year ended December 31, 2012, we recorded a gain of
$360,461 on the change in fair value of derivative liabilities related to our
convertible notes payable, compared to a gain of $77,787 during the year ended
December 31, 2011. The change in derivative liability has no impact on our cash
flows for operations and was primarily a result of the decrease in our stock
price during the years ended December 31, 2012 and 2011, respectively.

During the year ended December 31, 2012, we recorded $799,374
in interest expense compared to $1,733,359 during the year ended December 31,
2011. During the year ended December 31, 2011, we incurred a $1,179,886 interest
charge related to the modification of warrants issued in connection with our
Senior Secured Convertible Debentures.

During the year ended December 31, 2012, we recorded a loss on
the extinguishment of debt in the amount of $22,750 compared to $79,717 during
the year ended December 31, 2011.

-23-

---

Liquidity and Capital resources

We had zero cash balances at December 31, 2012 and 2011. The
Company had a working capital deficit of $3,784,346 as of December 31, 2012. We
do not have enough cash on hand to commence operations. We believe that we will
need approximately $1,500,000 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.

From our inception we raised $25,000 through an exercise of
warrants at $0.40 per share for 62,500 shares. We issued 100,000 shares for fair
value services rendered with respect to media relations of $135,000 in the
fourth quarter of 2010. We issued Senior Secured Convertible Debentures for
$400,000 on August 16, 2010. We raised an additional $75,000 and $72,600 from
short-term loans in the 4th quarter of 2010.

In April 2011, the Company raised $1,201,000 in convertible
debentures, with an individual face value of $5,000, a maturity of 36 months and
a coupon rate of 10% per annum payable in cash or capital stock at the Companys
discretion. Each debenture shall be convertible (using a conversion factor of
1.4) into 3,571 Units of the Company where each Unit (at a price of $1.40 per
Unit) , comprises of 1 share of common stock at and one half a stock purchase
warrant of the Company with an exercise price of $2.00 per full unit and a maturity of 36
months. Warrants are exercisable at the option of the holder at any time prior
to maturity. The Debentures shall carry an anti-dilution provision if the total
outstanding shares exceed 9,250,000 shares.

On February 21, 2012, the Company raised an additional $119,500
in similar conditions as the ones above except for a conversion price of $1.45 per
unit and a warrant exercise price of $2.10.

In 2011, the Company received $894,000 in short term loans from
shareholders and repaid $315,200.

In 2012, the Company received approximately $1,566,000 (approximate
  $765,000 from related parties) in short term loans and repaid approximately
  $449,000.

Principal Cash Flows for the Fiscal Year Ended December
31, 2012

Operating activities used cash flows of $790,954. Net
change in operating assets and liabilities generated cash flows of $533,761.
This increase in use of cash relates primarily to the net loss incurred during
2012 after adjusting for non-cash expenses.

Financing activities provided cash flows of $790,954,
primarily as a result of receipt of funds for the issuance of $119,500 in
convertible debentures, $765,296 in shareholder loans and $681,500 in loan
payable-related party. In addition, the Company repaid $326,350 of the note
payable - related party, and repaid $448,992 on loans payable -
shareholders.

-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.(A Development Stage Company)

Consolidated Financial Statements December 31, 2012

-25-

---

Hybrid Coatings Technology Inc.(A Development Stage Company)

Consolidated Financial Statements

Contents

|Reports
      of Independent Registered Public Accounting Firms | F-1 
|--------------------------------------------------------------- | ----
|                                                                |     
|Consolidated
      Balance Sheets                               | F-3 
|                                                                |     
|Consolidated
      Statements of Operations                     | F-4 
|                                                                |     
|Consolidated
      Statement of Stockholders Deficit           | F-5 
|                                                                |     
|Consolidated
      Statements of Cash Flows                     | F-8 
|                                                                |     
|Notes
      to Consolidated Financial Statements                | F-11

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Hybrid Coating Technologies,
Inc.(A Development Stage Company) 
  Daly City, CA

We have audited the accompanying consolidated balance sheet of Hybrid Coating Technologies, Inc. as of December 31, 2012 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended and the period from July 8, 2010 (inception) to December 31, 2012.  Hybrid Coating Technologies, Inc.’s management is responsible for these financial statements.  Our responsibility is to express an opinion on these financial statements based on our audit.  The consolidated financial statements for the period from July 8, 2010 (inception) through December 31, 2011 were audited by other auditors whose report expressed an unqualified opinion on those financial statements.  The consolidated financial statements for the period from July 8, 2010 (inception) through December 31, 2011 include total revenues of $4,870 and a net loss of $8,728,044.  Our opinion on the consolidated financial statements for the period from July 8, 2010 (inception) through December 31, 2012, insofar as it relates to amounts from July 8, 2010 (inception) through December 31, 2011, is based solely on the report of other auditors.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit 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 audit 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 audit provides 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, 2012, and the results of its
operations and its cash flows for the year 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 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 16, 2013

F-1

---

Report of Independent Registered Public Accounting
Firm

To the Board of Directors ofHybrid Coating Technologies
Inc. 
  (A Development Stage Company)

We have audited the accompanying balance sheets of Hybrid
Coating Technologies Inc. (the Company) as of December 31, 2011, and the
related statements of operations, stockholders deficit, and cash flows for the
year ended December 31, 2011 and period from July 8, 2010 (inception) to
December 31, 2011. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2011, and the results of its operations and its cash flows
for the year ended December 31, 2011 and the period from July 8, 2010
(inception) to December 31, 2011, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, the
Companys absence of significant revenues, recurring losses from operations, and
its need for additional financing in order to fund its operations raise
substantial doubt about its ability to continue as a going concern. The 2011
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ LBB & Associates Ltd., LLP

LBB & Associates Ltd., LLPHouston, Texas
  may 10, 2012

F-2

---

Hybrid Coatings Technology Inc.(A Development Stage Company)Consolidated Balance
SheetsAs of December 31, 2012 and 2011

|                                                                                                                                                                           |   | December 31 |   |   | December 31 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|ASSETS                                                                                                                                                                     |   | 2012        |   |   | 2011        |  
|                                                                                                                                                                           |   |             |   |   |             |  
|Current assets                                                                                                                                                             |   |             |   |   |             |  
|Samples and supplies                                                                                                                                                       | $ | -           |   | $ | 37,836      |  
|Total current assets                                                                                                                                                       |   | -           |   |   | 37,836      |  
|                                                                                                                                                                           |   |             |   |   |             |  
|Intangible asset, net of accumulated amortization                                                                                                                          |   | 626,963     |   |   | 845,543     |  
|                                                                                                                                                                           |   |             |   |   |             |  
|TOTAL ASSETS                                                                                                                                                               | $ | 626,963     |   | $ | 883,379     |  
|                                                                                                                                                                           |   |             |   |   |             |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                      |   |             |   |   |             |  
|                                                                                                                                                                           |   |             |   |   |             |  
|Current liabilities                                                                                                                                                        |   |             |   |   |             |  
|Bank overdraft                                                                                                                                                             | $ | 22,104      |   | $ | 40,013      |  
|Accounts payable and accrued liabilities                                                                                                                                   |   | 435,245     |   |   | 293,214     |  
|Accounts payable and accrued liabilities-related parties                                                                                                                   |   | 554,633     |   |   | 172,695     |  
|Stock payable                                                                                                                                                              |   | 15,000      |   |   | -           |  
|Senior secured convertible debentures, net of unamortized
      discounts of $0 and $21,566, respectively                                                                  |   | 200,000     |   |   | 178,434     |  
|Loans payable, net of unamortized discount
      of $14,638 and $0, respectively                                                                                           |   | 694,362     |   |   | 27,500      |  
|Loans payable  shareholders, net of unamortized discounts
      of $25,194 and $30,632, respectively                                                                      |   | 1,062,521   |   |   | 697,568     |  
|Note payable  related party                                                                                                                                               |   | 800,481     |   |   | 1,126,831   |  
|Total current liabilities                                                                                                                                                  |   | 3,784,346   |   |   | 2,536,255   |  
|Convertible debentures, net of unamortized
      discount of $325,136 and $461,225, respectively                                                                           |   | 995,364     |   |   | 739,775     |  
|Derivative liability                                                                                                                                                       |   | 166,721     |   |   | 480,461     |  
|                                                                                                                                                                           |   |             |   |   |             |  
|Total liabilities                                                                                                                                                          |   | 4,946,431   |   |   | 3,756,491   |  
|                                                                                                                                                                           |   |             |   |   |             |  
|Commitments and contingencies                                                                                                                                              |   |             |   |   |             |  
|                                                                                                                                                                           |   |             |   |   |             |  
|STOCKHOLDERS DEFICIT                                                                                                                                                      |   |             |   |   |             |  
|                                                                                                                                                                           |   |             |   |   |             |  
|Common stock, $0.001 par value, 75,000,000 shares
      authorized, 6,503,568 shares and
      
               5,816,733 shares
      issued and outstanding, respectively |   | 6,504       |   |   | 5,817       |  
|Additional paid-in capital                                                                                                                                                 |   | 6,651,428   |   |   | 5,849,115   |  
|Deficit accumulated during development stage                                                                                                                               |   | (10,977,400 | ) |   | (8,728,044  | )
|Total stockholders deficit                                                                                                                                                |   | (4,319,468  | ) |   | (2,873,112  | )
|                                                                                                                                                                           |   |             |   |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                | $ | 626,963     |   | $ | 883,379     |  

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

F-3

---

Hybrid Coatings Technology Inc.(ADevelopmentStageCompany)ConsolidatedStatementsofOperationsFor the Years EndedDecember31,
2012 and 2011and the Period from July 8, 2010(Inception)throughDecember31,
2012

|                                                                             |   | Year ended        |   |   | Year ended        |   |   | July 8, 2010 (inception)  |  
|---------------------------------------------------------------------------- | - | ----------------- | - | - | ----------------- | - | - | ------------------------- | -
|                                                                             |   | December 31, 2012 |   |   | December 31, 2011 |   |   | through December 31, 2012 |  
|                                                                             |   |                   |   |   |                   |   |   |                           |  
|Revenues                                                                     | $ | 66,642            |   | $ | 4,870             |   | $ | 71,512                    |  
|Cost of sales                                                                |   | 27,700            |   |   | 4,000             |   |   | 31,700                    |  
|                                                                             |   |                   |   |   |                   |   |   |                           |  
|Gross-margin                                                                 |   | 38,942            |   |   | 870               |   |   | 39,812                    |  
|Operating expenses                                                           |   |                   |   |   |                   |   |   |                           |  
|General and administrative                                                   |   | 1,608,055         |   |   | 2,104,639         |   |   | 7,502,480                 |  
|Impairment of intangible asset                                               |   | -                 |   |   | 631,917           |   |   | 631,917                   |  
|Amortization of intangible asset                                             |   | 218,580           |   |   | 194,583           |   |   | 491,120                   |  
|Total operating expenses                                                     |   | 1,826,635         |   |   | 2,931,139         |   |   | 8,625,517                 |  
|Loss from operations                                                         |   | (1,787,693        | ) |   | (2,930,269        | ) |   | (8,585,705                | )
|Other income (expense)                                                       |   |                   |   |   |                   |   |   |                           |  
|Loss on extinguishment of debt                                               |   | (22,750           | ) |   | (79,717           | ) |   | (102,467                  | )
|Change in fair value of derivative
      liability                           |   | 360,461           |   |   | 77,787            |   |   | 438,248                   |  
|Interest expense                                                             |   | (799,374          | ) |   | (1,733,359        | ) |   | (2,727,476                | )
|Net loss                                                                     | $ | (2,249,356        | ) | $ | (4,665,558        | ) | $ | (10,977,400               | )
|                                                                             |   |                   |   |   |                   |   |   |                           |  
|Basic and diluted net loss per common share                                  | $ | (0.36             | ) |   | (0.85             | ) |   |                           |  
|Basic and diluted weighted average number of common shares
      outstanding |   | 6,316,699         |   |   | 5,501,026         |   |   |                           |  

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

F-4

---

HybridCoatings TechnologyInc.(ADevelopmentStageCompany)StatementofStockholdersDeficitFor the Period July 8, 2010(Inception)throughDecember31,
2012

DeficitAccumulatedDuring theNumber of
    
    
    
    
    
    Additional
    
    
    DevelopmentShares
    
    
    Amount
    
    
    paid-in capital
    
    
    Stage
    
    
    TotalIssued
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance , July 8, 2010
    
    -
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -Issuance of Founders shares for services rendered
    
    3,381,003
    
    
    3,381
    
    
    334,719
    
    
    
    
    
    338,100Fair value of warrants granted on July 8- re-valued on
      August 30
    
    -
    
    
    -
    
    
    2,047,471
    
    
    -
    
    
    2,047,471Fair value of warrants granted on July 14-
      re-valued on August 30
    
    -
    
    
    -
    
    
    849,063
    
    
    -
    
    
    849,063Exchange of shares for 33,810,035 shares of Nanotech
      Industries Intl Inc.
    
    1,821,000
    
    
    1,821
    
    
    (1,821
    )
    
    -
    
    
    -Issuance of shares for services rendered
    
    100,000
    
    
    100
    
    
    134,900
    
    
    -
    
    
    135,000Beneficial conversion feature on Senior Secured Convertible
      Debenture
    
    -
    
    
    -
    
    
    126,607
    
    
    -
    
    
    126,607Valuation of warrants issued
    
    -
    
    
    -
    
    
    273,393
    
    
    -
    
    
    273,393Exercise of warrants for cash on July 30, 2010 - 62,500
      shares at $0.40 per share
    
    -
    
    
    -
    
    
    25,000
    
    
    -
    
    
    25,000Net loss during the development stage
    
    -
    
    
    -
    
    
    -
    
    
    (4,062,486
    )
    
    (4,062,486
    )Balance, December 31, 2010
    
    5,302,003
    
    $
    5,302
    
    $
    3,789,332
    
    $
    (4,062,486
    )
    $
    (267,852
    )


(Continued on next page)

F-5

---

Issuance of shares as payment for
      consulting fees on February 9, 2011
    
    30,000
    
    
    30
    
    
    50,970
    
    
    -
    
    
    51,000Valuation of warrants issued with Loans
      payable shareholders
    
    -
    
    
    -
    
    
    48,710
    
    
    -
    
    
    48,710Remeasurement of warrants July 14, 2010 and
      Series A warrants
    
    -
    
    
    -
    
    
    1,179,886
    
    
    -
    
    
    1,179,886Issuance of shares as payment for
      consulting fees on May 16, 2011
    
    112,928
    
    
    113
    
    
    175,925
    
    
    -
    
    
    176,038Fair value of 25,000 warrants issued with
      loans payable shareholders - May 24, 2011
    
    -
    
    
    -
    
    
    15,450
    
    
    -
    
    
    15,450Issuance of shares as payment for
      consulting fees on June 2, 2011
    
    58,000
    
    
    58
    
    
    89,842
    
    
    -
    
    
    89,900Issuance of shares for services rendered on
      June 15, 2011
    
    20,000
    
    
    20
    
    
    30,980
    
    
    -
    
    
    31,000Fair value of 25,000 warrants issued with
      loans payable shareholders - July 15, 2011
    
    -
    
    
    -
    
    
    27,915
    
    
    -
    
    
    27,915Issuance of shares for services rendered on
      September 6, 2011
    
    40,000
    
    
    40
    
    
    59,560
    
    
    -
    
    
    59,600Replacement of outstanding pre-merger
      shares on September 7, 2011
    
    30,500
    
    
    31
    
    
    (31
    )
    
    -
    
    
    -Issuance of shares for services rendered on
      September 7, 2011
    
    10,000
    
    
    10
    
    
    14,390
    
    
    -
    
    
    14,400Issuance of shares for services rendered on
      September 9, 2011
    
    2,000
    
    
    2
    
    
    2,878
    
    
    -
    
    
    2,880To record shares to be issued with loans
      payable shareholders
    
    -
    
    
    -
    
    
    36,000
    
    
    -
    
    
    36,000Issuance of shares for services rendered on
      October 31, 2011
    
    27,302
    
    
    27
    
    
    42,291
    
    
    -
    
    
    42,318Issuance of shares for services rendered on
      November 9, 2011
    
    184,000
    
    
    184
    
    
    285,016
    
    
    -
    
    
    285,200Net loss during the development stage
    
    -
    
    
    -
    
    
    -
    
    
    (4,665,558
    )
    
    (4,665,558
    )Balance, December 31, 2011
    
    5,816,733
    
    $
    5,817
    
    $
    5,849,115
    
    $
    (8,728,044
    )
    $
    (2,873,112
    )


(Continued on next page)

F-6

---

Issuance of shares for services rendered on
      January 31, 2012
    
    18,000
    
    
    18
    
    
    26,982
    
    
    -
    
    
    27,000Fair value of 30,000 warrants issued for
      services rendered - February 16, 2012
    
    -
    
    
    -
    
    
    29,136
    
    
    -
    
    
    29,136Fair value of 230,000 warrants issued for
      services rendered - February 23, 2012
    
    -
    
    
    -
    
    
    239,269
    
    
    -
    
    
    239,269Issuance of shares for services rendered -
      March 5, 2012
    
    51,000
    
    
    51
    
    
    66,249
    
    
    -
    
    
    66,300Issuance of shares with loans payable
      to shareholders - March 5, 2012
    
    10,000
    
    
    10
    
    
    12,990
    
    
    
    
    
    13,000Issuance of shares for interest and premium
      on loan - March 5, 2012
    
    90,000
    
    
    90
    
    
    92,910
    
    
    -
    
    
    93,000Issuance of shares for cashless exercise of 220,000 warrants on loan - March 23, 2012
    
    205,135
    
    
    205
    
    
    (205
    )
    
    -
    
    
    -Issuance of shares for interest on
      convertible debentures - May 21, 2012
    
    240,200
    
    
    240
    
    
    119,860
    
    
    -
    
    
    120,100Issuance of shares for services rendered -
      May 21, 2012
    
    50,000
    
    
    50
    
    
    16,450
    
    
    -
    
    
    16,500Issuance of shares for services rendered -
      August 15, 2012
    
    22,500
    
    
    23
    
    
    12,352
    
    
    -
    
    
    12,375Imputed interest on note payable  related
      party
    
    -
    
    
    -
    
    
    169,452
    
    
    -
    
    
    169,452Valuation of warrants issued with loans
      payable - shareholders
    
    -
    
    
    -
    
    
    16,868
    
    
    -
    
    
    16,868Net loss during the development stage
    
    -
    
    
    -
    
    
    -
    
    
    (2,249,356
    )
    
    (2,249,356
    )Balance, December 31, 2012
    
    6,503,568
    
    $
    6,504
    
    $
    6,651,428
    
    $
    (10,977,400
    )
    $
    (4,319,468
    )


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

F-7

---

Hybrid Coatings Technology Inc.(ADevelopmentStageCompany)ConsolidatedStatementsof Cash FlowsFor the Years EndedDecember31, 2012 and
2011 and the Period from July 8, 2010(Inception)throughDecember31, 2012

|                                                                                                |   | Year ended        |   |   | Year ended        |   |   | July 8, 2010 (inception)  |  
|----------------------------------------------------------------------------------------------- | - | ----------------- | - | - | ----------------- | - | - | ------------------------- | -
|                                                                                                |   | December 31, 2012 |   |   | December 31, 2011 |   |   | through December 31, 2012 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                            |   |                   |   |   |                   |   |   |                           |  
|Net loss                                                                                        | $ | (2,249,356        | ) | $ | (4,665,558        | ) | $ | (10,977,400               | )
|Adjustments to reconcile net loss to net cash provided by
      (used in) operating activities: |   |                   |   |   |                   |   |   |                           |  
|Stock-based compensation                                                                        |   | 390,580           |   |   | 751,337           |   |   | 4,511,551                 |  
|Impairment of samples and supplies                                                              |   | 10,136            |   |   | -                 |   |   | 10,136                    |  
|Interest paid through issuance of
      shares                                                  |   | 213,100           |   |   | -                 |   |   | 213,100                   |  
|Amortization of intangible asset                                                                |   | 218,580           |   |   | 194,583           |   |   | 491,120                   |  
|Interest expense from revaluation of
      SSCD warrants                                        |   | -                 |   |   | 1,180,886         |   |   | 1,180,886                 |  
|Interest expense on beneficial conversion feature
      related to SSCD warrants                |   | -                 |   |   | -                 |   |   | 126,607                   |  
|Interest imputed on notes payable 
      related party                                         |   | 169,452           |   |   | -                 |   |   | 169,452                   |  
|Loss on extinguishment of debt                                                                  |   | 22,750            |   |   | 79,717            |   |   | 102,467                   |  
|Loss on impairment of intangible
      assets                                                   |   | -                 |   |   | 631,917           |   |   | 631,917                   |  
|Change in fair value of derivative liability                                                    |   | (360,461          | ) |   | (77,787           | ) |   | (438,248                  | )
|Incentive and interest paid on
      prepayment of debt                                         |   | -                 |   |   | 25,833            |   |   | 25,833                    |  
|Amortization of debt discounts                                                                  |   | 260,505           |   |   | 402,740           |   |   | 714,506                   |  
|Change in operating assets and liabilities                                                      |   |                   |   |   |                   |   |   |                           |  
|Samples and supplies                                                                            |   | 27,700            |   |   | (37,836           | ) |   | (10,136                   | )
|Accounts payable and accrued
      liabilities                                                  |   | 142,031           |   |   | 234,825           |   |   | 449,412                   |  
|Accounts payable and accrued liabilities related
      parties                                  |   | 381,938           |   |   | 172,695           |   |   | 554,633                   |  
|Bank overdraft                                                                                  |   | (17,909           | ) |   | 40,013            |   |   | 22,104                    |  
|Net cash used in operating activities                                                           |   | (790,954          | ) |   | (1,066,635        | ) |   | (2,222,060                | )
|                                                                                                |   |                   |   |   |                   |   |   |                           |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                            |   |                   |   |   |                   |   |   |                           |  
|                                                                                                |   |                   |   |   |                   |   |   |                           |  
|Proceeds from sale of intangible asset                                                          |   | -                 |   |   | 150,000           |   |   | 150,000                   |  
|Net cash provided in investing activities                                                       |   | -                 |   |   | 150,000           |   |   | 150,000                   |  

(CONTINUED ON NEXT PAGE)

F-8

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Hybrid Coatings Technology Inc.(ADevelopmentStageCompany)ConsolidatedStatementsof Cash FlowsFor the Years EndedDecember31, 2012 and
2011 and the Period from July 8, 2010(Inception)throughDecember31, 2012

|                                                                |   | Year ended   |   |   | Year ended   |   |   | July 8, 2010(inception) |  
|--------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------------------- | -
|                                                                |   | December 31, |   |   | December 31, |   |   | through December 31,    |  
|                                                                |   | 2012         |   |   | 2011         |   |   | 2012                    |  
|                                                                |   |              |   |   |              |   |   |                         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                            |   |              |   |   |              |   |   |                         |  
|                                                                |   |              |   |   |              |   |   |                         |  
|Proceeds from issuance of convertible
      debentures          |   | 119,500      |   |   | 851,000      |   |   | 970,500                 |  
|Proceeds from issuance of Senior Secured Convertible Debentures |   | -            |   |   | -            |   |   | 400,000                 |  
|Proceeds from exercise of warrants                              |   | -            |   |   | -            |   |   | 25,000                  |  
|Proceeds from loans payable - shareholders                      |   | 765,296      |   |   | 894,000      |   |   | 1,731,896               |  
|Repayments from loans payable -
      shareholders              |   | (448,992     | ) |   | (315,200     | ) |   | (764,192                | )
|Proceeds from loans payable                                     |   | 681,500      |   |   |              |   |   | 758,375                 |  
|Repayments of note payable - related party                      |   | (326,350     | ) |   | (516,359     | ) |   | (1,049,519              | )
|                                                                |   |              |   |   |              |   |   |                         |  
|Net cash provided by financing activities                       |   | 790,954      |   |   | 913,441      |   |   | 2,072,060               |  
|                                                                |   |              |   |   |              |   |   |                         |  
|                                                                |   |              |   |   |              |   |   |                         |  
|INCREASE (DECREASE) IN CASH                                     |   | -            |   |   | (3,194       | ) |   | -                       |  
|                                                                |   |              |   |   |              |   |   |                         |  
|CASH, BEGINNING                                                 |   | -            |   |   | 3,194        |   |   | -                       |  
|CASH, ENDING                                                    | $ | -            |   | $ | -            |   | $ | -                       |  

(CONTINUED ON NEXT PAGE)

F-9

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HybridCoatings TechnologyInc.(ADevelopmentStageCompany)ConsolidatedStatementsof Cash FlowsFor the Years EndedDecember31, 2012 and
2011 and the Period from July 8, 2010(Inception)throughDecember31, 2012

|                                                                       |   | Year ended   |  |   | Year ended   |  |   | July 8, 2010
    (inception) | 
|---------------------------------------------------------------------- | - | ------------ |  | - | ------------ |  | - | ---------------------------- | 
|                                                                       |   | December 31, |  |   | December 31, |  |   | through December 31,         | 
|                                                                       |   | 2012         |  |   | 2011         |  |   | 2012                         | 
|                                                                       |   |              |  |   |              |  |   |                              | 
|Supplemental disclosure of cash flow
      information                 |   |              |  |   |              |  |   |                              | 
|Cash paid during the period for:                                       |   |              |  |   |              |  |   |                              | 
|Interest paid                                                          | $ | 83,440       |  | $ | 6,000        |  | $ | 89,440                       | 
|Income taxes                                                           | $ | -            |  | $ | -            |  | $ | -                            | 
|                                                                       |   |              |  |   |              |  |   |                              | 
|Non-cash financing transactions:                                       |   |              |  |   |              |  |   |                              | 
|Acquisition of intangible
      asset through issuance of note payable | $ | -            |  | $ | 1,400,000    |  | $ | 1,900,000                    | 
|Discount arising from warrants attached to
      issuance of SSCD      | $ | -            |  | $ | -            |  | $ | 273,393                      | 
|Discount arising from loans
      payable - shareholders               | $ | -            |  | $ | 92,075       |  | $ | 92,075                       | 
|Transfer of loans and SSCD to convertible
      debentures             | $ | -            |  | $ | 310,000      |  | $ | 310,000                      | 
|Reclassification of accrued
      interest to SSCD                     | $ | -            |  | $ | 14,167       |  | $ | 14,167                       | 
|Shares issued for premium on shareholder loans                         | $ | 28,000       |  | $ | 36,000       |  | $ | 64,000                       | 
|Discount arising from loans
      payable  shareholders               | $ | 16,868       |  | $ | -            |  | $ | 16,868                       | 
|Fair value of derivative convertible
      debentures                  | $ | 46,721       |  | $ | 558,248      |  | $ | 604,969                      | 
|Cashless exercise of warrants                                          | $ | 205          |  | $ | -            |  | $ | 205                          | 

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

F-10

---

Hybrid Coatings Technology Inc.Notes to Consolidated Financial StatementsDecember
31, 2012 and 2011

NOTE 1  NATURE OF BUSINESS AND GOING CONCERN

Nature of Business OverviewHybrid Coating
Technologies Inc. (the Company, HCT), was incorporated in the State of
Nevada on July 8, 2010.

On July 27, 2011, the Company by majority vote of shareholders amended its articles of incorporation to change its name to Hybrid Coating Technologies Inc. from EPOD Solar Inc. (EPOD).  Further, the name change was approved by the Nevada Secretary of State on September 7, 2011, and the Company’s OTC Bulletin Board trading symbol has been changed to HCTI.ob.

On August 30, 2010, the Company acquired from Nanotech
Industries International Inc. ("Nanotech"), a corporation formed pursuant to the
laws of Nevada on July 8, 2010, all of the issued and outstanding shares of
capital stock of Nanotech ("Nanotech Shares") held by the holders of the
Nanotech Shares ("Nanotech Shareholders") (the "Acquisition"). The purchase
price for the Acquisition consisted of 3,381,003 shares of common stock, $0.001
par value per share (the " EPOD Common Stock") of the Registrant, issued to
Nanotech Shareholders. Nanotech is the surviving and continuing entity and the
historical financials following the reverse merger transaction will be those of
Nanotech. As a result of such acquisition, 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 ConcernThe Company also 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 $11,000,000 since inception, and has a working capital
deficit of approximately $3,800,000 as of December 31, 2012. 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.

F-11

---

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. All significant inter-company balances and transactions
have been eliminated in the consolidated financial statements.

Development StageThe Company complies
with Financial Accounting Standards Board Accounting Standards Codification
(FASB ASC) 915 Development Stage Entities in its characterization of the
Company as a development stage enterprise.

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 one financial institution 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.

Inventories-Inventories are valued at
the lower of cost or market. The cost is determined by using the average cost
method.

Intangible Assets-Intangible assets are comprised of intellectual property which is amortized on a straight-line basis over the assets’ respective life, 36 months, 60 months and 120 months. Intellectual property with a perpetual life in not amortized.

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.

F-12

---

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(contd)

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, 2012 and 2011, 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, 2012 and 2011, the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.

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.

F-13

---

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(contd)

Earnings (Loss) perShare -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, 2012 and 2011, the following
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, | 
|---------------- |  | ----------------------- | 
|                 |  | 2012                    | 
|Convertible debt |  | 1,206,936               | 
|Stock warrants   |  | 3,385,735               | 
|                 |  | 4,592,671               | 

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.

Subsequent Events The Company has
evaluated all transactions occurring between the year ended December 31, 2012,
and through the date of issuance of the consolidated financial statements for
disclosure consideration.

NOTE 3 INTANGIBLE ASSETS

On July 12, 2010, the Company entered into a licensing
agreement (the Licensing Agreement) with Nanotech Industries, Inc., (NTI, 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) using NTIs technology. As per the Licensing
Agreement, the Company has a three-year exclusivity for all of 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.

F-14

---

As part of this Licensing Agreement, the Company agreed to pay
NTI a one-time licensing fee of $500,000 and a 5% royalty on gross Coating
Product sales within North America. The $500,000 cost basis of capitalized
license rights (North American Rights) is being amortized over a three-year
life. 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, 2012 and 2011, management determined, through
independent valuation, that the fair value of the North American Rights 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,
2012 and 2011 was $73,080 and $162,500, respectively.

On March 17, 2011 the Company and NTI amended the Licensing
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 Coating Products in
the Russian Territory (Russian Rights), the Company shall pay to the Licensor
an ongoing royalty of 7.5%, and a one-time royalty fee of $150,000 (paid during
2011). These capitalized license rights will be amortized over a ten-year
period. The amount of amortization for the years ended December 31, 2012 and
2011 was $4,800 and $11,250, respectively. At December 31, 2011, the fair value,
through independent valuation of the Russian Rights was determined to be
$44,000. As this was determined to be a permanent impairment in value the
carrying value of the Russian Rights was reduced by $94,750 and the associated
loss was recorded. At December 31, 2012 management determined, through
independent valuation, that the fair value of the Russian Rights exceeded the
carrying value and no further impairment adjustment was deemed necessary.

On July 7, 2011, a second amendment was made to the Licensing
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 (European Rights) on an
exclusive basis for a period of five years from the date the option is
exercised, after which time the European Rights shall continue perpetually on a
non-exclusive basis. Upon exercise of 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 financing for which was provided by NTI and is recorded in notes payable 
related party. The Company has repaid $449,519 to Nanotech related to the option
as of December 31, 2012. The license rights shall be amortized over a five year
period.

At December 31, 2011, management determined, through
independent valuation, the fair value of the European Rights was $692,000,
requiring an impairment charge of $537,167. At December 31, 2012, management
determined, through independent valuation, that the fair value of the European
Rights exceeded the carrying value and no further impairment adjustment was deemed
necessary. The Company recorded $140,700 and $20,833 of amortization expense for
the years ended December 31, 2012 and 2011, respectively.

On October 18, 2011, the Company and NTI entered into a second
Licensing Agreement (Second Licensing Agreement) granting the Company an option
(Sealant Option) to be exercised within six months of the signing of the
Second Licensing Agreement, for the manufacturing and sale of environmentally safe adhesives and
sealants (Sealant Products), for the following:

F-15

---

| | 1. | The Company shall issue to NTI a one-time licensing fee
      (Sealant Shares), an aggregate number of shares of the Companys
      restricted common stock which shall give NTI, immediately upon such
      issuance of shares, an incremental 15% (fifteen percent) ownership stake
      in the Company.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                
| | 2. | The Company shall pay to NTI a royalty of 7.5% (seven and
      one half percent) of gross revenue from the sale of the Sealant Products
      for the duration of the agreement.                                                                                                                              

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.

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

CarryingValue atLicense Rights
    
    Term (date) of
    Original
    December 31,Overview
    Licensed Region
    License
    cost
    2012A Coating Products
    North America
    June 12, 2010 3 years
    $500,000
    $36,463B Coating Products
    Russian Territory
    March 17, 2011 10 years
    $150,000
    $39,200C Coating Products
    European Continent
    July 7, 2011 5 years
    $1,250,000
    $551,300


Intangible assets activity is as follows for the years ended December
31, 2012 and 2011:

|                                        |   | 2012     |   |   | 2011      |  
|--------------------------------------- | - | -------- | - | - | --------- | -
|                                        |   |          |   |   |           |  
|Net intangible asset, beginning of year | $ | 845,543  |   | $ | 422,043   |  
|Purchases                               |   | -        |   |   | 1,400,000 |  
|Sale                                    |   | -        |   |   | (150,000  | )
|Impairment                              |   | -        |   |   | (631,917  | )
|Less: current
      amortization        |   | (218,580 | ) |   | (194,583  | )
|Net intangible asset, end of year       | $ | 626,963  |   | $ | 845,543   |  

The balance of intangible assets is as follows as of December
31, 2012 and 2011:

|                               |   | 2012      |   |   | 2011      |  
|------------------------------ | - | --------- | - | - | --------- | -
|Intangible assets              | $ | 1,118,083 |   | $ | 1,118,083 |  
|Less, accumulated amortization |   | (491,120  | ) |   | (272,540  | )
|Intangible assets, net         | $ | 626,963   |   | $ | 845,543   |  

F-16

---

NOTE 4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 premium has been amortized and on April 29, 2011, the
lender converted $55,000 of this debt to convertible debentures. The balance at
December 31, 2012 and 2011 was $27,500, and the loan is currently in default.
The Company has not received any notices from the loan holders with respect to
the defaults.

During the year ended December 31, 2012, the Company entered
into various short term loans with different terms totaling $681,500 with
interest payable monthly at interest rates ranging from 15% to 25% per annum.
Some loans incur a penalty of up to 60% of the monthly interest if the interest
is not paid on time. During the year, the Company accrued approximately $47,500
in interest and penalties of which $31,100 was paid. Through the date of
issuance of these consolidated financial statements, the Company has defaulted
on four of these loans totaling $183,500; $19,000 maturing on October 1, 2012,
$94,500 on January 13, 2013, $50,000 on March 1, 2013 and $20,000 on April 3,
2013. The Company has not received any notices from the loan holders with
respect to the defaults.

During the year ended December 31, 2012, the Company issued 50,000
  warrants related to a $150,000 loan payable. The fair value of the 50,000 warrants
  issued in conjunction with the debt issued in 2012 amounted to $19,005 using
  the assumptions discussed in the table below. This resulted in a relative fair
  value of $16,668 which was recorded as a debt discount. The discount is amortized
  over the life of the associated loan payable. Interest expense of $2,230 was
  recorded from amortization of the debt discount, resulting in an unamortized
  discount of $14,438 at December 31, 2012.

|Expected volatility     | 166.04%
|----------------------- | -------
|Exercise price          | $0.50  
|Stock price             | $0.50  
|Expected life           | 2 years
|Risk-free interest rate | 0.25%  
|Dividend yield          | $ Nil  

NOTE 5  LOANS PAYABLE SHAREHOLDERS

A shareholder loaned the Company money to pay for Company
expenses. The loans are non-interest bearing and unsecured, with no specific
terms of repayment or collateral. During the years ended December 31, 2012 and
2011, the shareholder loaned the Company $177,866 and $60,000, respectively. The
Company made repayments in the amounts of $117,502 and $45,200 during the years
ended December 31, 2012 and 2011, respectively. The balance of the amounts owed
to the shareholder at December 31, 2012 and 2011 was $147,764 and $87,400,
respectively.

On January 17, 2011, the Company received a loan of $50,000
with a $10,000 premium due at maturity on April 30, 2011. The premium has been
expensed to interest. The balance due at December 31, 2012 and 2011 was $60,000 and
the loan is currently in default.

On January 21, 2011, the Company entered into a loan with a
shareholder for $100,000 to be repaid by May 21, 2011. The loan has a $10,000
premium payable at maturity and includes 10,000 warrants with a maturity of 24
months at an exercise price of $1.72. During the year ended December 31, 2011,
the Company paid $85,000. The balance at December 31, 2012 and 2011 was $25,000
and the loan is currently in default.

F-17

---

On March 2, 2011, the Company entered into a loan agreement
with a shareholder, whereby the shareholder agreed to loan the Company
$50,000 to be repaid by the maturity date of May 2, 2011. The loan had a $3,000
premium payable at a maturity and included 50,000 warrants with a maturity of 24
months at an exercise price of $1.48 per share. In the event of default, the shareholder
will receive an additional 50,000 warrants with a maturity of 24 months and an
exercise price of $1.48. During the year ended December 31, 2011, the Company
paid $53,000 and the balance at December 31, 2012 and 2011 was $0.

On March 8, 2011, the Company entered into a loan agreement
with a shareholder, whereby the shareholder had agreed to loan the Company
$50,000 to be repaid by the maturity date of May 8, 2011. The loan had a $3,000
premium payable at a maturity and included 30,000 warrants with a maturity of 24
months at an exercise price of $1.48 per share. In the event of default, the shareholder
will receive an additional 30,000 warrants with a maturity of 24 months and an
exercise price of $1.48. During the year ended December 31, 2011, the Company
paid $53,000 and the balance at December 31, 2012 and 2011 was $0.

On May 24, 2011, the Company entered into a loan agreement with
a shareholder, whereby the shareholder has agreed to loan the Company $50,000 to
be repaid by the maturity date of August 24, 2011. The loan had a $5,000 premium
payable at maturity and included 25,000 warrants with a maturity of 24 months at
an exercise price of $1.48 per share. In the event of default, the shareholder will
receive an additional 50,000 warrants with a maturity of 24 months and an
exercise price of $1.48 per share. The shareholder had an option to convert this loan into
future convertible debentures. During the year ended December 31, 2011, the
Company paid $55,000 and the balance at December 31, 2012 and 2011 was $0.

On June 16, 2011, the Company entered into a loan agreement
with a shareholder, whereby the shareholder agreed to loan the Company
$60,000 to be repaid by the maturity date of October 16, 2011. The loan had a
$6,000 premium payable at maturity that was charged to interest expense. The
Company has pledged security in the form of 60,000 shares of the Company. In the
event of default, the shareholder has the option to retain the 60,000 shares
instead of payment of the $66,000 liability. The lender has granted an extension
until June 16, 2013. The balance at December 31, 2012 and 2011 was $66,000.

On July 15, 2011, the Company entered into a loan agreement with a shareholder, whereby the shareholder agreed to loan the Company $100,000 to be repaid by the maturity date of October 15, 2011. The loan had a premium of $20,000 payable at maturity and included 25,000 warrants with a maturity of 24 months at an exercise price of $1.48
per share, which the Company has amortized over the three month term and expensed as interest. In the event of default, the shareholder will receive 30,000 warrants with a maturity of 24 months and an exercise price of $1.48 per share. The Company repaid $24,000 of the loan during the year ended December 31, 2011. On November 4, 2011, the lender has granted the Company an extension of the maturity date until June 29, 2012 for an additional $8,750 in interest payable at maturity. The balance at December 31, 2011 was $96,000. On July 1, 2012, the Company entered into a new loan agreement with the shareholder to extend the maturity in exchange for a new loan balance of $118,750. The new maturity date of the loan is December 31, 2013. The Company reviewed the debt modification for debt extinguishment and determined that the $22,750 additional premium caused the fair value of the new debt to exceed the carrying value of the old debt by more than 10%. Accordingly, the Company recorded the additional $22,750 in premium as a loss on debt extinguishment.  There is an additional premium of $26,800 payable at maturity. During 2012, $8,933 of this premium was amortized to interest expense leaving an unamortized premium of $17,867 at December 31, 2012.

F-18

---

On July 29, 2011, the Company entered into a loan agreement with a shareholder, whereby the shareholder agreed to loan the Company $100,000 to be repaid by the maturity date of November 29, 2011 which was extended to July 29, 2012. The loan carries an interest payment of $1,000 per month. The Company accrued $5,000 of interest expense as of December 31, 2011. As collateral, the Company pledged 70,968 shares valued at $110,000 at the date of grant. In the event of default, the shareholder will receive 50,000 warrants with a maturity of 24 months and an exercise price of $1.48 per share. The balance of the loan at December 31, 2012 and 2011 was $0 and $100,000, respectively.

On July 31, 2011, the Company entered into a loan agreement
with a shareholder, whereby the shareholder has agreed to loan the Company
$150,000 to be repaid by the maturity date of July 31, 2012. The Company received
half the funds on August 31, 2011 and the balance on September 12, 2011. $1,875
interest per month is payable for the term of the loan. The balance of the loan
at December 31, 2012 and 2011 was $0 and $150,000, respectively.

On February 14, 2012, the shareholder exchanged the two
outstanding loans of $100,000 and $150,000 mentioned above and advanced an
additional $50,000 for a new loan total of $300,000. The new loan bears interest
at 16% per annum with required interest payments of $4,000 per month. The loan
matures on December 31, 2013. The balance of the loan at December 31, 2012 was
$300,000.

On August 1, 2011, the Company entered into a loan agreement
with a shareholder, whereby the shareholder agreed to loan the Company
$74,000 to be repaid by the maturity date of August 1, 2012. The loan has a
$14,800 premium half payable on signing date and half payable at maturity. In
addition 20,000 shares will be issued at a premium valued on September 30, 2011
of $24,000. The 20,000 shares were issued during the year ended December 31,
2012. The premium will be amortized over the term of the loan. During the year
ended December 31, 2011, the Company amortized $20,483 of the premium to
interest expense, leaving unamortized premium of $18,317. In the event of
default, the shareholder will receive 50,000 warrants with a maturity of 24
months and an exercise price of $1.48 per share. The balance at December 31, 2011, net of
the unamortized discount, was $70,483. During the year ended December 31, 2012
the Company amortized the remaining $18,317 in premium to interest expense. The
balance at December 31, 2012 was $88,800.

On September 21, 2011, the Company entered into a loan
agreement with a shareholder, whereby the shareholder has agreed to loan the
Company $50,000 to be repaid by the maturity date of September 21, 2012. The
Company will pay a cash premium of $5,000 and will issue 10,000 shares at a
premium valued on September 30, 2011 of $12,000. The premium will be amortized
over the term of the loan. The amortization of the premium of $12,315 and $
4,685 has been charged to interest expense with unamortized premium of $0 and
$12,315 at December 31, 2012 and 2011, respectively. Interest of $625 per month
will be charged for the term of the loan. At December 31, 2012 and 2011, $1,875
of interest expense has been accrued. The balance of the loan at December 31,
2012 and 2011, net of the unamortized discount, was $ 55,000 and $42,685,
respectively. This loan is currently in default.

Except to the extent paid at inception of the loans the premiums described above were fully amortized using the effective interest method over their respective terms and included in interest expense.

The relative fair value of the 140,000 warrants issued in conjunction with the aggregate debt issued in 2011 amounted to $92,075 using the assumptions discussed in the table below. The discounts arising from these warrants have been fully amortized over the lives of the associated notes.

F-19

---

Fair value assumptions:

|Expected volatility     | 100.28% to 112.6%
|----------------------- | -----------------
|Expected life           | 2 years          
|Risk-free interest rate | 0.56%-0.73%      
|Dividend yield          | $ Nil            

During the year ended December 31, 2012, a company owned by the
CEO of HCT advanced the Company $357,430 and was repaid $331,490. The balance
owed at December 31, 2012 was $25,940. The advances are non-interest bearing and
unsecured, with no specific terms of repayment or collateral.

On February 22, 2012, the Company entered into a loan agreement with a shareholder, whereby the shareholder agreed to loan the Company $20,000 to be repaid by the maturity date of September 22, 2013. The loan had a premium of 10,000 shares that were valued at the issuance date at $13,000. This premium was fully amortized over the term of the loan. The loan bears interest at $267 per month and is payable monthly. In the event of default, the shareholder will receive 30,000 warrants with a maturity of 24 months and an exercise price of $1.48 per share.

On June 8, 2012, the Company entered into a loan agreement with
a shareholder, whereby the shareholder agreed to loan the Company $40,000 to
be repaid by the maturity date of October 18, 2012. The loan bears at interest
at 15% per annum and is payable monthly. The loan is unsecured, with no
collateral and is currently in default.

On July 2, 2012, the Company entered into a loan agreement with
a shareholder, whereby the shareholder agreed to loan the Company $100,000
to be repaid by the maturity date of January 2, 2013. The loan bears at interest
at 18% per annum and is payable monthly. The loan is unsecured, with no
collateral and is currently in default.

During 2012, the Company accrued $73,854 (2011-$10,500) in
interest of which $52,354 (2011-$8,625) was paid. The Company also issued 70,000
shares of common stock to a shareholder as payment of for extending the maturity
dates of several loans. The fair value of the stock issued was $93,000 based on the
stock price on the date of issuance and was recorded as interest expense.

NOTE 6  CONVERTIBLE DEBENTURES

On April 29, 2011, the Company issued convertible debentures for proceeds of $1,201,000 and on February 21, 2012, issued an additional $119,500 (“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 are held by third parties and by non-controlling shareholders, and are convertible  as follows:

April 29, 2014 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 one half of a warrant to
purchase a share of common stock of the Company with an exercise price of $2.00
per share and a maturity at April 29, 2014. Warrants are exercisable at the option of the
holder at any time prior to maturity.

February 21, 2015 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 one half of a warrant to purchase a share of common stock of the
Company with an exercise price of $2.10 per share and a maturity at February 21, 2015.
Warrants are exercisable at the option of the holder at any time prior to
maturity.

F-20

---

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.

We analyzed derivative financial instruments, (the convertible
debenture, share purchase and warrants) in accordance with FASB ASC 815, Fair
Value Measurements and Disclosures. The embedded conversion features in the
convertible debentures and attached warrants should be accounted for as a
derivative liability. The warrants contain full ratchet reset features (subject
to adjustment for dilutive share issuances) and should be valued as a derivative
liability.

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 of $558,248 as of April 29,
2011 and of $46,721 at February 21, 2012 for each issuance. The Company recorded
the change in the fair value of the derivative liability as a gain of $77,787 as
of December 31, 2011, to reflect the value of the derivative liability as
$480,461. The Company recorded another gain of $360,461 to reflect the value of
the derivative liability as $166,721 as of December 31, 2012.

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 three year term of the
debt. Amortization of the debt discount was $182,810 and $97,023 for the years
ended December 31, 2012 and December 31, 2011, respectively, leaving a remaining
discount of $325,136 at December 31, 2012. Interest of $130,651 has been accrued
for the year ended December 31, 2012 (2011-$81,274). During 2012, $120,100 in
interest has been paid through the issuance of 240,200 shares of common stock on
May 21, 2012. The balance of the debentures at December 31, 2012 and December
31, 2011, net of the unamortized discount, was $995,364 and $739,775,
respectively.

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, |  
|------------------------------------------------------------------------------------------------------------------------------ | - | -------------------------------------------------------------------------------- | -
|                                                                                                                               |   | 2012                                                                             |  
|Beginning balance                                                                                                              | $ | 480,461                                                                          |  
|Total gains                                                                                                                    |   | (360,461                                                                         | )
|Settlements                                                                                                                    |   | -                                                                                |  
|Additions                                                                                                                      |   | 46,721                                                                           |  
|Transfers                                                                                                                      |   | -                                                                                |  
|                                                                                                                               |   |                                                                                  |  
|Ending balance                                                                                                                 | $ | 166,721                                                                          |  
|                                                                                                                               |   |                                                                                  |  
|Change in unrealized gains included in 
    earnings relating to derivatives  still 
    held as of December 31, 2012 and 2011 |   | 360,461                                                                          |  

F-21

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NOTE 7  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.

The unamortized discount of $0 and $21,566 as of December 31,
2012 and 2011, respectively, was as a result of the relative fair value of the
Series A and B warrants attached to the SSCD. Amortization of the debt discount
was $21,566 and $ 120,849 for years ended December 31, 2012 and 2011,
respectively. The discount is amortized using the effective interest method over
the two year term of the debt. Interest of $20,075 was accrued during the year
ended December 31, 2012, for an outstanding balance of $46,575 (2011-$26,500)
that has been accrued. During the year ended December 31, 2011, $200,000 of the
debt was repaid along with $14,167 of accrued interest and $25,833 as an
incentive payment for pre-payment. This $240,000 was repaid through the issuance
of a Convertible Debenture due April 29, 2014. A loss on extinguishment of debt
of $79,717 has been recorded. The balance due at December 31, 2012 and 2011, net
of the unamortized discount, was $200,000 and $178,434, respectively. 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.

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 8 STOCKHOLDERS DEFICIT

2011

During the year the Company issued 22,000 shares to employees
and 462,230 shares to consultants for services with a fair value of $751,336.

On March 14, 2011, the board of directors authorized the
extension of the expiration date of the common stock purchase warrants described
in Note 6 to February 28, 2014. This extension of the expiration date will apply
to the following: (i) the 533,336 Series A warrants issued to a third party
pursuant to the SSCD agreement entered into on August 16, 2010; and (ii) the
687,500 remaining stock purchase warrants issued to a consultant on July 14,
2010. The 533,336 Series A warrants and the 687,500 warrants were re-valued
using the Black-Scholes method according to the following assumptions:

F-22

---

|Expected volatility     | 126.7% 
|----------------------- | -------
|Exercise price          | $1.25  
|Stock price             | $1.48  
|Expected life           | 3 years
|Risk-free interest rate | 1.07%  
|Dividend yield          | $ Nil  

The new value of the 533,336 Series A (see Note 7) and 687,500
July 14, 2010 warrants (see above) was determined to be $1,180,886 and was
recognized as an increase in additional paid in capital and interest expense.

On August 1, 2011 and September 1, 2011 the Company entered
agreements with shareholders whereby loan premiums of 20,000 and 10,000 shares
respectively would be issued to shareholders. The fair value of these shares was
recorded as a reduction in the carrying value of the loans and an increase in
additional paid-in capital of $36,000. The Company issued 20,000 shares during
the year ended December 31, 2012. The remaining 10,000 shares have not been
issued by the Company.

On September 7, 2011, the Company issued 30,500 shares to
pre-merger shareholders that were never issued their shares in error.

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

2012

During 2012, the Company issued 141,500 shares to employees and
consultants for services with a fair value of $122,175. The shares were valued
using the stock price on the date of grant.

During 2012, the Company issued 240,200 shares to the
Convertible Debenture holders as payment for one years interest totaling
$120,100. The shares were valued using the stock price on the date of grant.

During 2012, the Company issued 100,000 shares to a shareholder
as interest compensation for loans. 20,000 of the shares were issued for 2011
premiums previously valued and recorded in additional paid-in capital, 70,000
shares were issued as interest compensation and were valued at $93,000 and were
charged to interest expense and the remaining 10,000 shares valued at $13,000
were recorded as debt discount for new loan premiums.

During 2012, the Company issued 260,000 warrants to purchase common stock of the Company to consultants for services and 50,000 warrants in conjunction with the issuance of shareholder loans. The warrants were valued using the Black-Scholes option pricing model using the following assumptions:

F-23

---

|Expected volatility     | 104.75% - 166.04%
|----------------------- | -----------------
|Exercise price          | $0.10 - $0.50    
|Stock price             | $0.50 - $1.12    
|Expected life           | 2 - 3 years      
|Risk-free interest rate | 0.24% - 0.43%    
|Dividend yield          | $ Nil            

The value of the warrants (see above) issued to consultants was
determined to be $268,405 and was recognized as an increase in additional
paidin capital and expensed as consulting fees. The fair value of the warrants
issued for the shareholder loan was $19,005 and the relative fair value of the
warrants was $16,868. The relative fair value was recorded as a debt discount
against the carrying value of the loan and an increase in additional paid-in
capital.

On February 22, 2012, the Company entered an agreement with a
shareholder whereby a loan premium of 10,000 shares would be issued to the
shareholder. Although the shares had not been issued the Company has recorded a
reduction of the loan and an increase in stock payable of $15,000. The fair
value of the stock was determined using the stock price on the date of grant.

On March 23, 2012, a warrant holder exercised 220,000 warrants
through a cashless option for 205,135 shares. The Company recorded an increase
in par value for the shares and a corresponding reduction in additional paid in
capital of $205.

Warrants

A summary of the activity in the Companys warrants during the
years ended December 31, 2012 and 2011 is presented below:

|                                                        | Number of | Weighted Average
|------------------------------------------------------- | --------- | ----------------
|                                                        | Warrants  | Exercise Price  
|                                                        |           |                 
|Outstanding at December 31, 2010                        | 2,018,928 | $0.20           
|Issued                                                  | 140,000   | $1.72           
|Exercised                                               | -         | $0.00           
|Outstanding and exercisable, at December 31, 2011       | 2,158,928 | $0.28           
|Issued February 16, 2012                                | 30,000    | $0.10           
|Issued February 23, 2012                                | 230,000   | $0.10           
|Issued November 29, 2012                                | 50,000    | $0.50           
|Exercised March 23, 2011                                | (220,000) | $0.10           
|Outstanding and exercisable, at December
      31, 2012 | 2,248,928 | $0.29           

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 $1.25 per share and a maturity date of February 14, 2014 and
133,336 Series B warrants with an exercise price of $1.50 per share and a
maturity date of August 16, 2013.

The intrinsic value of warrants outstanding at December 31,
2012 was $591,430.

F-24

---

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 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 9 RELATED PARTY TRANSACTIONS

Fees charged by ShareholderDuring the years ended December 31, 2012 and 2011, the Company
was charged $262,000 and $375,000 by an outside consultant, who is also a
shareholder, for professional fees, expenses and commissions. The amounts are
included in accounts payable and accrued liabilities related parties. The
Company paid $46,000 and $359,000 to the consultant during the years ended
December 31, 2012 and 2011, respectively. The Company has an outstanding balance
as of December 31, 2012 and 2011 of $485,468 and $168,530, respectively.

Principal Debt PaymentsDuring the year ended December 31, 2012, the Company made
Principal payments of $326,350 on its note payable to NTI related to the 2011
acquisition of the license rights for Coatings in Europe. The note matures on
November 29, 2013, does not bear interest, and no payments are required prior to
maturity. The balance of the note was $800,481 and $1,126,831 at December 31,
2012 and December 31, 2011, respectively.

Shared Administrative CostsThe Company shares office space and certain personnel with NTI.
Costs are allocated among the parties based on usage. During 2012 and 2011, the
allocation of such shared costs between the Company and NTI was 80% and 20%,
respectively. Rent expense for the years ended December 31, 2012 and 2011 was $45,000 and $45,000, respectively.

NOTE 10  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, 2012 and
2011:

F-25

---

|                                       | 2012  | 2011 
|-------------------------------------- | ----- | -----
|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:

|                                |   | 2012       |   |   | 2011       |  
|------------------------------- | - | ---------- | - | - | ---------- | -
|Net operating loss carryforward | $ | 3,672,000  |   | $ | 2,967,000  |  
|Valuation
      allowance       |   | (3,672,000 | ) |   | (2,967,000 | )
|Deferred tax asset              | $ | -          |   | $ | -          |  

The Company has non-capital losses carried forward of approximately
  $7,130,000 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 11-COMMITMENT AND CONTINGENCIES

The Company has an option expiring July 12, 2013 to issue a
controlling stake in the Company amounting to 52.5% to 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 and additional 10% ownership
stake in the Company.

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.

NOTE 12 SUBSEQUENT EVENTS

Subsequent to December 31, 2012, the Company issued 74,000
shares for proceeds of $29,600 for services.

On January 21, 2013 the Company entered into a loan agreement
for $78,400 maturing on July 20, 2013. The loan bears interest at 2% per month,
with any interest unpaid bearing interest at an additional 2.5% /month. The loan
is secured by a legal interest in the Companys assets for approximately
$94,000.

In 2013, the Company negotiated terms on a shareholder loan
extending the maturity to December 31, 2013 from January 1, 2013 for an
additional premium of $30,000.

In March 2013 the company issued warrants to purchase shares
with an exercise price of $0.001and a 5 year term as follows:

-450,000 warrants to a related party for payment of three
years rent up to end of 2013.

F-26

---

-420,000 warrants to a shareholder for consulting
services.

-480,000 warrants to the CEO for back pay.

Subsequent to year end the Company received $300,000 in
advances from shareholders.

F-27

---

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

Our consolidated financial statements for the year ended
December 31, 2012 included in this annual report have been audited by GBH, CPAs
PC, Houston, Texas. Our consolidated financial statements for the year ended
December 31, 2011 included in this annual report have been audited by LBB &
Associates Ltd., LLP, Houston, Texas, as set forth in this annual report. There
have been no disagreements on accounting and financial disclosure for the years
ended December 31, 2012 and 2011.

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.

(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
  anddirectors 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.

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, 2012, 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, 2012, covered by this
annual report.

As of June 30, 2012, certain controls related to the financial
statement close and reporting process were not functioning effectively to
properly accrue certain expenses and classify some expenses in the financial
statements. Management concluded that this control deficiency constituted a
material weakness at December 31, 2012. 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.

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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 | 64  | Director,
      President, Treasurer and Chief Executive Officer
|Darin Nellis   | 43  | Secretary , Director of Sales
      & Marketing                 
|Alex Trossman  | 63  | 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.

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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, investor 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,SecretaryDirector 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.

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Significant Employees

Elena Shenkar,Director of Operations

Ms. Shenkar:has seventeen years of experience as a
business owner and upper level executive in the hospitality and finance
industries. Her expertise includes negotiations and management of contractual
relationships with bankers, private equity investors, landlords, trademark and
transactions attorneys, architects, interior designers, operations managers,
entitlement consultants, neighborhood community leaders, publicists, marketing
and promotions firms, major publications, graphic and brand designers, corporate
America executives and high profile charity organizations. She was one of the
founding partners of O Sushi Café in Brea, California and helped structure,
develop and finance several key concepts in the hospitality industry including
the construction, operations and ownership of Blowfish Sushi in the highly
publicized, billion-dollar, Santana Row Development. She has raised close to
five million dollars for various business ventures and has a wealth of
experience with investor relations. She attended the University of Southern
California where she received a bachelor of science in Business Finance. She
also attended Whittier Law School and has passed the California Bar Exam. Ms.
Shenkar was born in Odessa, Ukraine and immigrated to the United States in 1978.
She is fluent in English and Russian.

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.

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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. The
summary is qualified in its entirety by reference to the specific provisions of
the 2011 Plan, the full text of which is set forth as Exhibit C to this
Information Statement.

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.

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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, 2010.

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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 for the fiscal year of the Company indicated.

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

Name and Principal
      Position
    Year
    Salary ($)
    Bonus ($)
    S tock Awards
      ($)
    Option Awards($)
    NonequityIncentive
      Plan **Compensa** tion
      ($)
    **Nonqualified**Deferred
      Compensation Earnings ($)
    All Other
      Compen sation ($)
    Total ($)Joseph Kristul Director, President,
      Chief Executive Officer and Chief Financial Officer
    2012
    $184,000
    0
    0
    0
    0
    0
    0
    0


Compensation of Executive Officers

Mr Kristul receives a salary of $184,000 per annum.

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, 2012.

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Outstanding Equity Awards at Fiscal Year End

No unexercised options or warrants were held by any of our
named executive officers at December 31, 2012. No equity awards were made during
the fiscal year ended December 31, 2012.

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, 2012.

Pension Benefits

No named executive officers received or held pension benefits
during the fiscal year ended December 31, 2012.

Nonqualified Deferred Compensation

No nonqualified deferred compensation was offered or issued to
any named executive officer during the fiscal year ended December 31, 2012.

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.

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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, 2012, 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.

|                                                                                    |  | Beneficial       |     |  |                      | 
|----------------------------------------------------------------------------------- |  | ---------------- | --- |  | -------------------- | 
|                                                                                    |  | Ownership        |     |  |                      | 
|                                                                                    |  |                  |     |  |                      | 
|Name of
      Beneficial Owner                                                      |  | Total Shares (2) |     |  | Percent of Class (4) | 
|                                                                                    |  |                  |     |  |                      | 
|Joseph Kristul (1) Director, President,
      Treasurer and Chief Executive Officer |  | 500,000          | (3) |  | 7.69%                | 
|Darin Nellis (1), Secretary                                                         |  | 126,000          |     |  | 1.94%                | 
|Alex Trossman (1), Director                                                         |  | 62,500           |     |  | 0.96%                | 
|Eugene Shenkar                                                                      |  | 389,200          |     |  | 5.99%                | 
|All Directors and Executive Officers as a
      Group (3 Persons)                   |  | 688,500          |     |  | 10.59%               | 

|(1) | Executive officer and/or director of the Company. The
      appointment of Mr. Kristul and of Mr. Trossman shall become effective on
      the Effective Date.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                               
|(2) | Represents the total number of shares of Common Stock
      owned as of December 31, 2012.                                                                    
|    |                                                                                                                                                               
|(3) | Represents 400,000 shares of common stock issued to Mr.
      Kristul and 100,000 shares issued to his wife, Maria Kristul.                                   
|    |                                                                                                                                                               
|(4) | The percentages listed in the percent of class column are
      based upon 6,503,568 issued and outstanding shares of Common
  Stock.                         

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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, 2012. The Company did not
incur any fees from GBH during the year ended December 31, 2012. Our previous
auditor, LBB & Associates Ltd., LLP served as our independent registered
public accounting firm for our fiscal year ended December 31, 2011 and up to the
third quarter ended September 30, 2012 resigning on March 12, 2013. 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 Dec. 31, 2012 |  |   | Fiscal Year Ended Dec. 31, 2011 | 
|------------------ | - | ------------------------------- |  | - | ------------------------------- | 
|                   |   |                                 |  |   |                                 | 
|Audit Fees         | $ | 73,383                          |  | $ | 41,720                          | 
|Audit-Related Fees |   | -                               |  |   | -                               | 
|Tax Fees           |   | -                               |  |   | -                               | 
|All Other Fees     |   | -                               |  |   | -                               | 
|Total              | $ | 73,383                          |  | $ | 41,720                          | 

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, 2012 were pre-approved by the Board of
Directors.

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ITEM 15. EXHIBITS

|Exhibit |  | Description of Exhibits                                                                                                                                
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  |                                                                                                                                                        
|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)                                                                                   
|31.1    |  | Certification
        of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.                                
|32.1    |  | 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

-37-

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SIGNATURES

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 16, 2013 |     | HYBRID COATING
      TECHNOLOGIES INC               
|-------------------- | --- | ----------------------------------------------------
|                     |     | (Registrant)                                        
|                     |     |                                                     
|                     | By: | /s/ Joseph Kristul                                  
|                     |     | Name: Joseph Kristul                                
|                     |     | Title: President and Chief
      Executive Officer  
|                     |     | (Principal Executive, Financial
      and Accounting
|                     |     | Officer)                                            

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 16, 2013
|Joseph Kristul     |  | President and Chief Executive Officer,                                         |  |               
|                   |  | (Principal executive officer principal
      financial and accounting officer) |  |               
|                   |  |                                                                                |  |               
|                   |  |                                                                                |  |               
|                   |  |                                                                                |  |               
|/s/ Alex Trossman  |  |                                                                                |  | April 16, 2013
|Alex Trossman      |  | Director                                                                       |  |               

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