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

**FORM 10-Q**

x  QUARTERLY  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE *SECURITIES EXCHANGE           ACT OF  1934*

                 For the quarterly period ended September 30, 2002

OR

o  TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE *SECURITIES EXCHANGE           ACT OF  1934*

                 For the transition period from                                                          to                                                     

Commission file number      0-24364                                                                                                                      

| **INTERNATIONAL HI-TECH INDUSTRIES INC.**
(Exact name of Registrant specified in its charter)**CANADA**(State or other Jurisdiction of incorporation or      organization)******Not applicable**(I.R.S.      Employer Identification No.)
  
**1096 West 10th Avenue      Vancouver, British Columbia, Canada, V6H 1H8**
(Address of principal executive offices)
  
**604-733-5400**
(Registrant's telephone number, including area code)  
**Not applicable**
(Former Name, former address and former fiscal year, if  changed since last report)

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. 

 x Yes               o   No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and  reports required to be filed by Sections 12, 13 or 15(d) of the *Securities  Exchange Act of 1934* subsequent to the distribution of securities under a  plan confirmed by a court.

o  Yes             o    No

APPLICABLE TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes  of common stock, as of the latest practicable date.

102,531,371 (as at December 3, 2002)

 

 

**PART 1 - FINANCIAL INFORMATION**

**Item 1.                     Financial Statements.**

  Notice to Reader

  Consolidated Balance Sheets

    Consolidated Statements of Operations and Deficit

  Consolidated  Statements of Cash Flow

                                 Notes to Consolidated Financial Statements

                                 Quarterly Report as at September 30, 2002

**Item 2.                     Management's Discussion and Analysis of Financial Condition and Results of  Operations.**

 

 

 

**NOTICE TO READER**

We have compiled the consolidated balance sheet of International Hi-Tech  Industries Inc. as at September 30, 2002 and the consolidated statements of  operations and deficit, and cash flows for the nine month period then ended  from information provided by management.  We have not audited, reviewed  or otherwise attempted to verify the accuracy or completeness of such  information. Readers are cautioned that these statements may not be  appropriate for their purposes.
Vancouver, B.C."Morgan & Company"November 22, 2002Chartered Accountants
 
 
 

 
**INTERNATIONAL HI-TECH INDUSTRIES INC.**

** CONSOLIDATED FINANCIAL STATEMENTS**

** SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

 

 

 
**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**CONSOLIDATED BALANCE SHEETS  (Unaudited - see Notice to Reader)**
               
**SEPTEMBER 30**
DECEMBER 31
**2002**
2001         ** **
**ASSETS**** **** **
**Current**** **** **
     Cash and short term deposits**$****5,364,368 **$1,892,837 
     Restricted cash (Note 3)** ****193,854 **384,430 
     Accounts receivable** ****111,004 **42,418 
     Note receivable and accrued interest (Note 4)** ****1,862,170 **1,797,112 
     Prepaid expense** ****544,696 **181,496 
 ** ****8,076,092 **4,298,293 
**Restricted Cash**(Note 3)** **- 526,475 
**Capital Assets**(Note 5)** ****7,000,152 **6,544,500 
**Real Estate**(Note 6)** ****19,411,218 **18,449,039 
**Deferred Project Development Costs**** ****4,624,348 **4,604,327 
 **$****39,111,810 **$34,422,634 
**LIABILITIES**** **** **
**Current**** **** **
     Accounts payable and accrued liabilities**$****793,635 **$658,252 
     Accrued interest payable** ****223,145 **200,178 
     Preferred share dividends payable** ****68,391 **170,985 
     Current portion of loans payable (Note 7)** ****401,392 **97,500 
     Mortgage payable (Note 8)** ****1,868,000 **1,868,000 
     Current portion of long term debt (Note 9)** ****1,135,513 **1,204,554 
 ** ****4,490,076 **4,199,469 
**Loans Payable** (Note 7)** ****- **500,000 
**Long Term Debt**(Note 9)** ****1,745,571 **2,216,307 
**Share Subscriptions Received** (Note 10(f))** ****5,470,114 **652,460 
**Minority Interest**** ****3,818,975 **3,216,987 
 ** ****15,524,736 **10,785,223 
**Contingencies And Commitments**(Notes 13 and 14)** **** **
 ** **** **
**SHAREHOLDERS' EQUITY**** **** **
 ** **** **
**Share Capital**(Note 10)** ****44,669,114 **41,859,914 
 ** **** **
**Contributed Surplus**** ****305,000 **305,000 
 ** **** **
**Deficit**** ****(21,387,040)**(18,527,503)
 ** ****23,587,074 **23,637,411 
 **$****39,111,810 **$34,422,634 
 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT  (Unaudited - see Notice to Reader)**
               
**THREE MONTHS ENDED**
**NINE MONTHS ENDED**
**SEPTEMBER 30**
**SEPTEMBER 30**
** **
**2002**
 
2001** **
**2002**
2001** **** **** ****Revenue**** **** **** **** **     Licence rights**$****1,546,400 **$1,228,965 **$****1,546,400 **$2,889,137      Other income** ****101,270 **178,488 ** ****143,590 **353,188 ** ****1,647,670 **1,407,453 ** ****1,689,990 **3,242,325 **Expenses**** **** **** **** **     Audit and accounting** ****50,382 **36,035 ** ****119,600 **55,846      Capital taxes** **- - ** ****44,152 **75,800      Consulting fees** ****93,042 **20,124 ** ****146,080 **87,573      Depreciation and amortization** ****394,048 **197,756 ** ****1,163,897 **533,063      Directors' and officers' fees** ****42,000 **34,392 ** ****109,646 **93,240 
     Finders', loan guarantee and commitment fees** **
**78,370 **76,515 ** **
**106,809 **310,059      General expense** ****88,080 **45,790 ** ****222,119 **206,398      Legal** ****50,808 **118,586 ** ****228,379 **304,846      Insurance** ****12,040 **14,382 ** ****29,165 **27,668      Interest** ****117,397 **182,928 ** ****520,966 **503,592      Investor relations** ****7,180 **8,000 ** ****11,800 **32,500      Product representation costs** ****43,137 **55,718 ** ****129,886 **163,541      Telephone, fax and cellular** ****10,032 **12,795 ** ****26,609 **37,521      Office rent** ****24,655 **19,500 ** ****66,055 **58,500      Promotion and presentation** ****37,436 **- ** ****38,636 **16,620      Property taxes** ****131,953 **118,932 ** ****136,805 **130,367      Repairs and maintenance** ****16,026 **17,628 ** ****36,119 **53,520      Travel and business promotion** ****63,388 **62,536 ** ****150,028 **191,757      Transfer agent and filing fees** ****41,808 **4,085 ** ****68,653 **26,650      Wages and benefits** ****76,329 **102,754 ** ****256,364 **328,168 ** ****1,378,111 **1,128,456 ** ****3,611,768 **3,237,229 **Income (Loss) Before The Following**** ****269,559 **278,997 ** ****(1,921,778)**5,096 ** **** **** **
**Loss On Issue Of Treasury Shares By      Subsidiary Company**** ****- **- ** **** - **(37,368)
**Minority Interest In (Income) Loss Of Subsidiary**** **
**(724,987)**(303,091)** **
**(601,988)**(445,499)**Net Income (Loss) For The Period**** ****(455,428)**(24,094)** ****(2,523,766)**(477,771)** **** **** **** ****Deficit, Beginning Of Period**** ****(20,863,221)**(17,612,550)** ****(18,527,503)**(16,891,137)** ****(21,318,649)**(17,636,644)** ****(21,051,269)**(17,368,908)**Preferred Share Dividends**** **      **(68,391)**(172,340)** ****(335,771)**(440,076)**Deficit, End Of Period****$****(21,387,040)**$(17,808,984)**$****(21,387,040)**$(17,808,984)**Net Income (Loss) Per Share****$****(0.01)**$(0.01)**$**
**(0.04)**$
(0.01)
 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited - see Notice to Reader)**
               ** **
**THREE MONTHS ENDED**
**NINE MONTHS ENDED**** **
**SEPTEMBER 30**
**SEPTEMBER 30**** **
** **
**2002**
 
2001
** **
**2002**
 
2001** **** **** **** **** ****Cash Flows From Operating Activities**** **** **** **** **     Net income (loss) for the period**$****(455,428)**$(24,094)**$****(2,523,766)**$(477,771)     Adjustments for:** **** **** **** **
          Shares issued for loan guarantee                     and commitment fees** **** - **- ** **- 100,316           Depreciation and amortization** ****394,048 **197,756 ** ****1,163,897 **533,063 
          Loss on issue of treasury shares by                     subsidiary company** **** - **- ** ****- **37,368 
          Minority income in income (loss) of subsidiary** **** 724,987 **303,091 ** ****601,988 **445,499 ** ****663,607 **476,753 ** ****(757,881)**638,475      Changes in non-cash working capital items:** **** **** **** **          (Increase) in restricted cash** ****326,475 **(197,278)** ****526,475 **(459,542)          (Increase) Decrease in receivables** ****(49,181)**40,734 ** ****(68,586)**114,138 
          (Increase) Decrease in notes receivable                     and accrued      interest** **** (106,278)**(95,298)** **** (65,058)**(155,926)          (Increase) Decrease in prepaids** ****(355,311)**37,486 ** ****(363,200)**(55,003)
          Increase (Decrease) in accounts payable                     and accrued      liabilities** **
**(231,520)**(82,002)** **** 135,383 **14,014 
          Increase (Decrease) in accrued interest payable** **** (117,930)**4,675 ** **** 22,967 **10,178 
          Increase (Decrease) in preferred share dividend payable** ****           (15,531)**26,682 ** **** (102,594)**31,721           Increase (Decrease) in loans payable** ****(607,061)**4,000 ** ****(196,108)**(503,000)          Increase (Decrease) in deferred revenue** ****-**- ** ****- **(943,822)          Increase (Decrease) in long term debt** ****(204,517)**(25,646)** ****(539,777)**1,496,821 ** ****(1,360,854)**(286,647)** ****(650,498)**(450,421)**Cash Flows From Operating Activities**** ****(697,247)**190,106 ** ****(1,408,379)**188,054 ** **** **** **** ****Cash Flows From Financing Activities**** **** **** **** **     Shares issued for cash** ****2,809,200 **2,115,000 ** ****2,809,200 **2,115,000      Dividends paid** ****(68,391)**(172,340)** ****(335,771)**(440,076)     Issue of preferred shares** ****- **590,989 ** ****- **2,040,003      Increase (Decrease) in share subscriptions** ****2,647,694 **(718,916)** ****4,817,654 **72,480           Minority interest** ****- **- ** ****- **997,500 **Cash Flows From Financing Activities**** ****5,388,503 **1,814,733 ** ****7,291,083 **4,784,907 **Cash Flows From Investing Activities**** **** **** **** **     Capital assets** ****(292,194)**(894,685)** ****(1,619,549)**(3,745,964)     Real estate** ****(322,078)**(240,696)** ****(962,179)**(886,598)     Project development costs** ****(14,700)**(10,176)** ****(20,021)**(112,117)**Cash Flows From Investing Activities**** ****(628,972)**(1,145,557)** ****(2,601,749)**(4,744,679)
**Net Increase (Decrease) In Cash And Cash Equivalents**** **
**4,062,284 **859,282 ** ****3,280,955 **228,282 
**Cash And Cash Equivalents, Beginning Of Period**** **
**1,495,938 **1,751,587 ** **
**2,277,267 **2,382,587 **Cash And Cash Equivalents, End Of Period****$****5,558,222 **$2,610,869 **$****5,558,222 **$2,610,869 
 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS  (Continued)  (Unaudited - see Notice to Reader)**
               ** **
**THREE MONTHS ENDED**
**NINE MONTHS ENDED**** **
**SEPTEMBER 30**
**SEPTEMBER 30**** **
** **
**2002**
 
2001
** **
**2002**
 
2001** **** **** **** **** ****Cash And Cash Equivalents Are Comprised      Of:**** **** **** **** **     Cash on hand and balances with banks**$****1,939,654**$242,255**$****1,939,654**$242,255     Restricted cash** ****193,854**525,816** ****193,854**525,816     Short term investments** ****3,424,714**1,842,798** ****3,424,714**1,842,798** **** **** **** ****$****5,558,222**$2,610,869**$****5,558,222**$2,610,869
**SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:**

During the period ended, September 30, 2002, the Company issued 3,022,250  common shares on the conversion of 3,925,000 Series 2 Class A preferred  shares.
 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**1.   BASIS OF PRESENTATION**

The interim financial statements of International Hi-Tech Industries Inc.  (the "Company") have been prepared by management in accordance with accounting  principles generally accepted in Canada.  The interim financial  statements have been prepared following the same accounting policies and  methods of computation as the financial statements for the fiscal year ended  December 31, 2001, except as described below.  The disclosures included  below are incremental to those included with the annual financial statements.   The interim financial statements should be read in conjunction with the  financial statements and the notes thereto in the Company's annual report for  the year ended December 31, 2001.

**2.   SIGNIFICANT ACCOUNTING POLICIES**

a)   Consolidation

These financial statements include the accounts of the Company and its  subsidiaries - Canadian Hi-Tech Manufacturing Ltd. (65% owned), IHI  International Holdings Ltd. (51% owned) and IHI Construction Ltd. (100%  owned).

b)   Use of Estimates

The preparation of financial statements in conformity with generally  accepted accounting principles requires management to make estimates and  assumptions which affect the reported amounts of assets and liabilities, and  the disclosure of contingent assets and liabilities at the date of the  financial statements, and revenues and expenses for the periods reported.   Actual results could differ from these estimates.

c)   Cash Equivalents

The Company considers all highly liquid financial instruments purchased  with an original maturity of three months or less to be cash equivalents.

d)   Project Development Costs

The Company is deferring all architectural, design consulting and other  costs directly related to the ongoing development and commercialization of its  pre-fabrication building product and flexible design program to be amortized  against related revenues when production commences.

 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**2.   SIGNIFICANT ACCOUNTING POLICIES**(Continued)

e)   Depreciation and Amortization of Capital Assets
Automotive30% declining balance methodOffice furniture and equipment20% declining balance methodComputer equipment30% declining balance methodOther machinery and equipment20% declining balance methodPatent application costson a straight line basis over ten years             once a patent is securedLicense rightson a straight line basis over ten years
f)    Non-Monetary Transactions

Shares of common stock of the Company issued for non-monetary consideration  are valued at the quoted market price per share at the close of trading on the  day of completion of the transaction except for those circumstances where, in  the opinion of the Company and due to the nature of the transaction, the  trading price does not fairly represent the value of the transaction.  In  such circumstances, the value of the shares is determined based on the  estimated fair value of the consideration received.

g)   Stock Based Compensation

Employee and director stock options granted by the Company (as described in  Note 10(d)) are not recognized in the accounts until exercised, and then are  recorded only as a credit to share capital to the extent of the exercise  price.  No remuneration expense is recorded by the Company on the excess,  if any, of the trading price of the stock over its exercise price.

h)   Income Taxes

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

 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002**

**(Unaudited - see Notice to Reader)**

**2.   SIGNIFICANT ACCOUNTING POLICIES**(Continued)

i)    Interest in Joint Ventures

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

j)    Revenue Recognition

Non-refundable fees and deposits generated by the Company pursuant to  memorandums of understanding entered into with potential joint venture  partners are recorded on a cash basis.  Prior to a formal joint venture  agreement, the Company enters into a memorandum of understanding.  The  terms of the memorandum of understanding vary from region to region, however,  for a joint venture to proceed, the following conditions must be met:

i)    the potential joint venture partner must complete a  satisfactory joint venture business plan;

ii)   completion of satisfactory due diligence by the Company;

iii)   payment of all non-refundable fees and deposits required  under the terms of the memorandum of understanding for which the Company has  no further obligation whatsoever.  The Company is not required to use the  funds received for any particular purpose as the payments represent a good  faith indicator by the potential joint venture partner;

iv)  obtaining all necessary building approval as well as all  government regulatory approvals;

v)   creation, approval and execution by the respective companies  of the formal joint venture documentation which obligates the Company's joint  venture partner to contribute a minimum of US$9,000,000, and which provides  for the retention by the Company of a 51% equity interest in the joint venture  in consideration of the contribution of a license to permit the joint venture  to exploit the building process held under license, and all technical  expertise required to pursue the business objectives outlined in the joint  venture business plan.

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**2.   SIGNIFICANT ACCOUNTING POLICIES**(Continued)

k)   Foreign Currency Translation

Transactions recorded in foreign currencies have been translated into  Canadian dollars using the temporal method as follows:

i)    monetary items at the rate prevailing at the balance  sheet date;  ii)   non-monetary items at the historical exchange rate;  iii)   revenue and expense at the average rate in effect during  the applicable accounting period.

           Gains or losses arising on translation are included in the results of  operations.

l)    Loss Per Share

Loss per share is based on the weighted average number of shares  outstanding during the period.

**3.   RESTRICTED CASH**

As a condition of the Series 3 Preferred Share Offering, the Company agreed  to deposit with its trust company sufficient funds from the subscription  proceeds to fund the dividends payable for a two year period.

**4.   NOTE RECEIVABLE**

The notes receivable are repayable on demand with interest at 6.5% per  annum, and the notes and related accrued interest are secured by issuer's  license rights to the Company's building technology.

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

** **

** 5.   CAPITAL ASSETS**

**SEPTEMBER 30**
DECEMBER 31
**2002          **
2001        ** **Automotive**$****143,226**$143,226Office furniture and equipment** ****293,851**292,154Computer equipment** ****126,933**114,723Other machinery and equipment** ****7,536,668**6,036,787Patent application costs** ****2,283,978**2,178,217License rights** ****200,000**200,000** ****10,584,656**8,965,107Accumulated depreciation and amortization** ****3,584,504**2,420,607**$****7,000,152**$6,544,500
** **

**6.   REAL ESTATE**

**SEPTEMBER 30**
DECEMBER 31
**2002         **
2001        ** **** **Speen Road properties, Surrey** **** **Land and building**$****836,980**$836,980** **** **Hopcott Road property, Delta** **** **Land** ****1,356,527**1,356,527Site preparation** ****1,404,553**1,404,553Construction and design costs** ****14,548,942**13,586,763Construction financing** ****857,206**857,206Construction permits** ****135,810**135,810** **** **Langley properties** **** **Land** ****141,400**141,400** **** **Canadian National Railway properties** ****129,800**129,800**$****19,411,218**$18,449,039
**  **

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

** **

** 7.   LOANS PAYABLE**

**SEPTEMBER 30**
DECEMBER 31
**2002          **
2001        ** **** **
Repayable on January 2, 2003 with interest at 20% per      annum** $**
**303,892**$500,000Repayable on demand at various interest rates** ****97,500**97,500** ****401,392**597,500Less:  Current portion** ****401,392**97,500**$****-**$500,000
The $303,892 loan payable represents the amount advanced to date on a  $2,000,000 credit facility.  The loan is secured by a general security  agreement.

** 8.   MORTGAGE PAYABLE**

**SEPTEMBER 30**
DECEMBER 31
**2002          **
2001        ** **** **
The Company has arranged a conventional first      mortgage financing secured by the land and improvements located at Hopcott      Road in Delta, British Columbia.  Advances under the mortgage bear      interest at the rate of prime plus 5%, which is payable monthly.  The      mortgage is due on March 1, 2003.** $**** 1,868,000**$1,868,000
** **

** 9.   LONG TERM DEBT**

**SEPTEMBER 30**
DECEMBER 31
**2002          **
2001        CIBC Mortgage Corporation** **
     Repayable $1,815 per month including interest at 7.6%                per      annum, due February 1, 2003, secured by Speen           Road real estate** $**** 198,836**$203,908** **CIBC Mortgages Inc.** **
     Advances under this mortgage bear interest at the rate                of      prime minus 0.5% per annum, payable monthly.            The balance is due on      July 1, 2005** ****579,401**592,629
**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**9.   LONG TERM DEBT** (Continued)

**SEPTEMBER 30**
DECEMBER 31
**2002         **
2001        ** **** **Cove Mortgage Corporation** **
     Interest only at a rate of 14.0% per annum, due                February      1, 2004, secured by Speen Road real estate** $****300,000**$-** **CIBC Equipment Finance Limited** **
     Repayable $9,950 per month including interest, due                July 1,      2004** ****216,490**304,300** **** **GE Capital Canada Inc.** **** **
     Repayable $47,968 per month including interest at 12%                per      annum, due December 15, 2003** **** 728,887**1,049,881** **** **T&H Lemont** **** **
     Repayable US$10,006 per month plus interest at prime                plus      2%, due January 15, 2003** **** 63,528**207,193** **** **T&H Lemont** **** **
     Repayable US$14,010 per month plus interest at prime                plus      2%, due September 1, 2004
** **** 533,698**736,423** **** **Easy Lease Corp.** **** **
     Repayable $722 per month including interest at                15.144%,      due March 31, 2004** **** 10,767**16,442** **** **Heller Financial Canada Ltd.** **** **
     Repayable $243 per month including interest at                19.511%,      due June 30, 2004** **** 4,293**5,731** **** **Marathon Equipment Leasing Ltd.** **** **
     Repayable $849 per month including interest at                26.495%,      due August 1, 2004** **** 15,182**19,329** **** **MTC Leasing Inc.** **** **
     Repayable $132 per month including interest at                12.573%,      due November 1, 2004** **** 2,784**3,835** **** **MTC Leasing Inc.** **** **
     Repayable $156 per month including interest at                16.352%,      due October 1, 2004** **** 2,887**3,969
 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**9.   LONG TERM DEBT** (Continued)

**SEPTEMBER 30**
DECEMBER 31
**2002           **
2001       ** **** **OMB Capital Corp.** **** **
     Repayable $499 per month including interest at                15.708%,      due August 1, 2004** $**** 9,365**$11,655** **MTC Leasing Inc.** **
     Repayable $4,399 per month including interest at                19.886%,      due October 1, 2004** ****81,895**105,698** **** **MTC Leasing Inc.** **** **
     Repayable $265 per month including interest at 9.450%,                due      January 1, 2005** **** 5,889**7,449** **** **NA Leasing Inc.** **** **
     Repayable $399 per month including interest at                15.843%,      due October 1, 2004** **** 8,727**10,901** **** **MTC Leasing Inc.** **** **
     Repayable $1,102 per month including interest at                9.533%,      due February 1, 2005** **** 26,585**33,670** **** **WS Leasing Ltd.** **** **
     Repayable $1,790 per month including interest at                18.470%,      due October 1, 2005** **** 47,922**54,874** **** **Qualica Financial Group** **** **
     Repayable $815 per month including interest at                26.584%,      due October 1, 2004** **** 13,613**16,953** **** **Easy Lease Corp.** **** **
     Repayable $941 per month including interest at                15.392%,      due August 1, 2004** **** 16,352**21,555** **** **OMB Capital Corp.** **** **
     Repayable $637 per month including interest at                17.720%,      due June 1, 2004** ****11,173**14,466
 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**9.      LONG TERM DEBT** (Continued)

**SEPTEMBER 30**
DECEMBER 31
**2002         **
2001       ** **** **OMB Capital Corp.** **** **
     Repayable $136 per month including interest at                26.201%,      due April 5, 2005** $****2,810**$-** ****2,881,084**1,235,628Less:  Current portion** ****1,135,513**134,769** **** ****$****1,745,571**$1,100,859
The repayment requirements on the long term debt are as follows:
2002$1,135,5132003$672,1972004$53,2462005$34,2032006$27,892
**10.    SHARE CAPITAL**

a)   Authorized

An unlimited number of common shares without par value

An unlimited number of Class A preferred shares without par value, of which  50,000,000 have been designated Series 1, and 5,000,000 have been designated  Series 2, and 5,000,000 have been designated Series 3.

b)      Issued and Outstanding

**NUMBER OF      SHARES     **

** CONSIDERATION**
Common Shares     Balance, December 31, 200165,009,121$36,328,211          Issue of common shares on conversion14,022,2506,300,900     Balance, September 30, 200279,031,371$42,629,111
 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**10.    SHARE CAPITAL** (Continued)

b)   Issued and Outstanding (Continued)

**NUMBER OF      SHARES    **

** CONSIDERATION**

 Preferred Shares - Series 2     Balance, December 31, 20013,925,000 $3,491,700           Converted to common shares(3,925,000)(3,491,700)     Balance, September 30, 2002-$- Preferred Shares - Series 3
     Balance, December 31, 2001 and September 30, 20022,261,114 $2,040,003 Total Share Capital$44,669,114 
The Series 3 Preferred Shares are convertible at the rate of 0.77 of a  common share for each Preferred Share.  The preferred shares are  convertible for a period of two years at the option of the holder.  The  preferred shares are also convertible at the option of the Company if the  closing price of the common shares on the TSX Venture Exchange averages at  least $2.50 per Preferred Share.  On the second anniversary date of the  issuance of the Preferred Shares, the Preferred Shares will be automatically  converted into common shares.

Dividends on Series 3 Preferred Shares are cumulative and will accrue at an  annual rate equal to 12%.  Dividends will be payable in quarterly  instalments on each dividend date, subject to legal limits under Canadian law.

c)      Escrow Shares

Of the Company's issued and outstanding shares, 19,516,462 are held in  escrow to be released on the basis of 1,084,248 shares every six months  commencing August 21, 2002, increasing to 2,168,496 every six months  commencing February 21, 2004.

 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**10.    SHARE CAPITAL** (Continued)

d)   As at September 30, 2002, the Company had the following  outstanding directors' and employees' stock options:

**NUMBER           OF SHARES**

**EXERCISE        PRICE    **
**EXPIRY            DATE      **
25,000$2.25October 21, 20022,600,000$0.88October 6, 2003e)
As at September 30, 2002, the Company had outstanding  non-transferable share purchase warrants for the purchase of additional shares  as follows:

** **

**NUMBER**
**EXERCISE PRICE**
**EXPIRY DATE**
**OF SHARES**
**YEAR 1**
**YEAR 2**
**YEAR 1**
**YEAR 2**   154,000$1.30March 9, 2003   651,057$1.30June 1, 20031,000,000$$0.89August 17, 20031,550,000$$1.30August 17, 2003   325,500$$1.30September 8, 20036,000,000$0.28$0.28August 16, 2003August 16, 20045,000,000$0.40$0.40August 12, 2002August 12, 2004f)
The Company has received  $5,470,114 from the subscription for common shares and Series 3 Preferred  Shares which have not been issued at September 30, 2002.
   g)
As at September 30, 2002, the Company's  65% owned subsidiary, Canadian Hi-Tech Manufacturing Ltd. (Canadian Hi-Tech),  has 11,000 class B preferred shares outstanding, which are redeemable at $100  per share at the option of Canadian Hi-Tech, or after March 1, 1996 at the  option of the preferred shareholder who has agreed not to request Canadian  Hi-Tech to redeem its shares until all of the performance and escrow shares,  referred to in Note 10(c), have been earned out of escrow.

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**11.    INCOME TAXES**

The Company has non-capital losses for income tax purposes of $14,935,276  which may be available to reduce taxable income in future years.  The  potential benefit of these losses has not been recognized as a future income  tax benefit, as currently these amounts are less than likely to be realized.   These losses expire as follows:
2002$1,399,67520031,829,52020042,586,67520052,079,51820062,361,25220073,105,45020081,573,186$14,935,276
**12.    RELATED PARTY TRANSACTIONS**
a)
During the period, a company controlled by a director was  paid management fees of $54,000 (2001 - $54,000).  In addition, a company  controlled by a member of the family of the same director was paid rent of  $58,500 (2001 - $58,500).
   b)
During the period, the Company paid directors' and  officers' fees of $55,646 (2001 - $39,240).
   c)
Loans payable of $303,892 described in Note 7 are owing to  a company controlled by a relative of a director.
   d)
The Company is party to a consulting fee agreement under  which a company controlled by a director, and a second company controlled by  this same director's family, will provide all building engineering designs for  the Company's projects for an initial fee of 4% of the factory cost of the  initial design, and 1% of the factory cost for subsequent use of the same  design.
   e)
IHI International Holdings Ltd. ("IHI-International"), a  Bermuda company and a 51% owned subsidiary of the Company, holds the right to  use the building technology in all countries in the world other than Canada.   The Company has agreed to use its best efforts to offer, to its shareholders,  shares of IHI-International.  As a result, shareholders of the Company  will have an opportunity to acquire a direct interest in IHI-International  which will hold the right to use the technology in all parts of the world  other than Canada.

 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**13.    CONTINGENCIES**
a)
Builders' liens have been registered against the Company's Hopcott Road Property by the sub-contractors of a contractor engaged by the  Company during construction of the Hopcott Road facility.  The Company  has reached an agreement with the lien holders to discharge the liens on  payment to the lien holders of approximately $80,000.
   b)
Interim agreements entered into by the Company and, for  which the Company has received payments totalling US$1,200,000, provide that  there must not be any change in the Company's senior management.  The  interim agreements further provide that if there is such a change in  management, the Company's joint venture partner has the right to cancel the  interim agreement and the Company will have to repay the license fee plus an  amount equal to 20% of the license fee payment compounded annually calculated  from the date of such payment.  The Company has delivered a general  security agreement to their joint venture partner to secure the Company's  obligations.
   c)
A demand has been made by General Electric Capital Canada  Inc. for payment by the Company of $1,139,668 in relation to the Company's  purchase of a Flexible Panel Welding System.  Following the demand,  $400,000 was released to General Electric Capital Canada Inc. from the letter  of credit originally provided by the Company.  The Company disputes that  its lease contract with General Electric Capital Canada Inc. is in default,  and has commenced an action against Fanuc Robotics Canada Ltd., General  Electric Capital Canada Inc., Fanuc Robotics North American Inc. and Merrill  Lynch in the Supreme Court of British Columbia.  The action is for  damages arising from the claimed fundamental failure to deliver and implement  a "Flexible Panel Welding System" in accordance with agreed specifications as  sold to the Company.  Without limitation, the action is also for  injunctive relief enjoining Merrill Lynch from paying funds pursuant to a  letter of credit relating to the sale of said system.

 

**14.    COMMITMENTS**

As at September 30, 2002, the Company's financial obligations under  contracts for the purchase and installation of manufacturing equipment  totalled approximately $71,897.

 

 

**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER 30, 2002  (Unaudited - see Notice to Reader)**

**15.    FINANCIAL INSTRUMENTS**

a)   Fair Value Disclosure

The carrying amounts of certain of the Company's financial instruments,  including cash and short term deposits, notes receivable and accrued interest,  prepaid expenses, accounts payable and accrued liabilities, and other amounts  payable, approximate their fair value due to their short maturities.

The carrying value of long term debt approximates its carrying value since  the mortgage bears interest at floating market interest rates.

b)   Foreign Currency Risk

The Company operates internationally which gives rise to the risk that cash  flows may be adversely impacted by exchange rate fluctuations.  The  Company manages this risk by monitoring these international cash flows.

**16.    SUBSEQUENT EVENTS**

Subsequent to September 30, 2002:
a)
The Company completed the private placement of ten million  units at $0.68 per unit. Each unit consists of one common share and one  warrant exercisable at $0.68 per share for two years.
   b)
The Company completed the private placement of five million  units at $0.50 per unit. Each unit consists of one common share and one  warrant exercisable at $0.50 per share for two years.
   c)
The Company completed the private placement of one million,  five hundred thousand units at $0.30 per unit. Each unit consists of one  common share and one warrant exercisable at $0.38 per share for two years.   This private placement involved parties related to the Company.
   d)
The Company completed the private placement of five million  units at $0.30 per unit. Each unit consists of one common share and one  warrant exercisable at $0.38 per share for two years.  This private  placement involved parties related to the Company.
   e)
The Company completed the private placement of two million  units at $0.40 per unit. Each unit consists of one common share and one  warrant exercisable at $0.50 per share for two years.  This private  placement involved parties related to the Company.
 

 

**INTERNATIONALHI-TECH INDUSTRIES INC.**

**QUARTERLY REPORT**

**SEPTEMBER 30, 2002**

**Schedule A:   Financial Information**

        See attached financialstatements and schedule of deferred project development costs.

**Schedule B:   Supplementary Information**

        1.           See attached financial statements.

        2.  a)      Securitiesissued during the period:

Date of Issue

Type of Security

Type   of Issue

Number of  Shares

Issue Price

Total   Proceeds

Type of Consideration

Commission Paid

Aug. 12/02

Common

Private    Placement

5,000,000

$0.30

$

1,500,000

Cash

$

70,800

 

 

 

Aug. 16/02

Common

Private    Placement

6,000,000

$0.23

$

1,380,000

Cash

N/A

                b)      Stockoptions granted during the period:

                                None

           3.  a)

 

 

 

                    Issued                          

Class

Par Value

Authorized

Number

Amount

Common

Without  par value

Unlimited  number

79,031,371

$

42,629,111

Class A    Preferred

Without  par value

Unlimited  number

-

$

-

Class B    Preferred

Without  par value

Unlimited  number

2,261,114

$

2,040,003

                b)           See Notes 10(d) and 10(e) tothe attached financial statements.

                c)           See Note 10(c) to the attachedfinancial statements.
 
**INTERNATIONALHI-TECH INDUSTRIES INC.**

**QUARTERLY REPORT**

**SEPTEMBER 30, 2002**

                d)           List of Directors:

EvelyneSchmelerFerdinand RauerThomas PoLawryTrevor-DeutschDr. Rene Abi-RachedOmar TakeDr. Owen A.AndersonLarry Coston

                                List of Officers:

Roger A. Rached - PresidentDr. Owen A.Anderson - Chief Financial OfficerDr. Rene Abi-Rached - Chief Operating OfficerOmar Take - ChiefProject OfficerStephen D. Wortley - SecretaryCary Green - VicePresident of Business Development for Canada
 
**INTERNATIONAL HI-TECH INDUSTRIES INC.**

**OTHER FINANCIALINFORMATION**

**NINE MONTHS ENDED SEPTEMBER 30, 2002**

**1.**

**Deferred  Project Development Costs**

     Balance, December 31, 2001

$

4,604,327

     Additions during the  period

          Show home

5,321

          Product testing

14,700

     Balance, September 30,  2002

$

4,624,348

**2.**

**General Expense**
 
     Sundry
$

46,727

     Printing
13,130

     Courier
8,091

     Government fees
12,446

     Office supplies
60,858

     Equipment leasing
25,405

     Utilities
55,462
   
$

222,119

** **

** **

**3.**

**Investor Relations and  Product Representation Costs**

     Susan Hahn &  Associates (5 months at US$1,500)

$

11,800

** **

** **

**4.**

**Travel  and Business Promotion**

     Meals and entertainment

$

45,906

     Travel

25,960

     Veda S.A. Consult  reimbursable expenses and other costs            related to the Luxembourg Show Home

78,162

$

150,028

 

**SCHEDULE C**

**MANAGEMENT DISCUSSION**

**Overview**

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

During the third quarter of 2002, the Corporation has maintained its focus  and commitment to complete the installation of automated welding and cutting  systems at the Corporation's permanent manufacturing facility at 7393 Hopcott  Road, Delta, British Columbia (the "Hopcott Road Property").  

The Corporation has continued to demonstrate the attractiveness of its  Technology and its export-oriented business.  To September 30, 2002, the  Corporation has earned $1,546,400 of licence revenue.

Management is committed to enhancing the financial return on the  Corporation's $39.1 million of assets, primarily invested in its nearly  completed permanent manufacturing facility located in Delta, British Columbia.   In addition, the Corporation will continue to pursue strategic alliances that  increase revenue and that are compatible with its corporate culture.

**Manufacturing Facility**

The building for the permanent manufacturing facility (the "Facility") is  complete.  The Corporation is progressing in its plan to deal with  implementing several welding measures to minimize the impact of the equipment  supplied by FANUC, which the Corporation claims is deficient.  Phase 1 of  the Corporation's Plan was successfully completed in July with the  installation of semi-manual welding units.  The Corporation has just  purchased equipment to complete Phase 2 which will allow for semi-automated  cutting and welding units.  Due to a delay in obtaining final approval  for private placements, the Corporation now expects to complete Phase 3 by the  end of June 2003.  These phases are intended to solve most of the issues  associated with the fully flexible automated welding and cutting systems  involved in the Corporation's manufacturing process and to replace the system  supplied by FANUC.  See "*Legal Proceedings*" below.

The web site at http:///www.ihi.ca is frequently updated with pictures  detailing the construction process at the Facility.

***Application of Building Technology***

Since June 30, 2002, the Corporation has moved ahead with a number of  prototype manufacturing projects and tests to demonstrate the attractiveness  of the Technology, which have included the following: 
-  as announced on September 4,  2002, the Corporation has agreed to prepare an engineering and feasibility  study for a high-rise luxury hotel building in Saudi Arabia.  If the  study is positive, the Corporation plans to manufacture the building's steel  structural components at the Facility.  The anticipated shipping date of  the components is in 2003.  The Corporation's business plan calls for the  structure to be concreted and finished in Saudi Arabia at an IHI Industrial  Mobile Factory to be established in the region; 

 
-  as announced on September 4,  2002, the Corporation has accepted an order from its Saudi Arabia joint  venture partner to design a model home that is planned to be erected within  one of its major master planned urban community project sites.  Phase one  of the community is scheduled to be opened in 2003 and will consist of 1,000  luxury villas with 20 different design models.  Eventually, it is planned  that this community will total 3,000 deluxe villas.  The Corporation  plans to participate in this development; and 
-  as announced on November 4,  2002, the Corporation, together with other related and independent investors,  have secured the right to purchase a new high profile development property  totaling approximately 9,000 square meters. 

**Intellectual Property**

The United States Patent and Trademark office has granted United States  Patent No. 5,584,151 from the divisional application relating to foundation  components of the Technology.  The United States Patent and Trademark  office has also granted United States Patent Nos. 5,862,639 and 5,785,904  relating to the panels and the method of securing architectural finish  elements, respectively.  Over 110 patent applications and applications  for other forms of protection have been filed worldwide to attempt to  establish exclusionary rights to the Technology in at least 180 countries or  regions.

On September 4, 2002, the Corporation announced that an additional patent  has been issued in the Ukraine (No. 28017).

On November 4, 2002, the Corporation announced that additional patents have  been issued in all of the following countries:  Romania (No. 115743),  Uzbekistan (No. 1988), El Salvador (No. 214), Slovenia and (No. 9420070).   The Corporation also announced that an additional patent has been granted in  Brazil.

The Corporation further announced that the Corporation and its  international subsidiary are planning to file for additional new sets of  worldwide patents in 2003.

**Operations**

The Corporation had a net loss of $2,523,766 out of which approximately  $1.9 million is depreciation and amortization and after giving effect to a  minority interest in the income of a subsidiary for the nine months ended  September 30, 2002, as compared to a net loss of $477,771 for the nine months  ended September 30, 2001.  For the third quarter ended September 30,  2002, the Corporation had a profit of $269,559, before giving effect to a  minority interest in the income of a subsidiary of $724,987.

In the nine months ended September 30, 2002, the Corporation had licensing  fee revenue of $1,546,400.  In the nine months ended September 30, 2001,  the Corporation had licensing fee revenue of $2,889,137.

As at the end of the third quarter of fiscal 2002, the Corporation had  retained 26 interim licence agreements that call for the establishment of up  to 28*Hi-Tech Factories*.

Depreciation and amortization expense increased considerably from $533,063  for the nine months ended September 30, 2001 to $1,163,897 for the nine months  ended September 30, 2002.  This was principally due to the significant  increase in capital assets.  Depreciation and amortization is a non-cash  charge.

 

**Capital Requirements, Resources and Liquidity**

As at September 30, 2002 the Corporation had working capital of $3,586,016.   Of the current assets which total $8,076,092, $193,854 is restricted cash  which relates to the dividend fund for its Series 3 Preferred Shares.  Of  the current liabilities, (i) $1,868,000 is represented by the mortgage advance  that is repayable to Highland Pacific Mortgage Corporation, and (ii) $303,892  is represented by a loan from a related party.  Of the current assets, a  portion thereof represents two demand notes and the related accrued interest  received from Veda Consult S.A. ("Veda Consult"). Veda Consult has entered  into a memorandum of understanding (the "MOU") to promote, develop and market  the products of the Corporation's construction Technology and to establish and  operate factory operations in Luxembourg and in the surrounding regions. IHI-International  has accepted from Veda Consult two demand notes, secured by Veda's interest in  the MOU of November 27, 1995 and dated June 30 and September 30, 1998 each in  the amount of U.S.$462,500 as payment for the balance of the license fee  (U.S.$925,000), due under the MOU dated November 27, 1995 between Veda Consult  and IHI-International respecting the establishment of potential factory  operations.

As at September 30, 2002, the Corporation's financial obligations under  contracts for the purchase and installation of manufacturing equipment  totalled approximately $71,897.

As at September 30, 2002, the Facility, including the land on which the  Facility is located, had a book value of approximately $18.3 million.

The Corporation has taken several measures since the second quarter of this  fiscal year to improve its working capital position.

The Corporation completed the following private placements on August 20 and  August 22, 2002, respectively:
-  a private placement of  5,000,000 units at $0.30 per unit, for gross proceeds of $1,500,000.   Each unit is comprised of one common share and one non‐transferable share  purchase warrant entitling the holder thereof to purchase one additional  common share for a term of two years at a price of $0.40 per share.  This  private placement involved parties related to the Corporation; and 
-  a private placement of  6,000,000 units at $0.23 per unit, for gross proceeds of $1,380,000.   Each unit is comprised of one common share and one non‐transferable share  purchase warrant entitling the holder thereof to purchase one additional  common share for a term of two years at a price of $0.38 per share.  This  private placement involved parties related to the Corporation. 

The Corporation completed the following private placements on October 28,  2002:
-  a private placement of  5,000,000 units at $0.30 per unit, for gross proceeds of $1,500,000.   Each unit is comprised of one common share and one non‐transferable share  purchase warrant entitling the holder thereof to purchase one additional  common share for a term of two years at a price of $0.38 per share.  This  private placement involved parties related to the Corporation; 

 
-  a private placement of  1,500,000 units at $0.30 per unit, for gross proceeds of $450,000.  Each  unit is comprised of one common share and one non‐transferable share purchase  warrant entitling the holder thereof to purchase one additional common share  for a term of two years at a price of $0.38 per share.  This private  placement involved parties related to the Corporation; 
-  a private placement of  5,000,000 units at $0.50 per unit, for gross proceeds of $2,500,000.   Each unit is comprised of one common share and one non‐transferable share  purchase warrant entitling the holder thereof to purchase one additional  common share for a term of two years at a price of $0.50 per share; 
-  a private placement of  2,000,000 units at $0.40 per unit, for gross proceeds of $800,000.  Each  unit is comprised of one common share and one non‐transferable share purchase  warrant entitling the holder thereof to purchase one additional common share  for a term of two years at a price of $0.50 per share.  This private  placement involved parties related to the Corporation; and 
-  a private placement of  10,000,000 units at $0.68 per unit, for gross proceeds of $6,800,000.   Each unit is comprised of one common share and one non‐transferable share  purchase warrant entitling the holder thereof to purchase one additional  common share for a term of two years at a price of $0.68 per share. 

The short term outlook for the Corporation's liquidity is satisfactory.   The Corporation has made application to its first mortgage lenders to increase  the amount of the mortgage from approximately $1.9 million to $3.5 million.   If the application is accepted, the term of the mortgage would likely be for  three years with an annual interest rate of 9%.  The longer term outlook  for the Corporation's liquidity will depend on the Corporation's success in  accessing external sources of financing, the speed with which the Corporation  will be able to derive internally generated cash flow from the sales of its  products and license fees generated from memoranda of understanding.

**Recent Developments**

***Equity Financings***

The Corporation has completed a number of equity financings.  See *"Capital Requirements, Resources and Liquidity"* above.

***New Joint Ventures***

On September 4, 2002, the Corporation announced that Earthquake Resistance  Structures Inc. of Delaware ("ERS"), a company owned by the President's  mother, has expanded its territory in the United States and entered into an  agreement to purchase two additional licenses and to establish two more  potential joint venture factories. The first covers the South East United  States region covering Florida, Georgia, Alabama, Mississippi, North and South  Carolina, and the second for the South Central United States region covering  Texas, Oklahoma, Arkansas and Louisiana.  ERS is required to pay an  initial payment of US$200,000 by December 31, 2002, as per the form of interim  agreements established earlier between the Corporation and ERS that were  approved by the shareholders and accepted for filing by the Exchange.

 

 

On September 4, 2002, the Corporation further announced that IHI-International  has agreed to expand the license for the Middle Atlantic States to now include  one additional factory in the State of Pennsylvania.

On November 4, 2002, the Corporation announced that ERS has expanded its  territory in the U.S. and entered into an agreement to purchase one additional  license and to establish one or more potential joint venture factories to  cover Illinois and Michigan.  ERS is required to pay an initial payment  of US$100,000 by March 31, 2003.

These transactions are subject to regulatory acceptance.

On November 4, 2002, the Corporation announced that IHI-International had  received another U.S.$1,000,000 payment for the second and third license fees  for the Kingdom of Saudi Arabia.  The Corporation further announced that  IHI-International and its joint venture partner are currently negotiating to  secure a large piece of land to establish not only the first overseas IHI  joint venture factory, but also to allow for the future expansion that is  expected to be financed from the local operational profits.  Once the  land is secured, the Corporation expects to receive an order to manufacture  this factory.

***Terminated Joint Ventures***

On August 9, 2002, the Corporation announced that the Corporation and IHI  International have exercised their rights to cancel, suspend or extend certain  interim agreements and related licences to use the Technology.  The  affected agreements involve some former potential joint venture partners, the  Corporation alleges, who have failed to satisfy their financial and other  commitments to the Corporation and IHI International.  Hi-Tech America  Development Corp. and International Trade Circle SARL, two of the affected  former potential joint venture partners, have indirectly disagreed the  Corporation's entitlement to cancel their interim agreements.

**Financing, Principal Purposes and Milestones**

There have been no material variances from the intended use of proceeds for  the Corporation's placements that were completed in the first three quarters  of fiscal 2002.

Proposed     
Actual     
Primary purpose for the use of proceeds for      the private placements of Common Shares and Warrants announced on April 30      and May 30, 2002             Payment of Legal Accounts and Accounting Accounts$   230,000$    230,000             Working Capital1,820,0001,820,000             Equipping Facility for Production750,000750,000             Finder's Fees70,80070,800             Subscription Costs9,2009,200$2,880,000$2,880,000 
The business plan of the Corporation for fiscal 2002 focused on achieving  the commencement of commercial production of panels derived from the  Technology at the Facility.  The Corporation takes the position that  FANUC is incapable of rectifying the claimed deficiencies in the Flexible  Panel Welding System which it sold to the Corporation.  The Corporation  is presently in the process of implementing replacement production methods.   See "Manufacturing Facility" on page 1 of Schedule C.

 

 

The business plan of the Corporation for the end of fiscal 2002 also  focused on achieving the creation of further strategic relationships and  further joint ventures.  In 2002, the Corporation generated $1,546,400 of  license revenues.

The Corporation's main operating risks are its potential failure in meeting  its development goals.

**Stock Options**

The Corporation announced that officers, directors, employees and  independent consultants will be awarded a total of 4.3 million options as  follows:  860,000 to be exercised by the end of 2003 at $1.00 each,  860,000 in 2004 at $1.25 each, 860,000 in 2005 at $1.50 each, 860,000 in 2006  at $1.75 each and 860,000 in 2007 at $2.00 each.

The grant of stock options is subject to receipt of regulatory acceptance.

**Investor Relations**

Investor relations activities are conducted through Susan Hahn &  Associates for a retainer of U.S.$1,500 per month.

**Related Party Transactions**

There were no related party transactions, except as described under  "Capital Requirements, Resources and Liquidity" and under "New Joint  Ventures".

**Material Contracts**

During the third quarter of fiscal 2002, the Corporation did not enter into  any Material Contracts except as described herein.

**Legal Proceedings**

***Jean de Grasse and Robert de Grasse***

The Corporation has brought a claim for damages against Jean de Grasse and  Robert de Grasse for breach of fiduciary duty and conspiracy.  Jean de  Grasse and Robert de Grasse were former directors of the Corporation.   The claim for breach of fiduciary duty relates to an allegation and claim that  the defendants breached their statutory duty and fiduciary duty to the  Corporation as directors of the Corporation.  The action was commenced on  October 7, 1999.  The defendants have been served and have filed  statements of defence.  The action has not yet been set down for trial.   No discovery has taken place.

***Rossi International Consulting Inc.***

In December, 2000, the Corporation commenced a defamation action  in  the Supreme Court of British Columbia against Rossi International Consulting  Inc. and Geoffrey Haddad, a former engineering consultant, to the Corporation.   The defendants have been served and have filed a statement of defence and  counterclaim.  The counterclaim is for unpaid engineering consulting fees  of approximately $20,000.  The Corporation is defending the counterclaim.   The action has not yet been set down for trial.

 

***Fanuc Robotics Canada Ltd.***

On March 26, 2002, the Corporation commenced an action against Fanuc  Robotics Canada Ltd., General Electric Capital Canada Inc., Fanuc Robotics  North America Inc. and Merrill Lynch in the Supreme Court of British Columbia.   The action is for damages arising from the claimed fundamental failure to  deliver and implement a "Flexible Panel Welding System" in accordance with  agreed specifications as sold to the Corporation.  Without limitation,  the action is also for injunctive relief enjoining Merrill Lynch from paying  funds pursuant to a letter of credit relating to the sale of said system.   Statements of Defence have been filed on behalf of the Defendants, Fanuc  Robotics Canada Ltd., Fanuc Robotics North America Inc., and General Electric  Capital Canada Inc.  The Corporation responded to the request for better  and further particulars of the Defendant, General Electric Capital Canada  Inc., prior to said Defendant filing its Statement of Defence.  The  Defendants, Fanuc Robotics Canada Ltd. and Fanuc Robotics North America Inc.,  have filed a counterclaim against the Corporation for judgment in the amount  of $87,644.81, plus interest, as well as other relief, respecting which the  Corporation has filed a Defence seeking dismissal of said counterclaim with  costs.  The Defendant, General Electric Capital Canada Inc., has filed a  counterclaim against the Corporation for judgment in the amount of  $780,508.50, plus interest, as well as other relief, respecting which the  Corporation has filed a Defence seeking dismissal of said counterclaim with  costs.  Examinations for discovery in the within proceedings have been  tentatively scheduled for February, 2003.  The Defendant Fanuc Robotics  Canada Ltd. has notified the Corporation that it takes the position Fanuc  Robotics Canada Ltd. has complied with its obligations under the contract  related to the Flexible Panel Welding System, which the Corporation also  disputes.  Following said demand by General Electric Capital Inc.,  $400,000 was released to General Electric Capital Canada Inc. from an original  $600,000 letter of credit provided by the Corporation.  The Corporation  has consented to the dismissal of its proceedings against Merrill Lynch in  exchange for rights to document disclosure.

***Genesee Enterprises Ltd. and Related Matters***

Reference is made to the second quarter report.  There have been no  material changes in the status of this litigation.

***Continental Steel et al***

A number of builder's liens have been registered against the property held  by the Corporation on Hopcott Road, Delta British Columbia, on which the  Corporation's permanent manufacturing facility is built.  These liens can  be placed into two groups.

The first set of liens, filed by Continental Steel Ltd., H.C. Rental Inc.  and CTL Steel Ltd., were filed as a result of allegations of non-payment of  these sub-contractors by Alder Iron Works Ltd.  A receiver has been  appointed for Alder Iron Works Ltd. ("Alder").  These lien claimants have  commenced an action in the Supreme Court of British Columbia for payment by  Alder and to enforce their liens, and, in this action, an issue has been  raised regarding the issuance of the certificate of substantial completion.   The Corporation has reached an agreement with these lien holders to discharge  these liens on payment of approximately $80,000 as security for the lien  claims.  This payment represents the balance of the contract price and  lien hold back owing to Alder.  These funds had either been paid into  Court by the Corporation or held in trust pursuant to the *Builders Lien Act*  (British Columbia)*.*

 

The second set of liens, filed by ICI Canada Inc., Skyreach Equipment Ltd.  and Siplast Canada Inc., were filed as a result of allegations of non-payment  of these sub-contractors by Cary Praetor.  Mr. Praetor was engaged by the  Corporation to provide roofing and waterproofing services.  The  Corporation obtained default judgment against Mr. Praetor in August, 2000 with  damages to be assessed.  The Corporation has reached a settlement with  ICI Canada Inc., Skyreach Equipment Ltd. and Siplast Canada Inc. to have these  liens discharged in exchange for payment of a total of approximately $50,000  by the Corporation.  That amount has been paid and discharges have been  filed at the Land Title Office.

The Corporation expects to resolve all lien matters by the end of the year.
 
 
**SIGNATURES***

Pursuant to the requirements 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.
 **          International Hi-Tech Industries Inc.           **          (Registrant)December 3, 2002                               Date  "Roger A. Rached" (signed)                                                 Roger A. Rached Chief Executive Officer and President    December 3, 2002                                Date "Dr.  Owen A. Anderson"                                                     Dr. Owen A. Anderson Chief Financial Officer
 

 

 
**CERTIFICATIONS**

I, Dr. Owen A. Anderson, certify that:

1.      I have reviewed this quarterly report on  Form 10-Q of International Hi-Tech Industries Inc.;

2.      Based on my knowledge, this quarterly  report does not contain any untrue statement of a material fact or omit to  state a material fact necessary to make the statements made, in light of the  circumstances under which such statements were made, not misleading with  respect to the period covered by this quarterly report;

3.      Based on my knowledge, the financial  statements, and other financial information included in this quarterly report,  fairly present in all material respects the financial condition, results of  operations and cash flows of the registrant as of, and for, the periods  presented in this quarterly report;

4.      The registrant's other certifying officers  and I are responsible for establishing and maintaining disclosure controls and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and we have:
(a)    designed such disclosure controls and procedures to  ensure that material information relating to the registrant, including its  consolidated subsidiaries, is made known to us by others within those  entities, particularly during the period in which this quarterly report is  being prepared;
(b)   evaluated the effectiveness of the registrant's disclosure  controls and procedures as of a date within 90 days prior to the filing date  of this quarterly report (the "Evaluation Date"); and
(c)    presented in this quarterly report our conclusions  about the effectiveness of the disclosure controls and procedures based on our  evaluation as of the Evaluation Date;

5.      The registrant's other certifying officers  and I have disclosed, based on our most recent evaluation, to the registrant's  auditors and the audit committee of registrant's board of directors (or  persons performing the equivalent function):
(a)    all significant deficiencies in the design or  operation of internal controls which could adversely affect the registrant's  ability to record, process, summarize and report financial data and have  identified for the registrant's auditors any material weaknesses in internal  controls; and
(b)   any fraud, whether or not material, that involves  management or other employees who have a significant role in the registrant's  internal controls; and

6.      The registrant's other certifying officers  and I have indicated in this quarterly report whether or not there were  significant changes in internal controls or in other factors that could  significantly affect internal controls subsequent to the date of our most  recent evaluation, including any corrective actions with regard to significant  deficiencies and material weaknesses.
Date:  December 3, 2002           "Dr. Owen A. Anderson" (signed)          Dr. Owen A. Anderson        Chief Financial Officer
 

 
**CERTIFICATIONS**

I, Roger A. Rached, certify that:

1.      I have reviewed this quarterly report on  Form 10-Q of International Hi-Tech Industries Inc.;

2.      Based on my knowledge, this quarterly  report does not contain any untrue statement of a material fact or omit to  state a material fact necessary to make the statements made, in light of the  circumstances under which such statements were made, not misleading with  respect to the period covered by this quarterly report;

3.      Based on my knowledge, the financial  statements, and other financial information included in this quarterly report,  fairly present in all material respects the financial condition, results of  operations and cash flows of the registrant as of, and for, the periods  presented in this quarterly report;

4.      The registrant's other certifying officers  and I are responsible for establishing and maintaining disclosure controls and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and we have:

(a)    designed such disclosure controls and procedures to  ensure that material information relating to the registrant, including its  consolidated subsidiaries, is made known to us by others within those  entities, particularly during the period in which this quarterly report is  being prepared;

(b)   evaluated the effectiveness of the registrant's disclosure  controls and procedures as of a date within 90 days prior to the filing date  of this quarterly report (the "Evaluation Date"); and

(c)    presented in this quarterly report our conclusions  about the effectiveness of the disclosure controls and procedures based on our  evaluation as of the Evaluation Date;

5.      The registrant's other certifying officers  and I have disclosed, based on our most recent evaluation, to the registrant's  auditors and the audit committee of registrant's board of directors (or  persons performing the equivalent function):

(a)    all significant deficiencies in the design or  operation of internal controls which could adversely affect the registrant's  ability to record, process, summarize and report financial data and have  identified for the registrant's auditors any material weaknesses in internal  controls; and

(b)   any fraud, whether or not material, that involves  management or other employees who have a significant role in the registrant's  internal controls; and

6.      The registrant's other certifying officers  and I have indicated in this quarterly report whether or not there were  significant changes in internal controls or in other factors that could  significantly affect internal controls subsequent to the date of our most  recent evaluation, including any corrective actions with regard to significant  deficiencies and material weaknesses.
Date:  December 3, 2002          "Roger A. Rached" (signed)                     Roger A. Rached          Chief Executive Officer and President |
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