SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB/A

AMENDMENT NO. 1

(Mark One)

X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

_ TRANSITION REPORT UNDER SECITON 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission file number: 0-17232

CAPITAL RESERVE CORPORATION

(Name of small business issuer in its charter)



|COLORADO                                                       | 84-0888594                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
|335-25 STREET, S.E.,                                           | CALGARY, ALBERTA CANADA T2A 7H8     
|Telephone:                                                     | (403) 269-2274                      

(Address, including zip code, and telephone number, including area code,

of registrant's principal executive offices)

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



|Title of each class                                                   |  |  | Name of each exchange on which registered                                
|--------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------
|________________None______________
__________________________________ |  |  | ____________________________________
____________________________________

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

100,000,000 No Par Value

(Title of class)

_____________________________________________________________________________________



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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	__________No

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. _______

State issuer's revenues for its most recent fiscal year: $272,178

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.)

$572,509 as of April 12, 2001

Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST 5 YEARS)

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. _____Yes	______No

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 6,864,235

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g. Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Format (Check one): _________Yes	__________No

TABLE OF CONTENTS

|PART I                                                                                                                  | 4 
|----------------------------------------------------------------------------------------------------------------------- | --
|ITEM 1. DESCRIPTION OF BUSINESS                                                                                         | 4 
|ITEM 2. DESCRIPTION OF PROPERTIES.                                                                                      | 7 
|ITEM 3. LEGAL PROCEEDINGS                                                                                               | 9 
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             | 9 
|PART II                                                                                                                 | 10
|ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                        | 10
|ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                       | 12
|ITEM 7. FINANCIAL STATEMENTS                                                                                            | 14
|ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                            | 34
|PART III                                                                                                                | 34
|ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT | 34
|ITEM 10. EXECUTIVE COMPENSATION                                                                                         | 35
|ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                 | 36
|ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                 | 38
|ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                               | 39
|SIGNATURES                                                                                                              | 40



PART I

ITEM 1. DESCRIPTION OF BUSINESS

Capital Reserve Corporation was incorporated under the laws of the State of Colorado on August 3, 1982, for the purpose of operating as a financial services holding company. Capital Reserve Corporation is referred to herein as either "Capital Reserve", "the Corporation" and "we" or "our".

From 1988 through October 1994, Capital Reserve and its subsidiaries held various insurance agency licenses and sold life, accident and health insurance policies in the States of Colorado, New Mexico and Arizona. In 1994, Capital Reserve determined it could no longer maintain capital and surplus requirements for its insurance operations. As a result, on October 14, 1994, Capital Reserve sold all of the issued and outstanding shares of one of its subsidiaries, First West Life Insurance Company. Capital Reserve sold the shares to Old Reliance Insurance Company, an Arizona domiciled insurance company, for $1,227,301 in cash. Old Reliance was not affiliated with Capital Reserve, any of its affiliates or any director or officer of Capital Reserve. As a condition to closing, approvals were obtained from the Department of Insurance for the States of Colorado, New Mexico and Arizona.

On August 17, 1994, Capital Reserve dissolved Flexible Benefits, Inc., which was a wholly-owned subsidiary. This company had been a third party administrator of plans under Section 125 of the Internal Revenue Code.

After the sale of First West Life Insurance Company, Capital Reserve's main assets were real estate and cash from the sale. The real estate was comprised of a building and land located in Englewood, Colorado. The land was comprised of slightly less than one acre and the building contained 13,479 square feet of rentable space. At that time, the building housed all of Capital Reserve's operations, which occupied 750 square feet. The rental of this property become the main activity of Capital Reserve and remained its main activity through June 1996. On July 3, 1996 Capital Reserve sold this property for net proceeds of $501,276.

From July 1996 through the end of the fiscal year 1997, Capital Reserve, through its wholly-owned subsidiary, Wall Street Investment Corp., attempted to start a financial consulting services business. However, during fiscal year 1997, this venture generated only $21,935 in gross revenues and an operating loss of $6,615. As of March 20, 1998 neither Capital Reserve nor Wall Street Investment had any operations and Capital Reserve was seeking a major acquisition opportunity. Wall Street was later dissolved in July 2000.

On October 6, 1998, a change in control in Capital Reserve occurred when Mr. Glen C. Loder agreed to acquire the interests of Mr. Ralph W. Newton, Jr. and Patricia L. Newton. At the time, Mr. Newton was the President of Capital Reserve Corporation. Collectively Mr. and Mrs. Newton owned a majority of the outstanding shares of Capital Reserve Class B Preferred Stock, which as a class had the right to elect a majority of Capital Reserve's Board of Directors. In connection with such agreement, Mr. Newton and Mrs. Linda M. Opfer resigned as officers and directors of Capital Reserve. On October 6, 1998, Mr. Loder was appointed as President, Treasurer and a director and Mrs. Sharon Patmore was appointed as Secretary and a director. The acquisition of the Newton's shares closed on February 3, 1999.

Mr. Loder passed away on October 26, 1999. Following Mr. Loder's death, Capital Reserve's legal counsel, Mr. W. Scott Lawler, was appointed President until a successor could be located. Mr. Lawler was also named to the Board of Directors. Mr. Lawler had been serving as Capital Reserve's legal counsel since June 1999. In April 2000, Mr. Lawler relocated from California to Calgary, Alberta in order to focus more attention on the needs of Capital Reserve.

During fiscal year 2000, Capital Reserve made an investment in Texas T Resources Inc., a public reporting British Columbia corporation, to acquire 2,000,000 units of Texas T Resources Inc. at $0.0677 per unit, each unit comprising one common share and one share purchase warrant entitling the Company to purchase an additional share at $0.0880 for a period of two years from the date of issue. This investment represents 9.4% of the issued and outstanding shares of Texas T Resources Inc. Additionally, during the year the Company loaned a total of $1,457,110 to Texas T Petroleum Ltd., a private Colorado corporation and the 64% owned subsidiary of Texas T Resources Inc. On October 31, 2000, we converted $1,000,000 of this loan into 2,000,000 units of Texas T Petroleum Ltd., each unit comprised of a share of common stock of Texas T Petroleum Ltd. and a warrant to purchase an additional share at $1.00 for a period of two years from the date of issue. The investment in Texas T Petroleum Ltd. represents 9% of the issued and outstanding shares of Texas T Petroleum Ltd. The remainder of the Company's loan to Texas T Petroleum Ltd. was repaid in cash on November 1, 2000. Capital Reserve used working capital, proceeds from the sale of its common stock and the issuance of 500,000 shares of its common stock under the terms of a technology transfer agreement to fund these investments. Both Texas T Resources Inc. and Texas T Petroleum Ltd. are related parties to Capital Reserve Canada Limited, the Company's wholly-owned subsidiary, by virtue of a common officer and director.

As of the date of this filing, Capital Reserve has one (1) wholly-owned subsidiary, Capital Reserve Canada Limited. Capital Reserve Canada Limited was incorporated in the Province of Alberta, Canada, on December 8, 1999 and is in the business of locating and acquiring oil and gas properties.

As Capital Reserve Corporation is a U.S. corporation, all dollar amounts used herein refer to U.S. dollars.

Current Operations

Real Estate

Capital Reserve owns a commercial building that offers approximately 22,146 square feet of office space and laboratory space. This commercial building is located in the City of Calgary, Alberta and is used by Capital Reserve to generate income and also is used for its corporate headquarters.

Capital Reserve acquired the building for $1,519,000 in August 2000. Capital Reserve obtained a mortgage in the amount of $1,066,080 and used working capital of approximately $452,275 to purchase the building. The principal and interest payments on the mortgage are $15,209 monthly or $188,508 annually.

Capital Reserve has leased out all of the available space in this building that it does not occupy. Toshiba of Canada Limited has leased 6,546 feet of office space under a five year lease agreement at $50,161 per year, plus operating costs of $41,956. Synergy Technologies Corporation leases 8,414 square feet of office space and 4,364 square feet of laboratory space under a five year lease at $154,498 per year plus operating costs of $94,452.

Capital Reserve has leased out 2,822 square feet of office and lab space at $22,561 per year plus operating costs of $19,264 to its wholly-owned subsidiary, Capital Reserve Canada Limited. Capital Reserve Canada Limited has subleased all of this space in two separate sublease agreements. The first sublease is with an unrelated party for five years and generates $25,682 annual lease payments plus operating costs of $16,445. The second sublease is with Texas T Resources Inc. for five years and generates $5,967 in annual lease payments. Texas T Resources Inc. is a related party to Capital Reserve Canada Limited by virtue of a common officer and director.

Oil and Gas Properties

On March 1, 2000, Capital Reserve Canada Limited acquired a 5% interest in four wells and a gathering facility in a producing oil and gas field known as Chestermere located in Alberta, Canada. Pinon Oil & Gas Limited, a company located in Calgary, Alberta, Canada operates the property. The properties with petroleum and natural gas rights are located at S1/2 and NE1/4 of Section 16-23-28-W4M, NW1/4 of Section 20-23-28-W4M, NE1/4 of Section 20-23-28-W4M, S1/2 of Section 20-23-28-W4M, NW1/4 of Section 16-23-28-W4M, NW1/4, NE1/4 and SW1/4 of Section 21-23-28-W4M, SE1/4 of Section 21-23-28-W4M, NW1/4 of Section 16-23-28-W4M, SE1/4 of Section 26-23-28-W4M. As at the fiscal year end the four producing wells located on these properties had produced a total of 39,626 bbls of Oil, 46,676 BOE of gas and 5,032 bbls of other products.

The cost of the acquisition of this field was $612,630, which was paid by way of $204,105 in cash and in 817,050 shares of common stock of Capital Reserve, at a deemed price of $0.50 per share. The cash payment was made from the draw down of $204,105 from a stand-by operating line of credit provided to Capital Reserve Canada by the Alberta Treasury Branches. This line of credit was originally granted in the maximum amount of approximately $690,000. The Alberta Treasury Branches later reduced the line of credit to the outstanding balance of $199,860 due to lack of use. The line has an annual interest rate of the Bank of Canada prime rate plus 1%. Currently there is no provision for an increase in the line of credit. The line of credit is secured by a floating charge debenture over all of Capital Reserve Canada's assets. The Alberta Treasury Branches is an Agent of the Crown in right of the Province of Alberta, Canada and operates under the Alberta Treasury Branches Act, Statutes of Alberta, 1997. Under that Act, Alberta Treasury Branches was established as a provincial corporation.

Capital Reserve Canada's average monthly net revenue from this interest for fiscal year 2000 was $5,500. During fiscal year 2000, Capital Reserve Canada spent $36,500 on capital expenditures for workovers and re-completion of the wells. During fiscal year 2001, we will continue to perform re-completions and workovers on the existing wells to increase the production of both oil and gas. We anticipate that these expenditures will not exceed $25,000. Capital Reserve Canada believes this is a worthwhile endeavour as the market price for these resources has increased since the time these wells were acquired.

The Company entered into a Farmout Agreement and Casing Point Agreement with Hancock Enterprises to purchase a 5% interest in wells located in Rosebud and Garfield Counties, Montana The Company expended a total of $36,555 on drilling two wells. Both wells were dry holes.

The Company also purchased a 4% working interest in 54,237.57 acres for $18.00 per acre for a total consideration of $39,051. The Company is presently reviewing other drilling opportunities on the remaining partnership lands.

Technology Investment

Capital Reserve has become interested in a heavy oil upgrading technology known as "CPJ". As a result of this interest, Capital Reserve has made an equity investment in one of two companies that own the technology. The proceeds of the investment have been used to assist in the development of the technology.

As discussed above under "DESCRIPTION OF BUSINESS", Capital Reserve has a 9% interest in Texas T Petroleum Ltd., a Colorado corporation, of which Mr. James F. Marsh is president and a director; Mr. Marsh is also the president and a director of Capital Reserve Canada Limited. Texas T Petroleum Ltd. owns 50% of the outstanding shares of Carbon Resources Limited, a Cyprus corporation which owns this proprietary patented technology. The pilot unit constructed by Carbon Resources Limited to demonstrate and test the capabilities of this technology is located in Capital Reserve's commercial real estate building in Calgary, Alberta. Synergy Technologies Corporation, the other 50% owner of Carbon Resources, is the major tenant of Capital Reserve's commercial real estate building.

During the fiscal year 2000, Capital Reserve agreed with Texas T Resources Inc. to fund a portion of Texas T Petroleum Ltd.'s acquisition of the heavy oil upgrading technology described in the preceding paragraph. Texas T Resources Inc. is a public corporation organized under the laws of British Columbia, Canada, whose stock is traded on the Canadian Venture Stock Exchange under the symbol "TXT". As discussed above under "DESCRIPTION OF BUSINESS", Texas T Resources Inc. is the majority shareholder of Texas T Petroleum Ltd.

The Company's investments in Texas T Resources Inc. and Texas T Petroleum Ltd., had a recorded value of 1,133,240 as at December 31, 2000.

Employees

As of March 30, 2001, Capital Reserve and its subsidiary had 1 full-time employee and 2 part-time employees. The tasks and duties undertaken by Capital Reserve's employees include managerial, legal counseling, administrative, accounting and review of oil and gas prospects.

ITEM 2. DESCRIPTION OF PROPERTIES

During fiscal year 2000, Capital Reserve purchased three pieces of real estate all located in the City of Calgary; two of these properties are commercial real estate buildings and the other is residential. The first commercial building is 22,146 square feet of office space and laboratory space. Capital Reserve has entered into head lease agreements with 3 tenants that occupy all of the space in this commercial building including its wholly-owned subsidiary, Capital Reserve Canada Limited. One of the head lease agreements is between Capital Reserve and Toshiba, which was assigned to Capital Reserve upon the purchase of the building. The Toshiba lease generates $92,117 in annual lease payments and operating costs. This lease expires in July 2005.

The second head lease agreement is with Synergy Technologies Corporation for 8,414 square feet of office space and 4,364 square feet of laboratory facilities for a term of five years. The Synergy lease generates $248,950 in annual lease payments and operating costs. This lease expires in August 2005.

The ability of Capital Reserve to generate revenues through its real estate holdings could be directly related to the success of the CPJ Technology, due to the fact that Synergy Technologies, the major tenant of this property, is also a fifty percent owner of the CPJ Technology.

The third head lease agreement is with Capital Reserve Canada Limited for 2,822 square feet of office space and lab space for a term of 5 years. The lease generates $41,825 in annual lease payments and operating costs. Capital Reserve Canada has subleased all of this space under two sublease agreements. One of the sublease agreements expire in January 2005 and the other in October 2005. They generate in the aggregate $48,094 in annual lease payments and operating costs.

The second commercial real estate building was purchased by Capital Reserve at the end of fiscal year 2000 for $178,310 cash. This building has approximately 7,392 square feet of usable office space. Capital Reserve is currently renovating the building prior to offering it for lease. The renovations are anticipated to cost a total of $190,000. Upon completion, Capital Reserve intends to offer long-term leases at the approximate rate of $8.00 per square foot on an annual basis, plus actual operating costs.

Capital Reserve purchased a residential property for the use of its President, Mr. W. Scott Lawler, who relocated to Calgary from California to devote his time and attention to the needs of Capital Reserve. Mr. Lawler pays for all costs associated with this property, including mortgage payments, real estate taxes, insurance, maintenance and utilities.

To date, Capital Reserve's investments in property, other than the residential property, have been limited to real estate that it believes will generate monthly income and positive cash flow. At this time, Capital Reserve has no stated policy regarding any future investments in property other than to invest in properties that will generate monthly income. As our portfolio grows, it is our intent to limit any potential investments to no more than 25% of our total assets.

Capital Reserve currently has investments in commercial and residential real property located in the City of Calgary, Alberta. Its current policy regarding real estate investments is to invest in commercial properties that it believes will generate positive monthly net income. Any new acquisitions of real estate are expected to be purchased through debt and equity financing. All operations of proposed property acquisitions will be handled through property management companies.

Commercial Property #1

This property is a single story building on 1.68 acres and is comprised of 14,960 square feet of office space and 7,185 square feet of laboratory space. Capital Reserve intends to continue use this property as its corporate headquarters and for rental income. Approximately 750 square feet of office space is used by Capital Reserve for its headquarters. It does not anticipate needing more space for this purpose in the near future. The remaining office space and all of the laboratory space are currently leased. This property is carried on Capital Reserve's audited balance sheet as of December 31, 2000 at a book value of $511,660 for land and $1,007,340 for building and improvements. See "FINANCIAL STATEMENTS" below.

Capital holds a fee simple title to this property. In purchasing this property, Capital Reserve received a mortgage in the amount of $1,066,080 secured by the property. The mortgage is held by Standard Life and has a present balance of $1,056,978. The balance accrues interest at the rate of 8.60% per annum. The loan is amortized over fifteen years and matures on October 1, 2005. If all principal and interest payments are made as required between now and the maturity date, the loan will have a balance of $845,888 at maturity. The loan cannot be prepaid.

The property is depreciated over 25 years using the straight line method of depreciation. Annual property taxes are $20,753.

This property has an occupancy rate of 100%. There are three tenants that each occupy more than 10% of the total space in the building. (See "CURRENT OPERATIONS - Real Estate" for a description of the leases and tenants).

Capital Reserve has no present plans for the improvement of this property. During fiscal year 2000, Capital Reserve spent $50,000 in leasehold improvements to construct a demising wall for one of the tenants as well as renovations for new space taken over by another tenant. Management believes that this property is adequately covered by insurance.

Commercial Property #2

This property is a two-story commercial building located in the City of Calgary. The building is comprised of approximately 7,392 square feet of usable office space. Capital Reserve intends to spend approximately $190,000 on renovations during the first and second quarter of 2001. The building is currently vacant. After completion of the renovations, Capital Reserve will be offering to lease all space in this building at the rate of $8.00 per square foot.

Capital Reserve holds a fee simple title to this property and used working capital of $178,310 to purchase the building on December 1, 2000. No mortgage or other loan was obtained to purchase this building. Capital Reserve may obtain a mortgage on the building in order to complete the renovations.

The property is depreciated over 25 years using the straight-line method of depreciation. Management believes that this properly is adequately covered by insurance.

Residential Property

This property is a single family residence located in a lakeside community and was purchased by Capital Reserve for use by its President and as an enticement for him to relocate to Calgary, Alberta. This home is approximately 6,300 square feet on 1/3 of an acre, with a book value of $209,192 for land and $332,050 for the residence, for a total value of $541,242. Capital Reserve has realized $7,748 in depreciation on this property.

Capital Reserve has a fee simple title to this property. In acquiring this property Capital Reserve received a mortgage in the amount of $378,869, secured by the property. The mortgage is held by Alberta Treasury Branches and has a present balance of $376,495. The balance accrues interest at the rate of 7.36% per annum. The loan is amortized over 25 years and matures on May 1, 2005. If all principal and interest payments, but no prepayments, are made as required up to the maturity date the loan will have a balance of $515,972. Up to 20% of the original loan amount may be prepaid in each calendar year without incurring a penalty.

The property is depreciated over 25 years using the straight line method of depreciation. Annual property taxes are $3,998.

Mr. Lawler occupies the property and makes all payments related to the property's mortgage, insurance and property taxes. There are no present plans to make any further improvements to this property. It is the opinion of management that this property is adequately covered by insurance.

ITEM 3. LEGAL PROCEEDINGS

Capital Reserve is not involved in any legal proceedings as of the date of this filing.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On March 21, 2001, Capital Reserve held its annual meeting of shareholders. The meeting was held at Capital Reserve's offices in Calgary, Alberta.

At this meeting, the following directors were elected: Mr. W. Scott Lawler and Ms. Sharon Patmore. Capital Reserve did not solicit any proxies in connection with this meeting and the board of directors was re-elected in its entirety.

At the meeting, the shareholders voted on each of the following matters:

-	appointment of Miller and McCollum, Certified Public Accountants, as independent auditors;

-	authorization of the Board of Directors to fix the remuneration of the auditors; and

-	to determine the number of members of the Board and to elect its Members;

-	to approve a new class of common stock;

-	to approve a stock option plan for employees, officers, directors and/or consultants; and

-	to approve the increase of the authorized number of shares of common stock to 100 million shares.

There were 3,689,379 shares represented at the meeting either by shareholders attending in person or by proxy. The votes for each of the matters at this meeting were as follows:

|Item                                                                                                                   | Votes For           | Votes Against | Votes Withheld
|---------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------- | --------------
|1. Appointment of Auditors and remuneration                                                                            | 3,687,629           | 750           | 950           
|2. Increase the Number of Directors to 3                                                                               | 3,687,629           | 750           | 950           
|3. Election of Board of DirectorsMr. Lawler
Ms. Patmore                                                                | 3,687,629
3,687,629 | 750
750       | 950
950       
|4. Approve a creation of Class C Common Stock                                                                          | 3,687,729           | 800           | 650           
|5. Approve an employee and director Stock Option Plan                                                                  | 3,684,929           | 1,000         | 3,450         
|6. Approve the increase of the Corporation's authorized number of Class A shares of common stock to 100 million shares | 3,686,429           | 1,100         | 1,650         

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)	From May 30, 1989 to July 13, 1992, Capital Reserve's common stock was traded on NASDAQ, under the symbol "CRCOA". It then traded on OTC/BB until November 19, 1996 when it ceased trading. Capital Reserve's common stock recommenced trading on the OTC/BB under the symbol "CRCWA" on February 4, 2000. Following is a report of high and low bid prices since that time.



|Year 2000                  | High    | Low  
|-------------------------- | ------- | -----
|4th Quarter ended 12/31/00 | 1.53125 | 0.375
|3rd Quarter ended 9/30/00  | 3.21875 | 1.25 
|2nd Quarter ended 6/30/00  | 3.50    | 1.75 
|1st Quarter ended 3/31/00* | 2.75    | 1.75 

*This quarter's records are limited to the period commencing February 4, 2000.

As of April 6, 2001, there were 8 market makers in Capital Reserve's stock. The last available reported trade by the OTC/BB prior to the filing of this report was April 11, 2001at $0.38.

As of March 31, 2000, there were 1,008 record holders of Capital Reserve's stock.

During the last two fiscal years, no cash dividends have been declared on Capital Reserve's stock.

(b)	 RECENT SALES OF UNREGISTERED SECURITIES

On October 6, 1998, Ralph P. Newton, Jr., and Patricia L. Newton, the wife of Ralph P. Newton, Jr., entered into a Stock Purchase Agreement to sell their combined 140,000 shares of Class B Preferred Stock to Glen C. Loder. At the time of the transaction, Mr. Newton was a director and President of Capital Reserve. Mr. Loder paid the Newtons $40,000 for the shares ($0.35 per share).

Pursuant to the terms of the Stock Purchase Agreement, Capital Reserve conducted a private placement of 865,000 shares as described in the next paragraph. The first $40,000 from the sale of the shares was paid by Capital Reserve to Mr. Loder. On February 3, 1999, Mr. Loder paid Mr. and Mrs. Newton $40,000 to complete the acquisition of their shares. Mr. Loder also caused Capital Reserve to grant the Newtons stock options, granting the Newtons the right to acquire up to 200,000 shares of Capital Reserve's Class A Common Stock at a price of $0.25 per share on or before February 3, 2001. The agreement included an anti-dilution provision. In December 2000, Capital Reserve re-negotiated the option agreement with the Newtons due to the fact that there was a disagreement over the effect of the anti-dilution provision. In exchange for a reduction of the exercise price from $0.25 per share to $0.13 per share, the parties agreed to the cancellation of 100,000 of the options. The Newtons then immediately exercised the option on the remaining 100,000 options by paying to Capital Reserve the exercise price of $13,000.

From November 1998 through February 1999, Capital Reserve conducted a private placement of shares of Capital Reserve's common stock, no par value pursuant to Rule 506 of Regulation D, promulgated by the SEC under the Securities Act of 1933. Sales were made to a total of eight Canadian individuals and two foreign corporations, who are listed below. A total of 865,000 shares were sold at a price of $0.10 per share, for gross proceeds of $86,500. Capital Reserve paid commissions of $8,590.00 to persons assisting Capital Reserve with sales. No other discounts or commissions were paid and no underwriters were utilized. The subscribers to this offering were:

|Maximillian Greisser           | Cormorant Shipping Ltd.
|------------------------------ | -----------------------
|Douglas Raspberry              | James MacKay           
|Gaba Ventures                  | Adrianne Damgaard      
|Ralph Thompson                 | Dorothy Bell           
|Elsco Construction (1990) Ltd. | William Bell           

During 1999, Capital Reserve offered each of the purchasers of shares in the private placement an opportunity to rescind their purchases based upon previous statements by Capital Reserve that it would not pay commissions on sales of shares. Each of the purchasers declined Capital Reserve's rescission offer.

In November 1999, Capital Reserve made two (2) private placements of shares of its common stock to off-shore entities pursuant to Regulation S promulgated by the SEC under the Securities Act. One of the private placements was to Ocean Exploration Ltd., a private Belize corporation, for 113,820 units at $0.10 per unit, with Capital Reserve incurring commissions and offering expenses of $3,250. The units sold under the latter placement consisted of one share and a warrant to acquire a like number of additional shares of common stock at $1.00 per share for three years from the date of issuance. The other private placement to Grotto Holdings Ltd., a private Belize corporation, was for 325,000 shares at $0.10 per share. No underwriter was utilized in either of these offerings and no commissions were paid on the sale to Grotto Holdings.

On July 22, 1999, Capital Reserve commenced a private placement offering, pursuant to Rule 506 promulgated by the SEC under the Securities Act of 1933, of up to 2,000,000 units, each unit comprised of one share of common stock and a warrant to purchase an additional share of common stock for $1.00 for a period of two years. As of March 31, 2000, the offering was oversubscribed. During the quarter ended June 30, 2000, Capital Reserve elected to exercise its right under the terms of the offering to accept a portion of the subscriptions. As a result, Capital Reserve sent a letter to the subscribers notifying them that they could either receive a return of a portion of their subscription or apply a portion of their subscription towards the exercise of the warrants issuable with their subscriptions. As a result, certain of the subscribers elected to exercise a total of 415,730 warrants and certain subscribers requested back any funds in trust or on deposit. The offering closed on July 27, 2000, and all of the shares have been issued.The following is a list of the subscribers:

|Allison Stephanson                         | Fred Alexander Prof. Corp              | Leslie Haworth              
|------------------------------------------ | -------------------------------------- | ----------------------------
|293020 B.C. Ltd                            | Garnet Ferguson                        | Doug Steer                  
|555344 B.C. Ltd.                           | Gary Wotton                            | Elaine Kennedy              
|724500 Alberta Ltd.                        | Geoffrey Saxton                        | Gabe Hoffart                
|Allen Menning                              | George Christou                        | Gabrielle Wallack           
|American International Investors Ltd.      | George Eger                            | Garrett Greene              
|Andre Arrata                               | Glen Stelting                          | Hugo Kotar                  
|Art Willms                                 | Harold Pederson                        | Jason Gurandiano            
|Astral Enterprises Inc.                    | Harvey Nahirny                         | Joe Gormley                 
|Barbara Romano                             | Jared Fales                            | John Feeley                 
|Beaufort Corporation                       | Jeanette Eger                          | John Lagourgue              
|Brian Carey                                | Jennifer Fallow                        | John Stavros Theodoropoulis 
|Fern McMillan                              | John Kreviazuk                         | Joseph Copon                
|Charlotte Village Limited                  | Kerri Wotton                           | Keith Bekker                
|Chung S. Yue                               | Larry Dziwenka                         | Keith Williams              
|Clint Stewart                              | Laura Romano                           | Ken Buna                    
|Colin Lynch                                | Marten Gravel                          | Kevin Petford               
|Collin Harris                              | Maureen Hawkins                        | Lorenzo Ferri               
|David Romano                               | Michael Buna                           | Michael James               
|Deborah Louise Kennedy                     | Miliro Services Limited                | Scott Fleurie               
|Derek Boniecki                             | Noble House Investments Inc.           | Sharon Parker               
|N. Desmond Smith                           | Patricia Hawkins                       | Sommerset Holdings Inc.     
|Dinesh Dattani                             | Peabody Financial Ltd.                 | Terry Sklavenitis           
|Dirk Lohrisch                              | Revival Resources Ltd.                 | Jean Dan Management         
|Don Byers                                  | Richard Brown                          | Scott Koyich                
|Dorothy Cassidy                            | Robert Achtymichuk                     | 447017 B.C. Ltd.            
|Douglas Danforth                           | Rod Burns                              | CMJ Consulting Ltd.         
|DSK Consulting Ltd.                        | Shaun Lucas                            | Kelly Warrack               
|Dwayne Lashyn                              | Stephen Petts                          | Terry Eger                  
|EBM Investments Inc.                       | Thomas J. Taylor                       | Nicole Kotar                
|Ed Chynoweth                               | Tom Ringoir                            | Sunshine Pacific Corporation
|Eileen Stelting                            | Tyler Cran                             | Marilyn Murphy              
|Elaine Fales                               | Star Investments LLC                   | Lorraine Jones              
|Elston Johnston                            | Victor Kellough                        | Karl Cernovitch             
|Famourios Vendouris                        | 586180 Alberta Ltd.                    | Allan Frame                 
|655835 Alberta Ltd.                        | Buccaneer Holdings Inc.                | Ocean Exploration Ltd.      
|Bahamian Overseas Investment Fund Sociedad | Caribbean Overseas Investments Limited |                             

On March 21, 2000, Capital Reserve's wholly-owned subsidiary, Capital Reserve Canada Limited, purchased an interest in certain oil and gas producing leases and a process facility located in Alberta, Canada, known as Chestermere. On June 8, 2000, as part of the consideration for this purchase, Capital Reserve, issued 817,050 shares of its common stock to Stone Canyon Resources Ltd., an Alberta corporation. See, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS".

On April 24, 2000, Capital Reserve's President and a member of its Board of Directors, Mr. W. Scott Lawler, subscribed for a private placement of 167,842 shares of common stock at $1.00 per share. The shares were issued pursuant to the exemption from registration found in Rule 506 promulgated by the SEC under the Securities Act of 1933. No commissions or finders fee was paid in connection with this offering. The net proceeds to Capital Reserve realized from this offering were $167,842.

On September 25, 2000, Capital Reserve issued 500,000 shares of its common stock to Dr. Pierre Jorgensen. These shares were valued at $1.875 per share. Dr. Jorgensen is the inventor of the heavy oil upgrading technology that is described above in "CURRENT OPERATIONS - Technology Investment".

Mr. Lawler receives monthly directors' fees from Capital Reserve in the amount of 5,000 shares of Class A common stock. On February 15, 2001, Capital Reserve issued 60,000 shares to Mr. Lawler for the directors' fees he earned during fiscal year 2000. No issuance for fiscal year 2001 has yet been made.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

During the fiscal year ended 2000, Capital Reserve's operations were limited to passive investments in oil and gas leases, two commercial real estate buildings, an equity interest in a company that has a fifty percent interest in a heavy oil upgrading technology and an investment in a Canadian reporting company traded on the Canadian Venture Stock Exchange. Each of these investments was acquired during the fiscal year ended December 31, 2000. Seeabove, "CURRENT OPERATIONS". Through fiscal years 1998 and 1999, management disposed of most of Capital Reserve's assets and applied the proceeds from the sale of those assets to decreasing Capital Reserve's outstanding liabilities. Capital Reserve conducted a number of financings during fiscal years 1999 and 2000. Capital from equity issues or borrowings is required to fund future operations. Therefore, the audited financial statements for the fiscal years ended December 31, 2000 and 1999 are not necessarily indicative of Capital Reserve's future operations.

PLAN OF OPERATION

Capital Reserve currently has sufficient cash and liquid assets to satisfy its cash requirements for the next six months based on its present operations. In addition to this cash and liquid assets, Capital Reserve anticipates, however, that it will need to raise $380,000 to cover its overhead and operational needs for the subsequent six month period. The Company expects that it will be able to obtain additional equity and/or debt financing to meet this $380,000 need. While no specific sources for this purpose has yet been identified, the Company intends to contact investors that have been previously provided funds to the company.

At the time that this report was originally filed, Capital Reserve does not anticipate incurring any product research or development nor the purchase or sale any plant or significant equipment during the 12 month period from that date. Capital Reserve anticipates expending approximately $190,000 during fiscal year 2001 on the renovation of a commercial office building that it acquired in December 2000. The Company intends to raise funds for these renovations through a mortgage on the building or other debt financing. (See, "ITEM 2. DESCRIPTION OF PROPERTY-Commercial Property #2".)

At the time that this report was originally filed, during the next twelve months, Capital Reserve does not expect to increase the number of its employees.

ITEM 7. FINANCIAL STATEMENTS

|CONTENTS                                   |  |  |  |  | 
|------------------------------------------ |  |  |  |  | 
|Independent Auditors' Report               |  |  |  |  | 
|Consolidated Financial Statements          |  |  |  |  | 
|Balance Sheet                              |  |  |  |  | 
|Statements of Operations                   |  |  |  |  | 
|Statements of Stockholders' Equity         |  |  |  |  | 
|Statements of Cash Flows                   |  |  |  |  | 
|Notes to Consolidated Financial Statements |  |  |  |  | 



MILLER AND McCOLLUM

CERTIFIED PUBLIC ACCOUNTANTS

Independent Accountants' Report

Board of Directors

Capital Reserve Corporation

We have audited the accompanying balance sheets of Capital Reserve Corporation as of December 31, 2000 and December 31, 1999, and the related statements of operations, stockholders' equity, and cash flows for the years ended December 31, 2000 and December 31, 1999. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the account principles used and significant estimates made by management, as well as evaluating the overall financial statement presentations. We believe that our audits provide a reasonable basis for our opinion.

The financial statements as of December 31, 2000, and for the year then ended has been restated as described in the last paragraph of Note 1.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Reserve Corporation as of December 31, 2000 and December 31, 1999 and the results of its operations, stockholders' equity, and its cash flows for the years ended December 31, 2000 and December 31, 1999, in conformity with generally accepted accounting principles in the United States of America.

|/s/ Miller and McCollom
MILLER AND MCCOLLOM Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300 Wheat Ridge, Colorado 80033
|----------------------------------------------------------------------------------------------------------------------------------------

March 20, 2001, except for the last paragraph of note 1, note 8 and note 14 which are as of November 30, 2001

CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETAS AT DECEMBER 31



|ASSETS                                                                                                                                | 2000Restated
See Note 1 |             | 1999
|------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ----------- | ----
|Current Assets                                                                                                                        |                         |             |     
|Cash                                                                                                                                  | $                       | 20,909      | $   
|Accounts receivables                                                                                                                  |                         | 23,460      |     
|Loans receivable(Note 3)                                                                                                              |                         | 310,644     |     
|Prepaid expenses                                                                                                                      |                         | 32,134      |     
|Total Current Assets                                                                                                                  |                         | 387,147     |     
|                                                                                                                                      |                         |             |     
|Noncurrent assets                                                                                                                     |                         |             |     
|Property on operating leases and property held for leases (net of accumulated depreciation of $14,024)(Note 4)                        |                         | 1,733,560   |     
|                                                                                                                                      |                         |             |     
|Loans Receivable - Long Term(Note 3)                                                                                                  |                         | -           |     
|Investments(Note 5)                                                                                                                   |                         | 1,133,240   |     
|Fixed Assets                                                                                                                          |                         |             |     
|Oil and gas leases (net of accumulated depletion of $37,578)(Note 1)                                                                  |                         | 611,539     |     
|Land                                                                                                                                  |                         | 209,192     |     
|Buildings (net of accumulated depreciation of $7,748)(Note 1)                                                                         |                         | 324,302     |     
|Office equipment and computers (net of accumulated depreciation of $5,035)(Note 1)                                                    |                         | 20,177      |     
|Total Fixed Assets                                                                                                                    |                         | 1,165,210   |     
|                                                                                                                                      |                         |             |     
|Total Assets                                                                                                                          | $                       | 4,419,157   | $   
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                  |                         |             |     
|                                                                                                                                      |                         |             |     
|Current Liabilities                                                                                                                   |                         |             |     
|Loan payable (Note 7)                                                                                                                 | $                       | 199,860     | $   
|Accounts payable                                                                                                                      |                         | 104,886     |     
|Accrued expenses                                                                                                                      |                         | 21,635      |     
|Current portion of long-term debt                                                                                                     |                         | 156,828     |     
|Total Current Liabilities                                                                                                             |                         | 483,209     |     
|                                                                                                                                      |                         |             |     
|Commitments and contingencies(Note 14)                                                                                                |                         |             |     
|                                                                                                                                      |                         |             |     
|Advances Payable(Note 6)                                                                                                              |                         | 223,299     |     
|Future Site Restoration                                                                                                               |                         | 273         |     
|Long-Term Debt(Note 7)                                                                                                                |                         | 1,276,646   |     
|                                                                                                                                      |                         |             |     
|Stockholders' Equity(Note 2)                                                                                                          |                         |             |     
|Class A Common Stock - authorized 20,000,000 shares of no par value; 6,864,235 and 2,179,865 issued and outstanding for 2000 and 1999 |                         | 6,452,351   |     
|Accumulated deficit                                                                                                                   |                         | (4,011,907) |     
|Accumulated other comprehensive income (loss)                                                                                         |                         | (4,714)     |     
|Total Stockholders' Equity                                                                                                            |                         | 2,435,730   |     
|                                                                                                                                      |                         |             |     
|Total Liabilities and Stockholders' Equity                                                                                            | $                       | 4,419,157   | $   

See the accompanying notes to the consolidated financial statements.

CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                     | For the Years Ended December 31,
|-------------------------------------------------------------------- | --------------------------------
|                                                                     | 2000Restated
See Note 1         
|                                                                     |                                 
|Sales & other revenues                                               |                                 
|Petroleum & natural gas (net of royalties)                           | $                               
|Less:                                                                |                                 
|Related costs (including depletion)                                  |                                 
|Non productive exploration costs                                     |                                 
|Abandonment of non-productive leases                                 |                                 
|Gross profit                                                         |                                 
|Rental income                                                        |                                 
|                                                                     |                                 
|                                                                     |                                 
|Expenses                                                             |                                 
|Rent and operating costs                                             |                                 
|Legal                                                                |                                 
|Consulting                                                           |                                 
|Directors Fees                                                       |                                 
|Depreciation and amortization                                        |                                 
|Other Administrative expenses                                        |                                 
|                                                                     |                                 
|                                                                     |                                 
|Earnings (Loss) from operations                                      |                                 
|                                                                     |                                 
|Other income and expenses                                            |                                 
|Interest income                                                      |                                 
|Interest expense                                                     |                                 
|                                                                     |                                 
|                                                                     |                                 
|Provision for income taxes                                           |                                 
|Net Income (Loss)                                                    | $                               
|                                                                     |                                 
|Net Income (Loss) per Common Share                                   | $                               
|                                                                     |                                 
|Weighted Average Number of Common Shares Used in Calculation         |                                 
|                                                                     |                                 
|Other comprehensive income                                           |                                 
|Net loss                                                             | $                               
|Foreign exchange gain (loss)                                         |                                 
|Total other comprehensive income                                     | $                               
|                                                                     |                                 
|See the accompanying notes to the consolidated financial statements.

CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                     | For the Years Ended December 31,
|-------------------------------------------------------------------- | --------------------------------
|                                                                     | 2000Restated
See Note 1         
|Cash From Operating Activities:                                      |                                 
|Net income (loss) from continuing operations                         | $                               
|Reconciling adjustments                                              |                                 
|Depreciation and amortization                                        |                                 
|Non productive exploration costs                                     |                                 
|Abandonment of non-productive leases                                 |                                 
|Issuance of shares for services                                      |                                 
|Options issued for services                                          |                                 
|Changes in operating assets and liabilities                          |                                 
|Accounts receivable                                                  |                                 
|Prepaid expenses and deposits                                        |                                 
|Accounts payable and accrued expenses                                |                                 
|Net Cash Flows From Operating Activities                             |                                 
|                                                                     |                                 
|Cash From Investing Activities:                                      |                                 
|Acquisition of oil and gas properties                                |                                 
|Acquisition of property and equipment                                |                                 
|Investment in Texas T Companies                                      |                                 
|Proceeds from (payments to) loans receivable                         |                                 
|Net Cash Flows From Investing Activities                             |                                 
|                                                                     |                                 
|Cash From Financing Activities:                                      |                                 
|Loans Payable                                                        |                                 
|Issuance of long term debt                                           |                                 
|Proceeds from (payments to) advances payable                         |                                 
|Capital contribution by an officer                                   |                                 
|Sales of common stock (net of offering costs)                        |                                 
|Net Cash Flows From Financing Activities                             |                                 
|                                                                     |                                 
|Foreign exchange gain (loss)                                         |                                 
|Net change in cash and cash equivalents                              |                                 
|Cash at beginning of period                                          |                                 
|Cash at end of period                                                | $                               
|See the accompanying notes to the consolidated financial statements.

|Supplemental disclosure of cash flow information: |   |           |   |   
|------------------------------------------------- | - | --------- | - | --
|                                                  |   |           |   |   
|Interest paid                                     | $ | 47,058    | $ | --
|Income taxes paid                                 | $ | --        | $ | --
|Non-cash investing and financing transactions:    |   |           |   |   
|Acquisition of oil and gas properties             | $ | 729,858   | $ | --
|Less Common stock issued                          |   | 408,525   |   | --
|Cash paid                                         | $ | 321,333   | $ | --
|                                                  |   |           |   |   
|Acquisition of residence                          | $ | 552,396   | $ | --
|Less mortgage assumed                             |   | 384,554   |   | --
|Cash paid                                         | $ | 167,842   | $ | --
|                                                  |   |           |   |   
|Acquisition of commercial property                | $ | 1,519,000 | $ | --
|Less mortgage                                     |   | 1,066,080 |   | --
|Cash paid                                         | $ | 452,920   | $ | --
|                                                  |   |           |   |   
|Investment in Texas T Companies                   | $ | 1,133,240 | $ | --
|Less Common stock issued                          |   | 937,500   |   | --
|Cash paid                                         | $ | 195,740   | $ | --
|                                                  |   |           |   |   
|                                                  |   |           |   |   
|                                                  |   |           |   |   

See the accompanying notes to the consolidated financial statements

CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2000

|                                                                                          | Class A Common Stock
Shares Amount | Class B Stock Preferred
Shares Amount | Capital contributions | AccumulatedDeficit | Accumulated
Other
ComprehensiveIncome (loss) | Total
ShareholdersEquity
|----------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------- | --------------------- | ------------------ | -------------------------------------------- | ------------------------
|Balance at December 31, 1998                                                              | 796,045                            | $ 3,158,162                           | 250,000               | $ 50,000           | $ --                                         | $ (3,209,633)           
|Conversion of Class B preferred stock into common stock                                   | 200,000                            | 50,000                                | (250,000)             | (50,000)           | --                                           | --                      
|Issuance of common stock, net of offering cost of $3,650                                  | 1,183,820                          | 166,732                               | --                    | --                 | --                                           | --                      
|Net (loss)                                                                                | --                                 | --                                    | --                    | --                 | --                                           | (173,237)               
|Balance at December 31, 1999                                                              | 2,179,865                          | 3,374,894                             | --                    | --                 | --                                           | (3,382,870)             
|Issue of common stock:                                                                    |                                    |                                       |                       |                    |                                              |                         
|506 offering dated July 22, 1999 net of offering cost of $64,800                          | 1,870,000                          | 870,205                               | --                    | --                 | --                                           | --                      
|Issue of shares pursuant to an Amended and Restated Technology Transfer Agreement(Note 5) | 500,000                            | 937,500                               | --                    | --                 | --                                           | --                      
|Purchase of residential property(Note 1)                                                  | 167,842                            | 167,842                               | --                    | --                 | --                                           | --                      
|Warrants exercised @ $1.00                                                                | 415,730                            | 415,730                               | --                    | --                 | --                                           | --                      
|Option issued to officer for services(Note 8)                                             | --                                 | 43,000                                | --                    | --                 | --                                           | --                      
|Exercise of option by officer @ $0.13                                                     | 100,000                            | 13,000                                | --                    | --                 | --                                           | --                      
|Shares for services                                                                       | 813,748                            | 218,107                               | --                    | --                 | --                                           | --                      
|Capital contribution by an officer                                                        | --                                 | --                                    | --                    | --                 | 3,548                                        | --                      
|Acquisition of property                                                                   | 817,050                            | 408,525                               | --                    | --                 | --                                           | --                      
|Net loss for the period                                                                   | --                                 | --                                    | --                    | --                 | --                                           | (629,037)               
|Balance at December 31, 2000                                                              | 6,864,235                          | $ 6,448,803                           | --                    | $ --               | $3,548                                       | $ (4,011,907)           

CAPITAL RESERVE CORPORATION

Notes to Consolidated Financial Statements

December 31, 2000 and 1999

Note 1

This summary of significant accounting policies of Capital Reserve Corporation is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.

Organization

Capital Reserve Corporation (the "Company") was incorporated under the laws of the State of Colorado on August 3, 1982 for the purpose of operating as a financial services holding company.

From 1988 through October 1994, the Company and its subsidiaries solicited various life, accident and health insurance policies in the States of Colorado, New Mexico and Arizona. In October 1994, the Company determined it could no longer maintain capital and surplus requirements for its insurance operations.

From 1995 through June 1996, the Company's primary business was the rental of real property. On July 3, 1996, the Company sold its sole property for net proceeds of $501,276.

In 1997, the Company, through its wholly owned subsidiary Wall Street Investments Corp (WSIC), attempted to start a financial consulting services business. As of April 10, 1999, WSIC was no longer conducting operations and was dissolved in July 2000.

In 1999, the Company's principal place of business moved to Canada. In December 1999, the Company formed a wholly owned subsidiary, Capital Reserve Canada Limited, an Alberta corporation ("Capital Canada"), to locate and acquire producing oil and gas assets in Canada.

As of December 31, 2000, the Company has one (1) wholly owned subsidiary, Capital Reserve Canada Limited. WSIC was included in the consolidated statements for the fiscal year ended December 31, 1999 but was liquidated during the year 2000 and is not included in these statements.

Operations

Lease Agreement/Acquisition of Commercial Property:

In January 2000, the Company's wholly owned subsidiary, Capital Canada, acquired approximately 14,107 square feet of office and laboratory space in Calgary, Alberta, pursuant to a written five (5) year lease agreement. The lease agreement included an option to purchase the building (consisting of a total of approximately 22,507 square feet) at a price of $1,519,000. On June 30, 2000, Capital Canada assigned its purchase rights to the Company and gave notification to the Landlord of intent to purchase the building. The Company executed mortgage documents with a local lender to provide $1,066,080 toward the purchase price. The Company paid for the remainder of the purchase price in cash. The Company, at the closing, received a credit of $28,953 applied to the purchase price which amount was equal to fifty percent (50%) of six months of Capital Canada's basic rent payments. The rent expense for the year was reduced by the amount credited to the purchase. The closing took place on August 31, 2000.

During the fourth quarter, the Company purchased a second commercial building for a purchase price of $178,310. The purchase was completed on December 1, 2000. The acquisition of this building was financed from the proceeds of the sale of common stock.

Oil and Gas Activities:

During the year 2000 the Company began investing in oil and gas operations and has elected to follow the full cost method of accounting for these activities. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are depleted on the unit of production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

In addition, the capitalized costs are subject to a "ceiling test", which basically limits such costs to the aggregate of the "estimated present value" discounted at a 10-precent interest rate of future net revenues from proved reserves based on current economic and operating conditions, plus the lower of cost or fair market value of unproved reserves.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income. Abandonment of properties are accounted for as adjustments of capitalized costs with no loss recognized.

Capital Canada acquired a 5% interest in a producing oil and gas field that includes four wells and a gathering facility. The total cost of the acquisition was $612,630 which was paid for in the form of a cash payment of $204,105 and 817,050 shares of common stock of the Company, at a deemed price of $0.50 per share.

The Company entered into a Farmout Agreement and Casing Point Agreement with Hancock Enterprises to purchase a 5% interest in a well known as the Freedom Dome Well located in Rosebud County, Montana which would earn a 4% net revenue interest in the drill spacing unit before payout and a 3.5% net revenue interest after payout, as well as a 3.5% working interest in the balance of 1,766.73 acres. In addition, the Company purchased a 5% interest in a well known as the Pioneer Well located in Garfield County, Montana to earn a 0.58928% working interest in the Tyler formation only, subject to total lease overriding royalties of 19.1%. The Company expended a total of $36,555 on drilling the two wells. Both wells were dry holes.

The Company also purchased a 4% working interest in 54,237.57 acres for $18.00 per acre for a total consideration of $39,051. The Company is presently reviewing other drilling opportunities on the remaining partnership lands.

Acquisition of Residential Property

In connection with a Consulting Agreement agreed to between the Company and its President, Mr. W. Scott Lawler (See "Consulting Agreements"below), the Company and Mr. Lawler agreed that the Company would purchase a home in the City of Calgary for Mr. Lawler's personal use. The purchase price of the home was $541,241. The Company assumed a variable interest rate mortgage from ATB in the amount of $384,554 amortized over 25 years, due and payable on May 1, 2005. On May 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing fixed rate. The monthly payments of principal and interest, property taxes and all other payments are Mr. Lawler's obligation. Title to such property is in the name of the Company. Mr. Lawler provided funds to the Company in the amount of $167,842 to pay for the down payment and all closing costs associated with the purchase. The funds were provided in the form of a subscription for shares of Capital Reserve's Class A Common Stock at the purchase price of $1.00 per share. The net proceeds to Capital Reserve realized from the offering was $167,842, as this offering was made without the use of any agent or salesman and was conducted without any costs, commissions or finders' fees. If Mr. Lawler's Consulting Agreement expires or is terminated, Mr. Lawler will have the option to purchase the property by assuming the mortgage and returning to the Company 167,842 shares of its Class A Common Stock. Such purchase must be completed within 120 days of termination of the Consulting Agreement. If Mr. Lawler does not exercise his option to purchase the property, the Company will be obligated for the mortgage payments and other costs associated with this property. Thereafter, if and when the property is sold, the Company will receive any and all gains (and/or losses) from such sale, less the cost of any approved improvements to the property paid for by Mr. Lawler. The Company recognizes the principal reduction of the mortgage based on the payments of principal made by Mr. Lawler.

Consulting Agreements

As of April 24, 2000, the Company entered into a Consulting Agreement with its President and a member of its Board of Directors, Mr. W. Scott Lawler, pursuant to which Mr. Lawler agreed to relocate to Calgary, Alberta, Canada, to work at the Company's facilities in Calgary and devote more substantial time to the operations of the Company. The term of the Consulting Agreement is two (2) years, with an option on Mr. Lawler's part to extend for one (1) additional year. Mr. Lawler will receive an annual salary of $75,000.00, plus stock options (at terms yet to be determined) and automatic annual salary increases of ten percent (10%). As a further inducement to Mr. Lawler to move to Calgary on the Company's behalf, the Company purchased a home for Mr. Lawler's use. See "Acquisition of Residential Property"above.

Use of Estimates in the preparation of the financial statements

The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Basis of Consolidation

The consolidated financial statements for 2000 include the Company and its wholly owned subsidiary, Capital Reserve Canada Limited. The financial statements for 1999 also included WSIC, which was liquidated in 2000. All significant inter-company accounts and transactions have been eliminated.

Depreciation

Depreciation has been provided in amounts sufficient to relate the costs of depreciable assets to operations over their estimated useful lives principally on the straight-line method from two to five years for office equipment and computers and over 25 years for buildings.

Cash and Cash Equivalents

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

Treasury Stock

Treasury stock has been treated as common stock redeemed and canceled, consistent with the Colorado Revised Statutes.

Earnings (Loss) Per Share

Earnings (loss) per share of common stock is computed based on 4,724,523 and 1,416,780 weighted average number of common shares outstanding during the years' ended December 31, 2000, and 1999, respectively. Fully diluted earnings per share are not presented because they are anti-dilutive.

Commitments and Contingencies

Effective January 15 through August 31, 2000, Capital Canada had entered into a five-year non-cancellable operating lease with a third party. With the Company purchase of the commercial property effective August 31, 2000 the lease was terminated and therefore there are no longer any lease commitments. See Note 1-Operations-"Lease Agreement/Acquisition of Commercial Property"

Risks and Uncertainties

The Company is subject to substantial risks and uncertainties inherent in the operation of oil and gas properties.

Restatement of Financial Statements

The financial statements for the year 2000 have been restated from that previously filed and made publicly available. .  The net loss has been increased by $137,083 to $629,037 from $491,954   resulting from the addition to expense of $43,000 for the value of options issued, from the addition of $14,829 for a correction of value assigned to stock issued for services, from the addition to expense of $41,638 and $39,102 for the write of Non productive exploration costs and Abandonment of non productive leases respectively, addition to expenses of $3,548 being the gain arising on the principal reduction of the mortgage transferred to share capital less $5,034 of foreign currency loss reclassified from net income to comprehensive income. Certain other reclassifications have been made to conform to current classification. The effect of the restatement is to increase the net loss per common share by $0.01, from $0.12 per share to $0.13 per share.

Note 2 - Private Placement of Common Stock

During the fiscal year ended December 31, 1999, the Company offered for sale up to 2,000,000 units of common stock at $0.50 per unit, each unit consisting of one share and one warrant to acquire a like number of additional shares of common stock at $1.00 per share. The Company received subscriptions in excess of the total offering and elected to exercise its right under the terms of the offering to accept only a portion of each subscriber's subscription, and to allow each of them to apply the unaccepted portion towards the purchase price of the warrants issuable with the accepted portion of their subscriptions. As a result, 2,000,000 units were issued and certain of the subscribers elected to exercise a total of 415,730 warrants resulting in the issuance of an additional 415,730 shares. The total proceeds to the Company from this offering, including $415,730 from the exercise of warrants and net of commissions and finders fees, were $1,350,930.

In connection with the purchase of real estate and the issuance of stock discussed above, the Company's President, Mr. W. Scott Lawler purchased a total of 167,842 shares of the Company.(See Note 1-Operations-"Acquisition of Residential Property")

As part of its investment in Texas T Petroleum Ltd., (See Note 5-"Investments"),on September 25, 2000, the Company issued 500,000 shares pursuant to an Amended and Restated Technology Transfer Agreement with Dr. Pierre Jorgensen and Synergy Technologies Corporation and its subsidiaries, Carbon Resources Limited and Lanisco Holdings Limited. Dr. Jorgensen is the inventor of a heavy oil upgrading technology for which the Company has provided development funds.

During the quarter ended December 31, 2000, the Company renegotiated an option agreement with Ralph W. Newton and Patricia L. Newton that was originally executed on October 6, 1998 for 200,000 options at $0.25 per share. It was unclear from the original option agreement the effect of an anti-dilution provision set forth therein. In exchange for a reduction of the exercise price to $0.13 per share, the parties agreed to the cancellation of 100,000 options. The Company received $13,000 for the exercise of the 100,000 options and the issuance of the shares was approved on December 22, 2000.

During the quarter ended December 31, 2000, the Company approved the issuance of 60,000 shares to its President, W.S. Lawler for directors' fees.

Warrants unexercised at December 31, 2000 were as follows:

|Number of warrants | Exercise price | Expiry date      
|------------------ | -------------- | -----------------
|194,336            | $1.00          | June 13, 2003    
|43,100             | $1.00          | June 7, 2003     
|3,333              | $1.00          | July 21, 2003    
|1,343,471          | $1.00          | August 2, 2003   
|113,820            | $1.00          | November 30, 2002

Note 3

Loans Receivable of $310,644 represent monies advanced to various unrelated corporations. These amounts bear interest calculated on the daily outstanding principal at 2% above prime rate and have no specific repayment terms.

Long term loans receivable reported as at December 31, 1999 included loans to two unrelated third parties, such loans provided with no specific terms of repayment and no interest. The loans were settled in full subsequent to the year ended December 31, 1999 in cash.

Note 4 - Property on operating leases and property held on lease

Capital Reserve owns three pieces of real estate all located in the City of Calgary; two of which properties are commercial real estate buildings and the other is residential. Of the three properties acquired, there is currently one revenue generating property with existing operating leases. This commercial building is fully leased and consists of 22,146 square feet of office space and laboratory space. Capital Reserve has entered into head lease agreements with 3 tenants that occupy all of the space in this commercial building including its wholly-owned subsidiary, Capital Reserve Canada Limited. The first head lease agreements is between Capital Reserve and Toshiba, which was assigned to Capital Reserve upon the purchase of the building in August 2000. The Toshiba lease generates $92,117 in annual lease payments and operating costs. This lease expires in July 2005.

The second head lease agreement is with Synergy Technologies Corporation for 8,414 square feet of office space and 4,364 square feet of laboratory facilities for a term of five years. The Synergy lease generates $248,950 in annual lease payments and operating costs. This lease expires in August 2005.

The third head lease agreement is with Capital Reserve Canada Limited, a wholly owned subsidiary of the Company, for 2,822 square feet of office space and lab space for a term of 5 years. The lease generates $41,825 in annual lease payments and operating costs. Capital Reserve Canada has subleased all of this space under two sublease agreements. One of the sublease agreements expires in January 2005 and the other in October 2005. They generate in the aggregate $48,094 in annual lease payments and operating costs.

The following schedule provides an analysis of the company's investment in property on operating leases and property held for leases by major classes as of December 31, 2000.

|                               |   | 2000      |   | 1999
|------------------------------ | - | --------- | - | ----
|Land                           | $ | 511,661   | $ | -   
|Buildings                      |   | 1,235,923 |   | -   
|                               |   | 1,747,584 |   | -   
|Less: Accumulated depreciation |   | (14,024)  |   | -   
|                               |   | 1,733,560 |   | -   

Rentals under operating leases

The following is a schedule by years of minimum future rentals on non-cancelable operating leases as of December 31, 2000.

|Year ending December 31: |   |          
|------------------------ | - | ---------
|2001                     | $ | 240,130  
|2002                     |   | 236,570  
|2003                     |   | 236,570  
|2004                     |   | 236,570  
|2005                     |   | 155,160  
|                         |   | 1,105,000

Real Estate operations acquired during the year

The financial statements of real estate operations acquired during the year is set out below:

|Statement of operations                                                                  |   |          
|---------------------------------------------------------------------------------------- | - | ---------
|Rental operations                                                                        | $ | 107,954  
|Expenses                                                                                 |   | 69,702   
|                                                                                         |   | 38,252   
|Other income                                                                             |   |          
|Interest                                                                                 |   | 201      
|Foreign exchange gain                                                                    |   | 20,243   
|                                                                                         |   | 20,444   
|                                                                                         |   |          
|Earnings                                                                                 |   | 58,696   
|                                                                                         |   |          
|Balance Sheet                                                                            |   |          
|Current assets                                                                           |   |          
|Cash                                                                                     |   | 3,985    
|Accounts receivable                                                                      |   | 12,887   
|Prepaid expenses                                                                         |   | 639      
|                                                                                         |   |          
|Noncurrent assets                                                                        |   |          
|Property on operating leases & property held for leases(net of accumulated depreciation) |   | 1,733,560
|Total assets                                                                             |   | 1,751,071
|                                                                                         |   |          
|Liabilities                                                                              |   |          
|Accounts payable                                                                         |   | 21,150   
|Accrued expenses                                                                         |   | 5,235    
|                                                                                         |   |          
|Long term debt                                                                           |   |          
|Mortgage                                                                                 |   | 1,056,978
|                                                                                         |   |          
|Equity                                                                                   |   | 609,012  
|Surplus                                                                                  |   | 58,696   
|                                                                                         |   | 1,751,071

Note 5- Investments

On August 1, 2000, in consideration for cash proceeds advanced to Texas T Resources Inc. ("Texas T") a public reporting British Columbia, Canada corporation, the company entered into a private placement agreement with Texas T for the purchase of 2,000,000 units of Texas T's common stock at $0.0677 per unit, each unit comprised of one share and one share purchase warrant entitling the Company to purchase an additional share at $0.0880 for a period of two years from the date of issue. The investment represents 9% of the issued and outstanding common shares of Texas T. The proceeds of the private placement were used by Texas T to assist its majority owned subsidiary, Texas T Petroleum Limited, a private Colorado company, to acquire an interest in heavy oil upgrading technology. The interest in the technology was acquired by the acquisition of a 50% interest in Carbon Resources Limited, a Cyprus company, which holds the rights to the heavy oil upgrading technology known as "CPJ".

Subsequently in the fiscal year 2000, the Company also made an investment in Texas T's majority owned subsidiary, Texas T Petroleum Ltd., a private Colorado corporation, and acquired 2,000,000 units of Texas T Petroleum Ltd. at $0.50 per unit, each unit comprised of one share and one share purchase warrant entitling the Company to purchase one additional share at $1.00 per share for a period of two years from the date of issue. The investment represents 9% of the issued and outstanding common shares of Texas T Petroleum Ltd. The Company acquired this investment by converting $1,000,000 of a loan in the total amount of $1,457,110 made by the Company to Texas T Petroleum Ltd. into the 2,000,000 units of Texas T Petroleum Ltd. common stock and warrants. The total loan amount of $1,457,110 included the amount of $937,500 which represents the value of 500,000 shares of the Company's common stock issued to Dr. Jorgensen at the request of and to the benefit of Texas T Petroleum Ltd. at market value of $1.875 per share on the date of the transaction. The conversion of a portion of the loan into equity in Texas T Petroleum Ltd. was done pursuant to a written agreement between the parties dated October 31, 2000. The issuance of the 500,000 shares of the Company's common stock to Dr. Jorgensen was pursuant to the Amended and Restated Technology Transfer Agreement dated September 25, 2000, between the Company, Dr. Jorgensen, Synergy Technologies Corporation and certain subsidiaries of Synergy Technologies Corporation. (See Note 14 - Commitments and Contingencies).

In accordance with the Statement of Financial Accounting Standards No. 115 (SFAS 115), investments and securities may be classified as (1) Securities held-to-maturity, (2) Trading Securities and (3) Securities available for sale.  Securities available for sale are valued at fair value with unrealized gains or losses recorded in stockholders' equity.  The fair value of the investment in Texas T Resources Inc. is the same as the original invested cost since the quoted market value of the stock at December 31, 2000 was the same as the issuing. The investment in Texas T. Petroleum Ltd. does not have a quoted market value, and the company considers the fair value of this investment to be equivalent to the invested cost.

Note 6- Advances Payable

Advances Payable of $223,299 are advances from various unrelated parties that bear interest at prime plus 2% and have no stated terms of repayment.

Note 7- Loan payable

The Company's subsidiary, Capital Canada has a $199,860 revolving bank term loan payable on demand with the Alberta Treasury Branches. This amount has been fully drawn upon and represents $199,860 of the amount reflected on the consolidated balance sheet of the Company. The loan bears interest at the Bank of Canada's prime rate (7.5% as of December 31, 2000) plus 1% payable on the last day of each month. The revolving credit facility is subject to an annual review and specifies no repayment terms provided certain covenants related to the facility are met. As collateral security Capital Canada, has pledged a $3,331,000 floating charge debenture over all of its assets.

Note 8- Long-Term Debt

During the fiscal year ended December 31, 2000, the Company purchased a commercial property for a total purchase price of $1,519,000. The Company executed mortgage documents with Standard Life to provide $1,066,080 toward the purchase price. The mortgage has a five year term, amortized over 15 years, at an interest rate of 8.60%. On September 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing rate. The Company paid the remainder of the purchase price in cash. Monthly payments of principal and interest are $10,465. As at December 31, 2000 the mortgage balance was $1,056,978.

The aggregate amount of required payments at December 31, 2000 is as follows:

|Year 1   | $ | 125,580  
|-------- | - | ---------
|Year 2   |   | 125,580  
|Year 3   |   | 125,580  
|Year 4   |   | 125,580  
|Year 5   |   | 125,580  
|Later    |   | 1,224,405
|         |   | 1,852,305
|Interest |   | 795,327  
|         |   | 1,056,978

In connection with a Consulting Agreement agreed to between the Company and its President, Mr. W. Scott Lawler (see "Consulting Agreements"above). The Company assumed a variable interest rate mortgage from Alberta Treasury Branch in the amount of $384,554 amortized over 25 years, due and payable on May 1, 2005. On May 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing rate. Title to such property is in the name of the Company. As at December 31, 2000 the mortgage balance was $376,495.

The aggregate amount of required payments at December 31, 2000 is as follows:

|Year 1   | $ | 30,953 
|-------- | - | -------
|Year 2   |   | 30,953 
|Year 3   |   | 30,953 
|Year 4   |   | 30,953 
|Year 5   |   | 30,953 
|Later    |   | 601,010
|         |   | 755,775
|Interest |   | 379,280
|         |   | 376,495

Note 9 - Stock-Based Compensation

Stock options

As permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation, the Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its options granted to employees. Under APB 25, compensation expenses is recognized at the time of option grant if the exercise price of the Company's employee stock option is below the fair market value of the underlying common stock on the date of the grant.

The Company's Board of Directors has granted non-qualified stock options to an officer of the Company. The following is a summary of activity for the stock options for the years ended December 31, 2000 and 1999.

|                                      | Options   |  | Weighted Average Exercise Price
|------------------------------------- | --------- |  | -------------------------------
|Options Outstanding,December 31, 1998 | --        |  | $	--                           
|Granted                               | 200,000   |  | $	.25                          
|Exercised                             | --        |  | $	--                           
|Cancelled                             | --        |  | $	--                           
|                                      |           |  |                                
|Options Outstanding,December 31, 1999 | 200,000   |  | $	.25                          
|Granted                               | 100,000   |  | $	.13                          
|Exercised                             | (100,000) |  | $	(.13)                        
|Cancelled                             | (200,000) |  | $	(.25)                        
|Options Outstanding,December 31, 2000 | --        |  | $	--                           

For all options granted during 1999, the weighted average fair value of the Company's common stock on the grant date was approximately $.10. The fair value of the 200,000 employee options issued above market was approximately $6,500. At December 31, 1999, all options were fully vested and exercisable. The options granted in 2000 were a modification to the options outstanding at December 31, 1999. The weighted average fair value of the Company's stock on the modification date was $.56. The fair value of the 100,000 employee options reissued below market was approximately $43,000. At December 22, 2000, all options were fully vested and were exercised.

Pro Forma Stock-Based Compensation Disclosures

The Company applies APB Opinion 25 and related interpretations in accounting for its stock options which are granted to employees. Accordingly, compensation cost of $43,000 has been recognized for grants of options to employees since the exercise prices were less than the fair value of the Company's common stock on the grant dates. Had compensation cost been determined based on an estimate of the fair value consistent with the method of SFAS No. 123 at the grant dates for the awards, the Company's net income and EPS would not have been reduced by a material amount.

The fair value of each employee option granted in 2000 and 1999 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:



|                          |  | Year Ended 
December 31, 2000 |  | Year Ended
December 31, 1999
|------------------------- |  | ----------------------------- |  | ----------------------------
|Expected volatility       |  | 155%                          |  | 100%                        
|Risk-free interest rate   |  | 5.5%                          |  | 6.00%                       
|Expected dividends        |  | --                            |  | --                          
|Expected terms (in years) |  | 2.0                           |  | .12                         



Issuance of shares for services rendered

The Company issued the following shares in settlement of services rendered by unrelated third parties.

|Shares  | Price per unit | Total  
|------- | -------------- | -------
|677,210 | $0.10          | $67,721
|1,822   | $1.10          | $2,000 
|1,924   | $1.00          | $1,924 

Additionally, the company issued 72,792 shares valued at $0.42 each, with a total value of $30,397 in settlement of legal services and 60,000 shares at an average value of $1.93 in settlement of director's fees to an officer and president of the company.

Note 10 - Related Party Transactions

References made to notes 1, 2 and 6 with transactions involving the Company's President, W. Scott Lawler.

A company controlled by the President of Capital Reserve Canada Limited has incurred consulting fees of $37,500 for the fiscal year 2000 of which $22,500 remains outstanding.

The Company's wholly-owned subsidiary, Capital Reserve Canada Limited has subleased office space to Texas T Resources Inc., a public reporting British Columbia corporation, which shares a common officer and director with Capital Reserve Canada Limited. The lease agreement is for five years and generates $5,967 in annual lease payments. During the fiscal year 2000, the company received lease payments totaling $1,956.

The Company made an investment in two corporations which share a common officer and director with the Company's wholly-owned subsidiary, Capital Reserve Canada Limited. (See Note 5 - Investments above)

Note 11- Recent Accounting Pronouncements

In December 1999, The Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin no. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarized certain of the SEC's views regarding the application of generally accepted accounting principles to revenue recognition in financial statements. In June 2000, the SEC amended SAB 101 to acquire companies with fiscal years beginning after December 15, 1999 to implement the provisions of SAB 101 no later than the fourth fiscal quarter. The Company adopted the provision of SAB 101 in fiscal quarter ending December 31, 2000. The Company does not expect the adoption to have material effect on its financial statements.

Note 12- Subsequent Events

(a) At the time that this report was originally filed the Company has expended $44,000 for renovations on the second commercial building. The Company anticipates expending an additional $146,000 during fiscal 2001.

(b) Subsequent to December 31, 2000 at an annual meeting of the shareholders of the Company a majority of shareholders of the Company approved the following matters, among other matters tabled and approved:

1. A new class of common stock under which a total of 2,000,000 Class C shares have been authorized for issuance, each share of Class C common stock being convertible into 6 shares of Class A common stock subject to certain performance criteria.
2. Increase in authorized number of shares of common stock to 100 million shares
3. Creation of a 2001 Stock Option and Stock Award Plan for the Company's directors, employees and consultants.

Note 13 - Income Taxes

The Company, as of December 31, 2000 had approximately $2,510,000 net operating loss carryover that expires between 2001 to 2020. A change in ownership of more than 50% of the Company may result in the inability of the Company to utilize the carryover. The Company had deferred tax assets of approximately $1,200,000 relating to the net operating loss carryover. A valuation allowance has been provided for the total amount since the amounts, if any, of future revenues necessary to be able to utilize the carryover, are uncertain.

A reconciliation of income taxes computed using the statutory federal income tax differs from this effective tax rate is as follows:

|                                             | 2000   | 1999
|-------------------------------------------- | ------ | ----
|Computed at the expected statutory rate      | (34.0) | %   
|State income tax, net of federal tax benefit | (3.0)  |     
|Other                                        | (0.3)  |     
|Net change in valuation allowance            | 37.5   |     
|                                             |        |     
|Income tax expense - effective rate          | 00.0   | %   



Note 14 - Segmental analysis

|                                     |   | Oil & Gas | Leasing   | Investments | Total    
|------------------------------------ | - | --------- | --------- | ----------- | ---------
|                                     |   |           |           |             |          
|Revenue                              | $ | 90,600    | 181,578   | -           | 272,178  
|Related costs (including depletion)  |   | (78,714)  |           | -           | (78,714) 
|Non productive exploration costs     |   | (41,638)  | -         | -           | (41,638) 
|Abandonment of non-productive leases |   | (39,102)  | -         | -           | (39,102) 
|Gross profit                         |   | (68,854)  | 181,578   | -           | 112,724  
|                                     |   |           |           |             |          
|Expenses                             |   |           |           |             |          
|Rent & operating costs               |   | 24,470    | 49,041    | -           | 73,511   
|Legal                                |   | 28,798    | 57,716    | -           | 86,514   
|Consulting                           |   | 70,471    | 141,236   | -           | 211,707  
|Director's fees                      |   | 41,131    | 82,434    | -           | 123,565  
|Depreciation & amortization          |   | 3,002     | 27,788    | -           | 30,790   
|Other administration expenses        |   | 79,883    | 160,098   | -           | 239,981  
|                                     |   | 247,755   | 518,313   | -           | 766,068  
|                                     |   |           |           |             |          
|Loss from operations                 |   | (316,609) | (336,735) | -           | (653,344)
|                                     |   |           |           |             |          
|Other income and expenses            |   |           |           |             |          
|Interest income                      |   | 23,755    | 47,610    | -           | 71,365   
|Interest expenses                    |   | (24,950)  | (22,108)  | -           | (47,058) 
|Other comprehensive income           |   |           |           |             |          
|Foreign exchange loss                |   | (1,676)   | (3,358)   | -           | (5,034)  
|                                     |   | (2,870)   | 22,143    | -           | 19,273   
|                                     |   |           |           |             |          
|Loss                                 | $ | (319,479) | (314,592) | -           | (634,071)
|                                     |   |           |           |             |          
|Identifiable assets                  | $ | 611,539   | 1,733,560 | 1,133,240   |          

Note 15 - Commitments and Contingencies

Pursuant to an Amended and Restated Technology Transfer Agreement mentioned in the fourth paragraph of Note 2, in connection with the Company's investment in a heavy oil upgrading technology through its investment in Texas T companies described in Note 5, the Company is contingently liable in connection with stock issued to the inventor of the technology, Dr. Pierre Jorgensen. The Company has guaranteed certain values relating to portions of the 500,000 shares of stock issued, such guarantees being in the form of either the Company's Class A common stock or cash at the election of the Company.  Management believes that such stock issuance, if required, could exceed 1,000,000 shares, or alternatively, as much as $400,000.



|SUPPLEMENTAL OIL AND GAS OPERATING INFORMATION (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |          |   |          |   |         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | - | -------- | - | --------
|Year Ended December 31, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |          |   |          |   |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Capitalized Costs Relating to Oil and Gas Producing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |          |   |          |   |         
|Activities at December 31, 2000:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Total    |   | U.S.     |   | Canada  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Proved oil and gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $ | 649,118  | $ | -        | $ | 649,118 
|Unproved oil and gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | -        |   | -        |   | -       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 649,118  |   | -        |   | 649,118 
|Less accumulated depreciation, depletion,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |          |   |          |   |         
|amortization, and impairment reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 37,578   |   | -        |   | 37,578  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Net capitalized costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $ | 611,540  | $ | -        | $ | 611,540 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Costs Incurred in Oil and Gas Producing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |          |   |          |   |         
|for the Year Ended December 31, 2000:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |          |   |          |   |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Property acquisition costs -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |          |   |          |   |         
|Developed oil and gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $ | 612,630  | $ | -        | $ | 612,630 
|Undeveloped oil and gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 39,102   |   | 39,102   |   | -       
|Development costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 36,488   |   | -        |   | 36,488  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Results of Operations for Oil and Gas Producing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |          |   |          |   |         
|Activities for the Year Ended December 31, 2000:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Oil and gas sales, net of royalties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $ | 90,600   | $ | -        | $ | 90,600  
|Production costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | (41,136) |   | -        |   | (41,136)
|Depreciation, depletion, and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (37,578) |   | -        |   | (37,578)
|Abandonment of U.S. oil and gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (39,102) |   | (39,102) |   | -       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | (27,216) |   | (39,102) |   | 11,886  
|Income tax expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -        |   | -        |   | -       
|Results of operations for oil and gas producing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $ | (27,216) | $ | (39,102) | $ | (11,886)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|Reserve Information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |          |   |          |   |         
|All of the Company's reserves are located in the province of Alberta, Canada. The following estimates of proved developed reserve quantities and related standardized measure of discounted cash flow are estimates only, and do not purport to reflect realizable values or fair market values of the company's reserves. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, estimates are expected to change as future information becomes available.
Proved reserves are estimated reserves of crude oil (including condensate and natural gas liquids) and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment, and operating methods.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |          |   |          |   |         
|The standardized measure of discounted future net cash flows is computed by applying year-end prices of oil and gas (Edmonton Light Sweet for oil and Edmonton spot for gas, without consideration for price changes since the Company has no long-term contractual arrangements) to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated) to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions. The estimated future net cash flows are then discounted using a rate of 10 percent a year to reflect the estimated timing of the future cash flows.                                                                                   

|                                            |  | 12/31/00   |  | 12/31/99 
|------------------------------------------- |  | ---------- |  | ---------
|                                            |  | Oil
(Bbls) |  | Gas
(Mcf)
|Proved developed and undeveloped reserves - |  |            |  |          
|Beginning of year                           |  | -          |  | -        
|Purchase of minerals in place               |  | 20,521     |  | 409,385  
|Production                                  |  | 2,083      |  | 20,986   
|End of year                                 |  | 18,438     |  | 388,399  
|                                            |  |            |  |          
|Proved developed reserves -                 |  |            |  |          
|Beginning of year                           |  | -          |  | -        
|End of year                                 |  | 18,438     |  | 298,554  

|                                                                                                                |  |  |   |          
|--------------------------------------------------------------------------------------------------------------- |  |  | - | ---------
|Standarized Measure of Discounted Net                                                                           |  |  |   |          
|Cash Flows at December 31, 2000 -                                                                               |  |  |   |          
|Net cash inflows                                                                                                |  |  | $ | 2,100,000
|Future production costs                                                                                         |  |  |   | (401,000)
|Future development costs                                                                                        |  |  |   | -        
|Future income tax expense                                                                                       |  |  |   | (648,000)
|Future net cash flows                                                                                           |  |  |   | 1,051,000
|10% annual discount for estimated timing of cash flows                                                          |  |  |   | (359,000)
|Standarized measure of discounted future net cash flows relating to proved oil and gas reserves                 |  |  |   | 692,000  
|                                                                                                                |  |  |   |          
|The following reconciles the change in the standardized measure of discounted future net cash flow during 2000: |  |  |   |          
|Beginning of year                                                                                               |  |  | $ | -        
|Sales of oil and gas produced, net of production costs                                                          |  |  |   | (49,000) 
|Purchase of minerals in place                                                                                   |  |  |   | 613,000  
|Net change in prices and production costs                                                                       |  |  |   | 35,000   
|Development costs incurred during the year which were previously estimated                                      |  |  |   | 36,000   
|Accretion of discount                                                                                           |  |  |   | 61,000   
|Other                                                                                                           |  |  |   | (4,000)  
|End of year                                                                                                     |  |  | $ | 692,000  
|                                                                                                                |  |  |   |          
|                                                                                                                |  |  |   |          



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following table sets forth the names and ages of all directors and executive officers of Capital Reserve as of the date of this report, indicating all positions and offices with Capital Reserve and its subsidiary held by each such person:

|NAME              | AGE | POSITION                                                              
|----------------- | --- | ----------------------------------------------------------------------
|W. Scott Lawler   | 39  | President and Director, and Director of Capital Reserve Canada Limited
|Sharon M. Patmore | 58  | Secretary and Director                                                
|James F. Marsh    | 77  | President and Director of Capital Reserve Canada Limited              

Capital Reserve's directors are elected by the holders of Capital Reserve's common stock. Cumulative voting for directors is not permitted. The current management group, which was appointed in 2000, gave notice of and held the last Shareholders' Annual Meeting on March 21, 2001. The term of office of directors of Capital Reserve ends at the next annual meeting of Capital Reserve's shareholders or when their successors are elected and qualified. The annual meeting of shareholders is specified in Capital Reserve's bylaws to be held within six months from the Company's fiscal year end or within 15 months from the date of the last annual meeting. The term of office of each officer of Capital Reserve ends at the next annual meeting of our Board of Directors, expected to take place immediately after the next annual meeting of shareholders, or when his successor is elected and qualifies. Except as otherwise indicated below, no organization by which any officer or director previously has been employed is an affiliate, parent, or subsidiary of Capital Reserve.

W. SCOTT LAWLER has been President and a director of Capital Reserve since November 1, 1999 and a director of Capital Reserve Canada Limited since its inception on December 8, 1999. Mr. Lawler is an attorney and is admitted in the States of California and Utah. Mr. Lawler received a Bachelor's Degree in business management in 1984 from Brigham Young University and his Juris Doctorate degree from U.S.C. Law Center in 1988. Mr. Lawler was admitted to the California State Bar in 1988 and the Utah State Bar in 1995. Mr. Lawler has been the principal of Lawler & Associates, specializing in corporate and securities matters, since 1995.

SHARON M. PATMORE has been a director and Secretary of Capital Reserve since October 6, 1998. Ms. Patmore is the sole employee and President of Sharon Patmore Agencies and has been since its inception in 1979. Ms. Patmore's responsibilities with Sharon Patmore Agencies include sales and corporate management.

JAMES F. MARSH, B.SC., M.B.A., Brig. Gen. (Ret'd) has been President and a director of Capital Reserve Canada Limited since its incorporation on December 8, 1999. Mr. Marsh is a retired construction executive and developer who spent several years in the commercial building industry as an architect. Mr. Marsh has been President and a director of 447017 B.C. Ltd., a private consulting company, since 1993, and a director of Buccaneer Recoveries Ltd., a private investment company, since May 15, 1996. He has served as a director of Templar Resources Corporation, a reporting company in the Province of British Columbia, Canada since October 21, 1994 and its President since August 22, 1995. He has also served as President and a director of Texas T Resources Inc., a British Columbia reporting company trading on the CDNX exchange in Canada for the period from June, 1994 to June 23, 1998 and rejoined the Board of Directors on July 7, 2000 and continues to serve as a director. He is also the President of Texas T Petroleum Ltd. which is a 64% subsidiary of Texas T Resources Inc. and the Secretary of Texas T Petroleum Inc., a wholly owned subsidiary of Texas T Resources Inc.

Section 16(a) Beneficial Ownership Reporting Compliance

Each of W. Scott Lawler and Sharon Patmore were late in filing their initial Form 3 stating their beneficial ownership of equity securities of Capital Reserve and their annual Form 5 for stating their beneficial ownership of equity securities of Capital Reserve.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information for the individuals who served as the CEO of Capital Reserve during any portion of the last 3 fiscal years. No disclosure need be provided for any executive officer, other than the CEO, whose total annual salary and bonus for the last completed fiscal year did not exceed $100,000. Accordingly, no other executive officers of Capital Reserve are included in the table.

|ANNUAL COMPENSATION                                 | LONG TERM COMPENSATION |          
|--------------------------------------------------- | ---------------------- | ---------
|                                                    |                        |          
|Name and Principal Position                         | Year                   | Salary($)
|W. Scott Lawler, President(1)                       | 2000                   | $50,000  
|W. Scott Lawler, President                          | 1999                   | -0-      
|Glen C. Loder, Chairman, President and Treasurer(4) | 1999                   | -0-      
|Glen C. Loder, Chairman, President and Treasurer(4) | 1998                   | -0-      

(1) Capital Reserve has agreed to issue to Mr. Lawler a monthly restricted stock award of 5,000 shares of common stock in exchange for his services as president and director of Capital Reserve. For the period ending December 31, 1999, Mr. Lawler earned 15,000 shares. For the period ending December 31, 2000, Mr. Lawler earned an additional 60,000 shares. Mr. Lawler also receives cash compensation for his services as President of Capital Reserve in the amount of $6,250 per month pursuant to a consulting contract. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".

(2)	This compensation was paid in the form of 60,000 restricted shares were awarded to Mr. Lawler as compensation for serving on the board of directors.

(3) 	Mr. Lawler received this compensation in the form of 72,742 shares as follows: 57,742 as payment for legal fees of $28,897 earned in 1999 as outside counsel and 15,000 shares, valued at $0.10 per share, for the three months of monthly directors fees.

(4) 	Pursuant to the Management Agreement between Capital Reserve and Glen C. Loder dated October 6, 1998. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".

Mr. Lawler devotes approximately one-half of his time to Capital Reserve pursuant to a written consulting agreement described in "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".

Capital Reserve does not pay non-officer directors for their services as such, nor does it pay any director's fees for attendance at meetings except Mr. Lawler who receives 5,000 shares of common stock per month as director's fees. Directors are reimbursed for any expenses incurred by them in their performance as directors.

Effective October, 6, 1998, Capital Reserve entered into a Management Agreement with Glen C. Loder, an officer and director of Capital Reserve, pursuant to which Mr. Loder had agreed to serve as President and Chairman of the Board of Directors of Capital Reserve. Capital Reserve paid Mr. Loder a consulting fee of $5,000 per month in exchange for his services, plus reimbursement of reasonable expenses. During 1999 but prior to his death in October 1999, Mr. Loder was paid $61,200 for consulting fees (of which $11,200 was advanced prior to being earned and was written-off by Capital Reserve as a result of Mr. Loder's passing). Mr. Loder was also reimbursed $11,628.70 for entertainment expenses, miscellaneous items and other administrative costs.

OPTIONS

On February 3, 1999, Capital Reserve issued stock options to Ralph W. Newton and Patricia L. Newton to acquire up to 200,000 shares of Capital Reserve's common stock at a price of $0.25 per share on or before February 3, 2001. The options included standard anti-dilution rights which would cause the purchase price to be reduced as a result of Capital Reserve selling shares of common stock at a price lower than the purchase price of the shares issuable upon exercise of the options. Patricia L. Newton is the wife of Ralph W. Newton. The options were issued in connection with the Stock Purchase Agreement between the Newtons and Glen C. Loder, the President and CEO of Capital Reserve. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." The value of the options has not been included in the Executive Compensation Table, above, because there was no established value for the shares of common stock in 1999 since Capital Reserve's shares did not recommence trading on OTC/BB until February 4, 2000. Therefore, the value of the options is unknown as compensation for the fiscal year ended 1999. During the quarter ended December 31, 2000, Capital Reserve re-negotiated the terms of this option agreement. It was unclear from the original option agreement the effect of the anti-dilution provision. In exchange for a reduction of the exercise price to $0.13 per share, the parties agreed to the cancellation of 100,000 of the 200,000 options. The Newtons immediately exercised their right to purchase the remaining 100,000 options and paid Capital Reserve $13,000 for this exercise. The issuance of the 100,000 shares was approved on December 22, 2000.

STOCK OPTION AND STOCK AWARD PLANS

Capital Reserve adopted an Stock Option and Stock Award Plan, which permitted the Board of Directors or a committee of directors to grant stock options or stock awards for a total of 500,000 shares to employees and consultants who provide bonafide services to Capital Reserve of Capital Reserve.

On March 23, 2000, stock awards totaling 500,000 shares were granted under the Plan. Mr. Lawler received 57,792 of such shares as payment for legal fees earned in fiscal year 1999 and 15,000 shares as compensation for serving as a director.

At Capital Reserve's Annual Shareholders Meeting held on March 21, 2001, the shareholders approved a new stock option plan under which Capital Reserve can issue shares to its employees, officers, directors and consultants at terms to be set by the Board. Subsequent thereto, the Board set the terms to be $1.00 per share, exercisable for up to five years from the date of grant for up to 1,000,000 shares. As at March 30, 2001 no options have been granted under this plan.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of March 31, 2001, with respect to the beneficial ownership of Capital Reserve's common stock by each person known by Capital Reserve to be the beneficial owner of more than 5% of the outstanding common stock, by each of Capital Reserve's officers and directors, and by the officers and directors of Capital Reserve as a group. Capital Reserve converted all 250,000 outstanding shares of its Class B Preferred Stock in the last quarter of 1999 in accordance with the election of the holders of a majority of such shares. The holders of shares of Class B Preferred Stock received a total of 200,000 shares of Class A Common Stock for their 250,000 preferred shares of Class B or a conversion of .8 to 1. Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable officers and directors have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued:

COMMON STOCK

|BENFICIAL OWNER                                                                                                                                                                      | AMOUNT AND NATURE OF BENEFICIAL
OWNER                                                                                                                                   | PERCENT OF CLASS(1)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------
|                                                                                                                                                                                     |                                                                                                                                                                         |                    
|Buccaneer Holdings Ltd.(2), P.O. Box 1678, Belize, Central America                                                                                                                   | 629,502; this amount includes warrants for 200,000 shares                                                                                                               | 11.2%              
|                                                                                                                                                                                     |                                                                                                                                                                         |                    
|Ocean Exploration Ltd. (3)
25 Regent Street, Belize City, Belize, Central America                                                                                                    | 778,834 this amount includes warrants for 381,007 shares                                                                                                                | 10.7%              
|                                                                                                                                                                                     |                                                                                                                                                                         |                    
|W. Scott Lawler, President and director of Capital Reserve Corporation and a director of Capital Reserve Canada Limited, c/o 335 - 25 Street S.E., Calgary, Alberta, T2A 7H8, Canada | 235,842                                                                                                                                                                 | 3.4%               
|                                                                                                                                                                                     |                                                                                                                                                                         |                    
|Sharon Patmore, Secretary and director of Capital Reserve Corporation, #11, 1861 Beach Avenue, Vancouver, B.C., V6G 1Z1 Canada                                                       | 0                                                                                                                                                                       | -                  
|                                                                                                                                                                                     |                                                                                                                                                                         |                    
|James F. Marsh, President and director of Capital Reserve Canada Limited, c/o 335 - 25 Street S.E., Calgary, Alberta, T2A 7H8                                                        | 119,458 held in the name of 447017 B.C. Ltd., of which Mr. Marsh is the beneficial owner, President and a director; these securities include warrants for 59,744 shares | 1.7%               
|                                                                                                                                                                                     |                                                                                                                                                                         |                    
|Officers and Directors as a group (3 persons)                                                                                                                                        | 235,842                                                                                                                                                                 | 5.1%               
|                                                                                                                                                                                     |                                                                                                                                                                         |                    

(1)	Based on 6,864,235 shares of common stock outstanding.

(2)	Buccaneer Holdings Ltd.'s beneficial owners are Walter Brown, Al Brown, Berta Tillman,

Alfonso Sevasey, Renegade Recreational Rentals, Inc., Dorothy Vasquez, Rupert Flowers,

Gerald Jones and Yvette Burks.

(3) Ocean Exploration Ltd.'s beneficial owner is James Tippe

CHANGES OF CONTROL

Management is in the process of seeking a viable project or a company with which to complete an acquisition or a merger. Until a project or suitable company can be identified, Capital Reserve has only limited sources of income. There is no guaranty that management will be able to locate any such project or company. If Capital Reserve is able to find a suitable project or acquisition candidate, any such project or acquisition will most likely result in Capital Reserve having to issue a substantial amount of stock to consummate the transaction.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As of April 24, 2000, Capital Reserve entered into a Consulting Agreement with its President and a member of its Board of Directors, Mr. W. Scott Lawler, pursuant to which Mr. Lawler agreed to relocate to Calgary, Alberta, Canada, to work at Capital Reserve's facilities in Calgary and devote more substantial time to the operations of Capital Reserve. The term of the Consulting Agreement is 2 years, with an option on Mr. Lawler's part to extend for 1 additional year. Mr. Lawler will receive an annual salary of $75,000.00, plus stock options (at terms yet to be determined) and automatic annual salary increases of 15%. As a further inducement to Mr. Lawler to move to Calgary on Capital Reserve's behalf, Capital Reserve purchased a home for Mr. Lawler's personal use.

The purchase price of the home was $541,241. Capital Reserve assumed a variable interest rate mortgage from Alberta Treasury Branch in the amount of $384,554 amortized over 25 years. On May 1, 2005, the loan can either be repaid or renewed with the interest rate converted to the then prevailing rate. The monthly payments of principal and interest are $2,636, which Mr. Lawler is obligated to make, along with all payments for property taxes, property insurance and maintenance. Title to such property is in the name of Capital Reserve. Mr. Lawler provided funds to Capital Reserve in the amount of $167,842 to pay for the down payment and all closing costs associated with the purchase. The funds were provided in the form of a subscription for shares of Capital Reserve's common stock at the purchase price of $1.00 per share. The shares were issued pursuant to the exemption from registration found in Rule 506 promulgated by the SEC under the Securities Act of 1933. The net proceeds to Capital Reserve realized from this offering was $167,842, as this offering was made without the use of any agent or salesman and was conducted without any costs, commissions or finders' fees. If Mr. Lawler's Consulting Agreement expires or is terminated, Mr. Lawler will have the option to purchase the property by assuming the mortgage and returning to the Company 167,842 shares of its Class A Common Stock. Such purchase must be completed within 120 days of termination of the Consulting Agreement. If Mr. Lawler does not exercise his option to purchase the property, the Company will be obligated for the mortgage payments and other costs associated with this property.

If and when the property is sold, Capital Reserve will receive any and all gains (and/or losses) from such sale, less the cost of any pre-approved improvements to the property paid for by Mr. Lawler. However, Mr. Lawler has the option of acquiring title to the property (and thus all resulting gains or losses) by: (a) assuming or paying off Capital Reserve's mortgage; and (b) surrendering to Capital Reserve the 167,842 shares of common stock obtained from Capital Reserve in a private placement.

447017 B.C. Ltd., a private British Columbia corporation, earns a monthly consulting fee of $2,500 from Capital Reserve Canada Limited. Mr. James F. Marsh, President of Capital Reserve Canada Limited, is the beneficial owner of 447017 B.C. Ltd.



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)	Exhibits:

|REGULATION S-B NUMBER | EXHIBIT                                                                                                                                                                                                              | REFERENCE                                                                                                                                                              
|--------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1                   | Articles of Incorporation, as amended                                                                                                                                                                                | Incorporated by reference to the Exhibits previously filed with Capital Reserve Corporation's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1990 
|3.2                   | Amended Bylaws                                                                                                                                                                                                       | Incorporated by reference to the Exhibits previously filed with Capital Reserve Corporation's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994 
|10.1                  | Management Agreement with Mr. Loder                                                                                                                                                                                  | Incorporated by reference to the Exhibits previously filed with Capital Reserve Corporation's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998 
|10.2                  | Lease Agreement dated January 15, 2000 by and between Capital Reserve Canada Limited and 319835 Alberta Ltd.                                                                                                         | Incorporated by reference to Exhibit 10.14 previously filed with Capital Reserve Corporation's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999
|10.3                  | Purchase and Sale Agreement dated March 1, 2000 by and between Capital Reserve Canada Limited and Stone Canyon Resources Limited                                                                                     | Incorporated by reference to the Exhibits previously filed with Capital Reserve Corporation's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999 
|10.4                  | Consulting Agreement dated April 24, 2000 by and between Capital Reserve Corporation and W. Scott Lawler                                                                                                             | Filed herewith.                                                                                                                                                        
|99.1                  | Reserve Appraisal and Economic Analysis of the Registrant's interest in the oil and gas prospect located in Chesteremere, Alberta, Canada, effective January 1, 1999.                                                | Hard copy filed under Form SE; electronic copy to be filed within six (6) business days.                                                                               
|99.2                  | Unaudited Financial Statements for the commercial property located at 335-25th Street, S.E., Calgary, Alberta, Canada, for the fiscal year ended December 31, 1999 and the eight month period ended August 31, 2000. | Hard copy filed under Form SE; electronic copy to be filed within six (6) business days.                                                                               

(b) The following reports on Form 8-K were filed during the last quarter of the period covered by this report.

None.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CAPITAL RESERVE CORPORATION

By:/s/ W. Scott Lawler

Name: W. Scott Lawler

Title: President, Principal Executive, Financial and Accounting Officer

Date: April 13, 2001

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated, who constitute the entire board of directors:

|By:/s/ W. Scott Lawler Name: W. Scott Lawler Title: President and Board of Directors
|------------------------------------------------------------------------------------
|Date: April 13, 2001                                                                
|                                                                                    
|By:/s/ Sharon PatmoreName: Sharon Patmore Title: Secretary and Board of Directors   
|Date: April 13, 2001