U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549

FORM 40-F

(Check One)

[   ] Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

[X] Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2007

Commission file number 0-31070

RESIN SYSTEMS INC.

(Exact name of registrant as specified in its charter)

|                                                                                 |                                                                              |                                                                      
|-------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ---------------------------------------------------------------------
|Alberta, Canada(Province or other jurisdiction of incorporation or organization) | 2200(Primary Standard Industrial
Classification Code Number (if applicable)) | Not applicable(I.R.S. Employer
Identification Number (if Applicable))



400, 2421 37th Avenue NE, Calgary, Alberta, Canada, T2E 6Y7
(403) 219-8000(Address and Telephone Number of Registrants Principal Executive Offices)

DL Services Inc.,1420 Fifth Avenue, Suite 3400, Seattle, Washington  98101

(206) 903-5448(Name, Address (Including Zip Code) and Telephone Number 
(Including Area Code) of Agent For Service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

|                    |                                          
|------------------- | -----------------------------------------
|Title of each class | Name of each exchange on which registered

Securities registered or to be registered pursuant to Section 12(g) of the Act. Common Shares.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

For annual reports, indicate by check mark the information filed with this Form:

|                            |                                        
|--------------------------- | ---------------------------------------
|[X] Annual Information Form | [X] Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report: 133,004,494



Indicate by check mark whether the registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the Exchange Act).  If Yes is marked, indicate the file number assigned to the registrant in connection with such rule.

Yes ___   NoX

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

YesX  No_







---





FORM 40-F

Principal Documents

The following documents have been filed as part of this Annual Report on Form 40-F, beginning on the following page:

(a)

Annual Information Form for the fiscal year ended December 31, 2007;

(b)

Managements Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2007; and

(c)

Consolidated Financial Statements for the fiscal year ended December 31, 2007









































---











[rsform40f2007final001.jpg]











RESIN SYSTEMS INC.



ANNUAL INFORMATION FORM

for the year ended December 31, 2007























March 12, 2008







---





TABLE OF CONTENTS



Glossary of Terms

Certain References

Currency

Special Note Regarding Forward-Looking Statements

Corporate Structure

Name, Address and Incorporation

Intercorporate Relationships

General Development Of The Business

Corporate Strategy

Three Year History

Anticipated Changes in the Business

Business of the Corporation

I.

Overview of the Composite Industry

II.

RStandard Utility Poles

Product Advantages

Marketing, Sales and Distribution

Market Barriers and Competition

Manufacturing

III.

RStandard Roller Tubes

Product Advantages

Marketing and Sales

Market Barriers and Competition

Manufacturing and Distribution

IV.

Product Development

Our Version Resin System

Composite Development and Engineering

Commercialization

V.

Raw Material Inputs

VI.

Intellectual Property

Patent Applications and Patents

Trademarks

Confidentiality and Security

Risk Factors

Description of Capital Structure

Common Shares

Preferred Shares

Unsecured Convertible Debentures

Market for Securities

Dividend Record and Policy

Human Resources

Directors and Executive Officers

Name, Occupation and Security Holding

Governance of the Corporation

Audit Committee Information

Composition of the Audit Committee

Audit Committee Charter

Pre-Approval of Policies and Procedures

External Auditor Service Fees

Conflicts of Interest

Legal Proceedings

Interest of Management and Others in Material Transactions

Transfer Agent and Registrar

Material Contracts

Escrowed Securities

Prior Sales

Interests of Experts

Names of Experts

Interests of Experts

Additional Information

SCHEDULE "A"  AUDIT COMMITTEE CHARTER







---





GLOSSARY OF TERMS

In this Annual Information Form, the following terms shall have the following meanings, unless otherwise indicated.

"ABCA" means the Business Corporations Act (Alberta), together with any amendments thereto and all regulations promulgated thereunder;

"Common Shares" means common shares in our capital;

"composites" means a manufacturing or building material made of reinforcing fibre, usually glass fibre, in a polymer matrix. The polymer matrix is typically a thermoset resin, such as polyester, vinyl-ester or epoxy. Thermoplastic resins can also be used to form the polymer matrix of composites. Fillers and additives are often added to the matrix for specific applications. Version resin is an example of a polyurethane thermoset polymer matrix;

"die" means a mould, either open or closed, in or upon which composite material is placed to make a part;

"epoxy" means a class of thermoset resins exhibiting good strength and chemical resistant properties;

"fibreglass" means various forms (i.e., rovings, mats and veils) of chemically treated glass reinforcements used in composites;

"filament winding" means an automated process for fabricating composites in which continuous rovings or tows are either pre-impregnated with resin or drawn through a resin bath and then wound around a rotating mandrel (die). It is the primary method for making "hollow" parts, such as chemical resistant piping, scuba tanks, light standards and our RStandard modular composite utility pole;

"polyester" means a class of thermoset resins which combines alkyd resins with a monomer, such as styrene. Polyester resins are widely used by the composite industry due to their low cost, but do not deliver high end properties or performance;

"polyurethane" means a class of thermoset resins created by reacting disocyanurates with polyols, polyamides, alkyd polymers or polyether polymers. Polyurethanes are best known in the form of sound and heat insulating foams, but can also produce solid matrices, as in composite resins;

"pultrusion" means an automated, continuous process for manufacturing composite rods, tubes and structural shapes having a constant cross section. Roving and/or tows are impregnated with resin and continuously pulled through a temperature controlled die, where the part is formed and cured. The cured part is then cut to length;

"resin" means a reactive blend of chemicals (including epoxy, polyester, urethane and acrylic) that binds to a reinforcing fibre and gives the finished composite product its dimensional shape and mechanical properties;

"RStandard" means the tradename under which we market our modular composite utility poles and composite roller tubes;

"styrene" means primarily a synthetic chemical used to manufacture plastics, rubber and traditional resins. Styrene is a volatile organic compound and classified as a possible human carcinogen by the United States Environmental Protection Agency;

"thermoplastics" means general "household" plastics such as polyethylene and acrylic that may be heated and formed into an object and, unlike thermoset resins, can be reheated and returned to a liquid state. As a result, thermoplastics do not share the high performance characteristics of thermoset resins;

"thermosets" or "thermoset resins" means resins that begin as liquid polymers and are converted to a solid, or "cured", during the moulding process. This chemical process, known as "cross linking", is irreversible resulting in composite materials with increased heat and chemical resistance, higher physical properties and greater structural durability than thermoplastics;

"urethane" means any one of a myriad of compounds known for their abrasion and impact resistance (see "polyurethane" above);

"U.S." or "United States" means the United States of America;

"Version" means the registered trademark in Canada, the United States, Australia, South Korea and Europe for our resin system;

"VRoll" means the former tradename of our composite roller tubes used in roller assemblies for material handling equipment in industrial sectors.

CERTAIN REFERENCES

References in this Annual Information Form to "RS, "Corporation", "us", "we" or "our" mean Resin Systems Inc., a corporation existing under the laws of the Province of Alberta, and its subsidiaries, unless otherwise specified or the context otherwise requires. Certain terms used herein are defined in "Glossary of Terms". Unless otherwise indicated, all of our historical financial information has been presented in Canadian dollars in accordance with Canadian generally applied accounting principles.

Our website is located at www.grouprsi.com, the content of which is expressly not incorporated by reference into this Annual Information Form.

Our trademark VersionTM has been registered in Canada, the United States, Australia, South Korea and with the European Community Trademarks Office. RStandardTM is registered in Canada, South Korea and the European Community Trademarks Office, with applicationspending in various other countries. RSTM has been registered in Canada, with applicationspending in various other countries. Our trademarks  Stronger, Lighter, GreenerTM, RS Innovators in CompositesTM and Innovators in CompositesTM have been registered in Canada. Our trademark VRollTM is registered in South Korea and Australia.

CURRENCY

Unless otherwise indicated, references herein to "$" or "dollars" are to Canadian dollars. All references to "US$" refer to United States dollars.







---





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Information Form contains forward-looking statements. In some cases, you can identify forward looking statements by words such as "anticipate", "believe", "plan", "estimate", "expect", "predict", "intend", "will", "may", "could", "would", "should" and similar expressions intended to identify forward-looking statements. These forward-looking statements are not historical facts but reflect our current views and expectations concerning future results and events. These include statements regarding:

·

our business goals and strategy;

·

our and our distribution partners in North America, and international expansion plans;

·

our and our distribution partners' competitive positioning;

·

our and our distribution partners' marketing plans;

·

the size of the markets for our products or of third party products incorporating our products;

·

the market acceptance of our products or of third party products incorporating our products;

·

applications of and markets for our products or of third party products incorporating our products;

·

the benefits of our products or of third party products incorporating our products;

·

production rates of our products;

·

the scheduled timing of shipments and delivery of our products or of third party products incorporating our products;

·

the timing and cost of constructing new production cells for our RStandard utility pole product line;

·

the technical and production expertise of our personnel or of our manufacturing partners' personnel;

·

the timing of the engineering/design and testing of our new products or of third party products incorporating our products;

·

the timing of introduction and viability of our new products or of third party new products incorporating our products being contemplated;

·

our ability and our manufacturing partners' ability to produce products efficiently and economically;

·

our ability and our distribution partners' ability to market and distribute products efficiently and economically;

·

our ability to license our RStandard technologies to international companies;

·

the ability of our international licensees to sell our RStandard products in their territory;

·

our ability to continue as a going concern for the next twelve months;

·

the sufficiency of our resources to fund operations;

·

our ability to raise capital;

·

our future operating costs and our development, marketing and discretionary expenditures; and

·

the prices of raw material components of our products.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other suggestions of future performance contained in this Annual Information Form. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward looking statements. These factors include, but are not limited to, the following:

·

our lack of revenues and unpredictability of future revenues;

·

the uncertainty of profitability of existing and contemplated products;

·

our future capital requirements;

·

our future labour requirements;

·

competition from established competitors with greater resources;

·

the uncertainty of developing a market for our products or for third party products incorporating our products;

·

our reliance on third parties to supply raw materials to us so that we may make our Version resin and RStandard roller tubes;

·

our reliance on third parties to manufacture and sell our RStandard products and to manufacture and sell a line of rollers based on our RStandard composite roller tubes;

·

our reliance on third party licensees in international markets;

·

the risks associated with rapidly changing technology;

·

intellectual property risks;

·

risks associated with international operations; and

·

the other risks and uncertainties as are more fully described under "Risk Factors" in this Annual Information Form.

The risk factors described in this Annual Information Form are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in our forward-looking statements. These risks should be carefully considered and readers should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date of this Annual Information Form and, except as provided by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of an unanticipated event.

You should rely only on the information contained in this Annual Information Form and then only to the extent qualified by the risk factors and other qualifiers contained herein. We have not authorized anyone to provide you with information different from that contained in this Annual Information Form.







---





CORPORATE STRUCTURE

Name, Address and Incorporation

Resin Systems Inc.

Head Office

Registered Office

Suite 400, 2421  37th Avenue N.E.

Suite 1400, 350  7th Avenue S.W.

Calgary, Alberta  T2E 6Y7

Calgary, Alberta  T2P 3N9

We were incorporated on July 26, 1995 as Recycled Solutions for Industry Inc. under the ABCA and, effective September 15, 1998, we completed a reverse takeover of Summerwood Industries Inc. ("Summerwood"), which was incorporated on June 11, 1996 under the ABCA. By articles of amalgamation dated September 17, 1998, Summerwood amalgamated with us to form Recycled Solutions for Industry Inc. By articles of amendment dated May 5, 2000, we changed our name from Recycled Solutions for Industry Inc. to Resin Systems Inc.

Intercorporate Relationships

We have one material wholly-owned subsidiary, Resin Systems International Ltd. ("Resin International"), which was formed pursuant to the laws of Barbados. Pursuant to a technology transfer agreement dated effective January 6, 2003 (the "Technology Transfer Agreement") between us and Resin International, we transferred our exclusive intellectual property rights outside of North America in our Version resin system and our filament winding technology (the "Technologies") to Resin International. Pursuant to a related cost sharing agreement (the "Cost Sharing Agreement") between us and Resin International, we established a plan for the development, improvement and marketing for the Technologies and the sharing of the associated costs, risks and benefits of these activities. We expect that RS International will sell and distribute the Technologies outside of Canada and the United States through direct sales, licensing and joint venture arrangements.

In addition, we own approximately one-half of "Bazalt Inwestycje" Sp. z o.o., a Polish company ("Bazalt"), which will undertake the research and development of composite input materials and pursue market opportunities in the European Union and adjacent former eastern bloc countries. See "Legal Proceedings".

GENERAL DEVELOPMENT OF THE BUSINESS

Corporate Strategy

RS is a technology innovator that develops advanced, composite products for infrastructure markets. This new generation of products is not only structurally superior to products made with old world materials such as wood, steel and concrete, its also lighter, more durable and longer-lasting. The company has entered the North American market with modular utility poles and conveyor roller tubes as its two flagship products, and continues to identify a growing list of additional innovative products.

RS designs, engineers and markets its products worldwide, while outsourcing its manufacturing and product distribution.

Our business model to capitalize on load bearing composite products, which we develop for large-scale infrastructure markets, is comprised of the following stages:

(i)

Product Screening screening new product opportunities that have large and addressable markets with uniform requirements globally and where the benefits of our proprietary materials and processes provide significant economic and performance advantages compared to conventional materials;

(ii)

Product Development product engineering and development, and prototyping and testing;

(iii)

Market Entrypartnering with strategic third party distributors to introduce the product to market, raise customer awareness and distribute the product for customer pilot projects and initial orders. During this stage, we will produce the product in small quantities and refine and test the product to meet the market's needs; and

(iv)

Market Penetration engaging experienced third party manufacturers to meet growing customer demand. During this stage, we will supply manufacturing partners with our Version resin, oversee production and quality control and collaborate with distribution partners to provide technical product support and drive market demand for the product.







---







Our competitive advantage is our Version resin system and our composite development and engineering expertise. We create load bearing composite products using our proprietary materials and skills that deliver significant competitive advantages to our customers.

We focus on products that have large and addressable markets with uniform requirements globally and where the benefits of our proprietary materials provide significant economic and performance advantages compared to conventional materials. By developing these products, we believe we can achieve significant revenue growth and superior returns without significant capital and resource requirements. In addition, because our business model is based on partnering with experienced and established manufacturing and distribution partners, we believe we can achieve market penetration faster because we benefit from our partners' established infrastructure, resources, reputations and expertise.

Currently, our primary business focus is commercializing our first two products for which we have completed the product development stage:

(i)

our RStandard utility pole is a light and durable modular pole that satisfies the most common heights and strengths of transmission and distribution pole needs of power utilities. The product is in the market penetration stage of our business plan. See "Business of the Corporation  II. RStandard Utility Poles"; and

(ii)

our RStandard composite roller tube is a light and durable large-diameter tube used in roller assemblies for industrial bulk material handling equipment. The product is in the market entry stage of our business plan. See "Business of the Corporation  III. RStandard Composite Roller Tubes".

In addition to our 2008 business focus which will concentrate on capitalizing on our two current composite products, we will continue to seek, develop and commercialize new product applications using our proprietary materials and our composite engineering expertise. See "Business of the Corporation  IV. Product Development".

Three Year History

Our focus during the period from 2005 through 2007 has primarily been on taking our RStandard utility pole business line from product development to market penetration. Since 2005, we have also been working on the product development of our second product, RStandard composite roller tubes.

RStandard Utility Poles

The following is a summary of the development of our RStandard utility pole business from 2005 through 2008:

·

in February 2005, we raised gross proceeds of $10 million through a private placement of 8.7 million units comprised of Common Shares and warrants. The proceeds from this financing were used to fund our start-up activities;

·

in 2006, we designed and engineered a modular composite utility pole manufacturing facility in Calgary, engaging McClean Anderson ("McClean Anderson") of Wisconsin, United States to build our first two production cells and we expended significant resources commissioning and refining our production capability for our RStandard utility pole product line. See "Legal Proceedings";

·

we started receiving international interest in our composite utility structures which led to two initial agreements based on our licensing model for the territories of Australia and New Zealand, and China. See "Business of the Corporation  II. RStandard Utility Poles  International Markets";

·

in October 2005, to provide working and plant capital for our RStandard utility pole business, we completed a private placement of $25 million principal amount of unsecured convertible debentures due October 7, 2010 and bearing interest at 8.5% per annum payable semi-annually. See "Description of Capital Structure  Unsecured Convertible Debentures";







---







·

in 2005, we received $8.9 million from the exercise of warrants outstanding from previous financings, which proceeds were used to fund RStandard pole production equipment, the commercialization and further development of our Version resins and related products, and for general working capital purposes;

·

throughout 2005 and 2006, we initiated pilot projects and initial orders with targeted utility customers. By the end of 2006, our global customer base consisted of 72 customers, of which 14 had made repeat orders;

·

in June 2006, in order to fund order fulfillment of RStandard poles and general working capital, we completed a private placement of 5.6 million units comprised of Common Shares and warrants raising gross proceeds of $9.8 million;

·

in November 2006, we generated gross proceeds of $5 million through the private placement of 3.4 million Common Shares;

·

in January 2007, we entered into a distribution agreement (the "Distribution Agreement") with HD Supply Utilities, Ltd. ("HD Supply Utilities"), pursuant to which we appointed HD Supply Utilities as our exclusive distributor for our RStandard transmission and distribution poles in Canada, the United States, Mexico, Bermuda, the Bahamas and all of the Caribbean islands. Pursuant to the Distribution Agreement, HD Supply Utilities provided us with an initial purchase order for RStandard poles with a value exceeding US$50 million. See "Business of the Corporation  II. RStandard Utility Poles  Marketing, Sales and Distribution";

·

in January 2007, we entered into a binding letter of intent with Global Composite Manufacturing Inc. ("Global"), a corporation operating in Tilbury, Ontario, which provided the framework whereby Global moved, upgraded and re-commissioned our existing RStandard utility pole manufacturing equipment as well as related additions for use in Global's production of our RStandard utility pole product under license. See "Business of the Corporation  II. RStandard Utility Poles  Manufacturing";

·

in the second half of 2006 and the early part of 2007, we restructured our operations and resource levels to improve efficiencies. The transfer of RStandard utility pole manufacturing to Global, the consolidation of operations to one facility, and the streamlining of corporate administration and associated resource reductions reduced finished product costs and is expected to increase gross margins. In addition, it saved us approximately $3.8 million per quarter compared to 2006 expenditures;

·

in January 2007, we completed a private placement of 5,000 units raising gross proceeds of $5 million. This issuance was comprised of $5 million principal amount of unsecured promissory notes and warrants, and the proceeds were used to fund general working capital;

·

in March 2007, we raised proceeds of $31.3million through a private placement of 31.2 million Common Shares, which proceeds funded the repayment of $1.4 million of our unsecured promissory notes issued January 12, 2007, the restructuring costs related to the relocation of our RStandard manufacturing to the facilities of Global in Tilbury, Ontario, the start-up costs and capital expenditures required to start manufacturing our RStandard roller tubes and for general working capital purposes. In addition, we issued 3.7 million Common Shares to holders of $3.6 million of our unsecured promissory notes issued January 12, 2007 at a deemed price of $1.00 per share pursuant to such holders' rights to participate in the private placement;

·

in August 2007, we entered an amended and restated manufacturing and licensing agreement with Global reflecting substantially the same conditions as outlined in the letter of intent signed in January 2007;

·

in August 2007, commercial production of RStandard utility poles started at the Global facility in Tilbury;

·

in September 2007, commercial shipments of RStandard utility poles resumed. Shipments through the remainder of 2007 were delivered to utilities within Canada, the United States and Australia; and

·

in January 2008, Global completed its $6.1 million financing in connection with the manufacturing and license agreement between Global and our company. We provided guarantees to the lenders in this financing, with $2.1 million on a limited recourse basis collateralized by the RStandardTM utility pole manufacturing equipment, and $4.0 million on a full recourse basis. The guarantees would be called upon if Global fails to perform under its obligations to its lenders.







---







RStandard Roller Tubes 
(formerly VRoll Roller Tubes)

The following is a summary of the development of our RStandard roller tube business from its inception in 2005 through 2008:

·

in early 2005, we began development of various composite tubular applications, including the application that later became known as RStandard roller tube;

·

in August 2005, Bazalt received a three-year purchase order from a domestic European Union mining conglomerate to supply approximately US$45 million of industrial conveyor rollers once the rollers were developed by us and accepted by the customer. We do not anticipate that we will be delivering any conveyor rollers under this order in the near-term as we are in litigation with Bazalt in Poland. See "Legal Proceedings";

·

during 2006, we engineered, prototyped and tested the RStandard roller tube. We completed the product development stage in late 2006;

·

in December 2006, we entered into a multi-year exclusive supply agreement with FMC Technologies, Inc. ("FMC Technologies") of Houston, Texas, a leading manufacturer and distributor of material handling systems and conveyor rollers to the mining industry and operators of bulk material handling systems worldwide. Pursuant to the agreement, we are to supply our RStandard roller tubes to FMC Technologies's Material Handling Solutions business for use in their new line of composite Link-Belt® Conveyor Idler Rolls. The agreement provides that we work with FMC Technologies exclusively in the area of composite conveyor rollers globally, except for the territories of Poland and Australia. See "Business of the Corporation  III. RStandard Roller Tubes";

·

during the last half of 2007 and the first quarter of 2008, we, along with FMC Technologies, pursued customer-paid pilot sites for Link-Belt® composite conveyor idler rolls made with our RStandard roller tubes. Over twenty pilot sites were identified and deliveries of Link-Belt® composite conveyor idler rolls made with our RStandard roller tubes to the pilot sites started; and

·

during the third quarter of 2007, we made our first commercial shipment of RStandard roller tubes; and

·

during the first quarter of 2008, we expanded our manufacturing capacity with the installation of a high tonnage pultruder, increasing our roller tube manufacturing capability, allowing us to pultrude single-piece utility poles and enhancing our ability to continue our research and development of new products.



Anticipated Changes in the Business

RStandard Utility Poles

We can supply the most common transmission and distribution poles required by North American utilities with our market tested RStandard product line. With our Distribution Agreement with HD Supply Utilities and our contract manufacturing agreement with Global, we believe that we are now in a position to more aggressively penetrate the North American market with our RStandard utility poles.

Our goal in 2008 will be to achieve the following important milestones for our RStandard utility pole business line:

·

continue North American market penetration for RStandard poles, working with HD Supply Utilities pursuant to the Distribution Agreement, by adding key North American customers and increasing the number of repeat orders from existing customers;

·

continue to develop the RStandard product line based on the needs and experiences of utility customers;

·

support and oversee the operation of the first cell of the RStandard utility pole manufacturing equipment by Global;

·

support and oversee the upgrade, recommissioning and operation of the second cell of the RStandard utility pole manufacturing equipment by Global;

·

support and oversee the engineering, construction, commissioning and operation of additional production cells to meet the growing market demand for our RStandard utility poles; and

·

develop and commercialize additional products in our RStandard utility pole product line, including pultruded utility poles up to 12 metres (40 feet), and pultruded crossarms and pultruded crossbraces for H-frame structures. The new pultruded utility poles will allow us to compete more effectively in the distribution pole market and the crossarms and crossbraces will allow our modular poles to be used in H-frame structures opening a significant segment of the market for our company.

We believe we are positioned to acquire a significant market share of utility pole sales because our competitively priced RStandard poles provide significant competitive advantages for utility customers compared to conventional wood, steel and concrete poles.







---







RStandard Roller Tubes

We expect to be in a position to manufacture and supply our RStandard roller tubes in sufficient quantities to FMC Technologies for use in its new line of composite Link-Belt Conveyor Idler Rolls to support the introduction of the product to the mining industry and operators of bulk material handling systems.

Our goal in 2008 will be to achieve the following important milestones for our RStandard roller tube business line:

·

support FMC Technologies as it continues to introduce its composite Link-Belt Conveyor Idler Rolls to its strategic customers, continues to identify and deliver product to paid-for pilot projects, supply repeat customers and initiate full market launch of the product;

·

manufacture initial quantities of RStandard tubes required by FMC Technologies during the market entry stage of its Link-Belt Conveyor Idler Rolls;

·

continue to develop our RStandard roller tubes based on the needs and experiences of customers;

·

enter into licenses with experienced third parties, as required, to manufacture greater quantities of our RStandard roller tubes to position us to meet growing customer demand; and



·

expand the RStandard roller tube product line by adding larger diameter tubes made by the new high-tonnage pultruder.



We believe that FMC Technologies's composite Link-Belt Conveyor Idler Rolls which utilize our RStandard roller tubes will be successfully introduced to the market because of the significant competitive advantages that bulk material handling equipment customers will derive from the product compared to conventional steel rollers.

BUSINESS OF THE CORPORATION

I.

OVERVIEW OF THE COMPOSITE INDUSTRY

Our Version resin system and our composite development and engineering expertise are the foundations of our business because they provide us with important competitive advantages in both traditional composite applications and new applications not possible with other composites. See "Business of the Corporation  IV. Product Development".

What is a Composite?

Composites are a reinforcing fibre held in a polymer matrix. Most commonly, the reinforcing fibre is fibreglass, however carbon fibre and aramid fibres are becoming more common in high performance applications. The polymer matrix is typically a thermoset resin with polyester and epoxy resins as the most common matrix of choice.

Common household plastics, such as polyethylene, acrylic and polystyrene are non-reinforced thermoplastics. These materials may be heated and formed, and can be re-heated and returned to a liquid state. Composites typically use thermoset resins, which begin as liquid polymers and are converted to solids during moulding. This process, known as cross linking, is irreversible giving composite materials manufactured using thermoset resins increased heat and chemical resistance, higher physical properties and greater structural durability than thermoplastics.

Use of Composites

Manufacturers, designers and engineers recognize the ability of composite materials to produce high-quality durable cost-effective products. Composite materials are found in many products used in our day-to-day lives from the cars, boats and recreational vehicles we drive to the skis and golf clubs we use. Additionally, composites are used in many critical industrial, aerospace and military applications.







---







Benefits of Composites

The benefits of composite materials have fuelled growth of new applications in markets such as transportation, construction, infrastructure, electrical, aircraft and aerospace. The benefits of using composite materials include:

·

High Strength and Design Flexibility  Composite materials can be designed to meet the specific strength requirements of an application and can be moulded into complex shapes at relatively low cost. This flexibility offers designers extensive latitude in new product design. A distinct advantage of composites over other materials is the ability to use many combinations of resins and reinforcements, and custom tailor the mechanical and physical properties of a structure.

·

Lightweight  Composites offer materials that can be designed for both lightweight and high strength usage. Composites are used to produce the highest strength-to-weight ratio structures currently available. We believe that as energy efficiency requirements increase, material technologies that reduce weight and at the same time increase performance, will be increasingly embraced.

·

Corrosion Resistance and Durability  Composites provide long-term resistance to severe chemical and temperature environments. Composites are the material of choice for outdoor exposure, chemical handling applications and severe environment conditions. Coupled with low maintenance requirements, the longevity of composites is a benefit when used in critical applications. In a half-century of composites development, well designed composite structures have yet to wear-out.

II

RSTANDARD UTILITY POLES

We have commercialized our proprietary RStandard modular composite transmission and distribution pole product line based on the following proprietary elements:

·

composite inputs including our Version resin enable production of larger and lighter poles than any other composite material and allows us to compete effectively with conventional poles;

·

the modular design of our RStandard poles is our proprietary design that provides inventory, transportation and handling advantages; and

·

the production equipment and process is unique to us and provides us with pricing advantages which should increase market share.



Our RStandard utility pole product line consists of transmission and distribution poles up to heights of 36.58 metres (120 feet)  and most importantly, all strength classifications required by the market. We continue to develop and modify our product line to address market needs.

Product Advantages

Our RStandard product line has significant advantages which we believe enables us to compete effectively with well-entrenched wood, steel and concrete transmission and distribution poles. These advantages include:

·

low total logistics cost:  our RStandard poles have a low total logistics cost due primarily to:

-

modularity:  our RStandard poles' modular design has many benefits over traditional poles including:

o

eight modules assemble into almost any pole size and class up to 36.58 metres (120 feet) allowing utilities to inventory a series of modules that make a range of poles instead of each individual pole size and class. This enables utility customers to have a wide selection of poles in inventory, important in emergency situations, reducing inventory costs by approximately 40 to 70 percent;

o

modules nest inside each other, for transportation and storage, making 5.79 metre (19 foot) and 11.28 metre (37 foot) bundles. This allows more poles to be shipped per shipment and more poles to be stored per storage area compared to traditional poles; and

o

short modules increase the ease of transporting, handling and installing RStandard poles;

-

lightweight:  our RStandard poles have a high strength-to-weight ratio making them the lightest pole on the market. Benefits include:

o

easier and safer to handle and install;

o

lower transportation and installation costs; and

o

utilities can use smaller equipment and fewer employees to install the poles; and

-

RStandard poles can take less time to install than traditional poles.







---









·

low total liability costs:  our RStandard poles have a low total liability resulting primarily from:

-

increased safety:

o

non-conductive;

o

light  allowing RStandard poles to be handled, transported and installed in a safer manner; reducing the risk of injury; and

o

toxic chemicals are not used to extend the life of the pole, eliminating the risk of exposure these chemicals pose to utility workers and the public;

-

self-extinguishing;

-

prevents pole fires arching due to lightening strikes, tracking and animal contact;

-

environmentally friendly:  our RStandard poles are environmentally friendlier than traditional poles because:

o

volatile organic compounds or hazardous airborne pollutants are not emitted during manufacturing;

o

they do not require the toxic chemical treatments other poles require for protection or to extend their life;

o

their longer service life results in fewer replacements and less waste;

o

non-leaching; and

o

they are not considered hazardous waste at the end of their service life;

-

engineered product allows for a:

o

predictable life; and

o

structural reliability;

-

minimal maintenance;

-

ensure quick service restoration:

o

the ability to build a variety of pole lengths and classes from just eight modules gives utilities a faster deployment time for emergency outages because it ensures the utility will have the pole it needs in inventory;

o

the light and short modules simplify transportation to inaccessible locations; and

o

RStandard poles can withstand storm conditions better than other poles due to their strength and flexibility.



·

long life: our RStandard poles have a longer life than traditional poles because unlike some traditional poles they are:

-

corrosion-resistant;

-

immune to rot and pests; and

-

UV-resistant  UV protection is built into the RStandard pole wall, the UV protection cannot be scratch or chipped off.



·

low life cycle costs:  our RStandard poles have a low life cycle cost resulting from the:

-

low total logistic costs;

-

low liability costs; and

-

long life.







Marketing, Sales and Distribution

Our market tested RStandard utility pole product line is fully commercialized and is in the market penetration stage of our business model. This product line was targeted as the first for commercial development for various reasons, including:

·

the market for transmission and distribution poles is a large and homogeneous global market;

·

market demand for utility poles is stable and driven by well understood factors;

·

competition for and scarcity of materials for competing utility structures is increasing their cost;

·

increased environmental pressure in many jurisdictions to restrict the use of pole treatments is a challenge for wood and steel structures; and

·

utility customers are financially stable and their small number simplifies the market introduction for a new pole product.



The global utility pole market is extensive. In North America alone, the value for replacement and new pole demand is in excess of US$8 billion per year. This market consists of replacing existing poles at an annual rate of three percent and adding new poles at a rate of two percent. The remaining global market is significantly larger and growing at a much faster rate in emerging regions such as Asia and former Eastern-bloc countries.







---







Domestic Markets

Through the Distribution Agreement with HD Supply Utilities, we will continue our efforts to penetrate the top buyers/users of utility poles in North America which have historically accounted for 80 percent of total North American market purchases of 500,000 transmission poles per year.

Distribution Agreement with HD Supply Utilities

We entered into the Distribution Agreement with HD Supply Utilities dated effective January 26, 2007, pursuant to which we appointed HD Supply Utilities as our exclusive distributor for our RStandard transmission and distribution poles in Canada, the United States, Mexico, Bermuda, the Bahamas and all of the Caribbean islands (the "Territory"). The Distribution Agreement has an initial term of five years and is automatically renewed for additional terms of five years unless terminated in accordance with the provisions of the agreement. Starting July 1, 2009, the continued exclusivity of the Distribution Agreement is contingent on HD Supply Utilities maintaining certain minimum purchase commitments.

Duties of the Corporation and HD Supply Utilities

Pursuant to the Distribution Agreement, we agreed to perform the following duties:

·

support HD Supply Utilities distributor obligations by providing reasonable product sales, marketing and technical support during HD Supply Utilities staff training and product introduction;

·

provide ongoing technical support for RStandard transmission and distribution poles; and

·

introduce and train HD Supply Utilities personnel on the product line.



HD Supply Utilities, in its role as exclusive distributor of the RStandard transmission and distribution poles in the Territory, agreed to perform the following duties pursuant to Distribution Agreement:

·

make HD Supply Utilities sales resources available for introduction and training on the product line;

·

invest adequate resources to achieve rapid and significant market penetration of the products within the Territory; and

·

diligently lead the development of a marketing plan for the products with the assistance of our personnel.



Initial Purchase Order

Pursuant to the Distribution Agreement, HD Supply Utilities provided us with an initial purchase order for monthly RStandard transmission and distribution pole purchases and deliveries. This initial purchase order has an aggregate value exceeding US$50 million starting in June 2007 and ending in June 2009 provided that with our written consent, HD Supply Utilities may reschedule such product deliveries over a longer period if the parties believe that business conditions warrant a slower delivery schedule. As a result of delays by Global in reaching expected production levels needed, we and HD Supply Utilities have informally agreed to reschedule shipments under the Distribution Agreement.

Pricing for the products shall be as agreed to by our company and HD Supply Utilities in the Distribution Agreement and adjusted only for changes in our costs for raw materials, with any such adjustment to be fixed for six month periods in advance.

Actions Required By Our Company

Pursuant to the Distribution Agreement, we were required to take the following actions in order to meet our obligations under the Distribution Agreement and under the initial purchase order:

(a)

design, engineer and implement manufacturing equipment and process improvements as previously identified by us to HD Supply Utilities  completed;

(b)

design, engineer and test product accessories, attachments and improvements, as previously identified by us to HD Supply Utilities  ongoing;

(c)

relocate our manufacturing facilities, equipment, process and technology to Ontario to achieve better access to skilled manufacturing labour and to be closer to customers within the Territory  completed; and

(d)

commission the improved manufacturing facility and start manufacturing in June 2007 and provide minimum shipments in accordance with the shipping schedule agreed to by the parties. Due to recommissioning delays, Global Manufacturing started manufacturing in August 2007. These delays have been accepted by HD Supply Utilities.







---







International Markets

Our international marketing strategy is based on licensing our RStandard utility pole technology to third parties selected for their presence and capability in targeted regional markets. The essence of our licensing model is as follows:

·

licensees are granted exclusive marketing rights for our RStandard utility pole products in their territory up to a pre-defined product volume. The issuance of additional licenses for a territory will follow a protocol designed to protect both parties' interests;

·

initially, we will support local market penetration by supplying our licensee with RStandard utility pole products manufactured by us or a manufacturing partner; the amount of time for this initial market penetration will vary depending on the local market size and conditions;

·

once adequate local market penetration has been achieved, a local manufacturing facility will be constructed; and

·

from the time local production has been established, in addition to a return on our invested capital, we will earn royalties on the licensee's sales.



In 2005, we entered into two initial agreements with companies in respect of the territories of Australia and New Zealand, and China. During 2006, we worked with our partners in these territories to introduce our RStandard utility poles to the market. However, such activities were hampered by production difficulties encountered at our Calgary production facilities. During 2007, we did not expend a significant amount of our resources in these international markets as our primary business focus with respect to our RStandard utility pole product was to collaborate with HD Supply Utilities to achieve market penetration in the Territory. As our market penetration increases in North America we will increase our focus internationally.

Market Barriers and Competition

Transmission and distribution poles have traditionally been constructed from soft-wood timber, steel and concrete. Companies supplying concrete, steel and wood poles are generally financially strong well-known companies in the utility market and have established sales channels and proven products.

In North America, we expect that our RStandard modular utility poles will be most competitive with wood and steel in mono-pole and H-frame transmission applications. With the introduction of the single-piece RStandard pultruded utility pole, we expect to effectively compete at the low distribution pole heights, currently dominated by wood poles.

New entrants must overcome both their competitors' entrenched positions and their targeted customers' reluctance to change. We believe that our distributor in the Territory, HD Supply Utilities, will be successful in overcoming these obstacles due to the significant competitive advantages of our RStandard utility poles. These competitive advantages include its low life cycle costs, environmental friendliness, and its lightweight and modularity. See "Product Advantages".

Manufacturing

We are party to an amended and restated manufacturing and licensing agreement dated as of August 15, 2007 (the "Manufacturing and Licensing Agreement") with Global, a corporation operating in Tilbury, Ontario. The Manufacturing and Licensing Agreement provides the framework whereby Global moved our existing RStandard utility pole manufacturing equipment, and upgraded and re-commissioned the first production cell and provides the framework to upgrade and re-commission the existing second production cell as well as related additions for use in Global's production of our RStandard utility pole product under license with us and use its unique manufacturing skills in advance materials, processes, systems and related physical and intellectual infrastructure to support the efficient manufacture of our utility poles. Pursuant to the Manufacturing and Licensing Agreement, we have advanced $3.5 million to Global to be repaid through product deliveries and/or cash. In addition, in order to facilitate the completion of Global's $6.1 million debt financing pursuant to the agreement, we have provided a $4.0 million guarantee on a full recourse basis to Global's lenders and a $2.1 million limited recourse guarantee to Global's lenders, which guarantee is collateralized with the RStandard utility pole manufacturing equipment and related additions. Our benefits from this manufacturing arrangement include:

·

access to Global's extensive equipment design, automation and manufacturing experience, including direct experience in composites manufacturing;

·

reduction of our exposure to production-related risk, and capital and operating expenditures; and

·

access to the larger manufacturing labour force in southern Ontario reducing our dependency on the limited Alberta labour market.







---









The Manufacturing and Licensing Agreement provides:

(a)

the license and lease of our RStandard technology and equipment (the "License/Lease") to Global;

(b)

a purchase order whereby we supply resin required by Global to meet its contract manufacturing obligations on an exclusive and ongoing basis at a prescribed price on our standard terms and conditions;

(c)

we purchase from Global, and it manufactures for us in southwest Ontario, a minimum quantity of finished RStandard poles in the timelines and for the prices agreed to by us and Global; and

(d)

during the term of the Manufacturing and Licensing Agreement we will provide reasonable technical support to Global for the upgrade and re-commissioning of the manufacturing equipment;

(e)

Global is granted its exclusive manufacturer in North America for 14 million kilograms of utility poles to be manufactured in such quantities and volumes and at such times as set forth in the Manufacturing and Licensing Agreement;

(f)

we will establish quality control requirements to be followed by Global in the production of all of our RStandard poles;

(g)

we will retain at all times our intellectual property rights to all RStandard utility pole products and Global agrees to use its best efforts to protect all of our intellectual property rights and the reputation of our RStandard utility pole product line; and

(h)

Global will be bound by conditions of non-competition and confidentiality in order to protect our interests.



The Manufacturing and Licensing Agreement provides that the definitive purchase orders will include the terms and conditions customarily included in such agreements, including the following:

(a)

we will supply resin required by Global to meet its contract manufacturing obligations on an exclusive and ongoing basis at a prescribed price on our standard terms and conditions. Any change in prices for resin will be directly passed through in the finished price contemplated;

(b)

we will purchase from Global, and it will manufacture for us, finished RStandard poles in such quantities and volumes, and at pricing as reflected in the Manufacturing and Licensing Agreement, subject to acceleration of such volumes of utility poles which may be requested by our company in our sole and absolute discretion;

(c)

in the event that the Purchase Order is extended, provisions will be made for inflation on non-material costs.

III

RSTANDARD ROLLER TUBES

We have completed the product development phase of our RStandard large-diameter roller tube made using our proprietary Version resin system. We entered into a multi-year exclusive supply agreement (the "Supply Agreement") dated effective December 18, 2006 with FMC Technologies of Houston, Texas, a leading manufacturer and distributor of material handling systems and conveyor idler rolls to the mining industry and operators of bulk material handling systems worldwide. Pursuant to the Supply Agreement, we will supply our RStandard roller tubes to FMC Technologies's Material Handling Solutions business for use in their new line of composite Link-Belt Composite Conveyor Idler Rolls. The agreement provides that we will work with FMC Technologies exclusively in the area of composite conveyor rollers globally, except for the territories of Poland and Australia. During 2007, we worked with FMC Technologies to introduce to market their Link-Belt Composite Conveyor Idler Rolls made with our RStandard tubes and in 2008 together we will focus on market penetration.

We targeted our RStandard roller tube product line for commercial development for a number of reasons, including:

·

the market for bulk-material handling system idler rolls is a large and homogeneous global market;

·

market demand for idler rolls is stable and driven by well understood factors, particularly the frequent need for replacement of idler rolls in existing installations due to the corrosive effects of  harsh environments or bearing failure from use;

·

competition for and scarcity of steel is driving up the cost of steel idler rolls;

·

increasing energy costs in many parts of the world is increasing the cost of operating bulk-material handling systems and increasing the weight advantages of rollers made with our RStandard roller tubes; and

·

end users are generally large and financially stable global customers.







---







Product Advantages

Idler rolls made with our RStandard roller tubes are ultimately aimed at users of bulk-material handling systems globally, such as harbours and coal and aggregate mines. We have successfully completed the engineering and testing of the first tube diameters for the most commonly used idler rolls and will continue testing and refining our RStandard tubes as our business progresses.

Our RStandard tubes provide end users of composite rolls with certain key advantages which we believe will enable FMC Technologies's line of Link-Belt Composite Conveyor Idler Rollers made with our RStandard roller tubes to compete effectively with well-entrenched steel rollers. Our RStandard tubes are:

·

40percent lighter than steel tubes;

·

more corrosion resistant than steel; and

·

as abrasion resistant as steel and more abrasion resistant than other non-metallic alternatives.



Due to these advantages, customers of idler rolls made with RStandard tubes will experience lower overall replacement costs from a more durable idler roll. In addition, idler rolls made with our lightweight roller tubes will be safer to handle and replace, and will use less energy to operate.



Marketing and Sales

Our company and FMC Technologies will jointly introduce to market FMC Technologies's line of Link-Belt Composite Conveyor Idler Rolls made with our RStandard roller tubes. The first rollers were for above ground applications and were delivered and installed in pilot installations during the second half of 2007. Our company has also received certification for use of RStandard roller tubes in underground applications from the U.S. Mining Safety and Health Administration, adding a significant addressable market segment for the roller tube business line

Initially, we believe sales will be focused in North America. As North American acceptance of the product develops, we anticipate leveraging this acceptance into international sales.

Exclusive Supply Agreement with FMC Technologies

The Supply Agreement with FMC Technologies has a term of five years unless terminated earlier in accordance with the provisions of the agreement.

Obligations of RS

During the term of the Supply Agreement, we agree to expend our commercially reasonable best efforts to manufacture and supply our RStandard tubes and to perform our obligations in a diligent and timely manner in compliance with the terms and conditions of the agreement. This includes assisting FMC Technologies in the planning and distribution of composite idler rolls and sharing relevant information with FMC Technologies to allow it to manage its marketing and distribution plans and obligations.

Obligations of FMC Technologies

During the term of the Supply Agreement, FMC Technologies agrees to expend its commercially reasonable best efforts to develop sales markets, promote and sell conveyor rollers and roller systems that incorporate RStandard roller tubes manufactured and supplied by us, and to perform its obligations in a diligent and timely manner in compliance with the terms and conditions of the agreement, including the following:

(a)

to market, promote and sell Link-Belt Composite Conveyor Idler Rolls made with RStandard roller tubes supplied by us throughout the world, excluding the countries of Australia and Poland, in such volumes as are deemed commercially reasonable by the parties; and

(b)

to share with us on an ongoing basis relevant information to allow us to manage our production plans and obligations.







---







Exclusivity

During the term of the Supply Agreement, the parties agree to operate exclusively with each other throughout the world, excluding the countries of Australia and Poland, in the promotion, marketing, development, design, manufacture and sales of composite-based conveyor idler rolls and conveyor idler roll systems. All such idler rolls and conveyor idler roll systems will exclusively use our RStandard roller tubes.

Pursuant to the Supply Agreement, we will retain at all times our intellectual property rights to our RStandard roller tubes.

Market Barriers and Competition

Most of the end users of rollers in the world use rollers made with steel tubes. There are several established companies supplying the steel-based rollers that are generally financially strong, well-known companies with established sales channels and proven products.

We anticipate that FMC Technologies's line of Link-Belt Composite Conveyor Idler Rolls made with our RStandard roller tubes will be competitive with all existing heavy-duty roller applications and will provide significant competitive advantages to end users in highly abrasive and/or corrosive environments such as coal, aggregates, iron ore, copper, potash and salt mines.

FMC Technologies and our company must overcome both the established reputation of existing idler roll suppliers and the industry's natural reluctance to change. We believe that FMC Technologies and our company will overcome these obstacles due to the significant competitive advantages of FMC Technologies's line of Link-Belt Composite Conveyor Idler Rolls made with our RStandard tubes. These competitive advantages include being lighter, more corrosion resistant and as abrasion resistant than steel-based rollers. A major benefit of being lighter is that less energy is needed to operate a conveyor system using Link-Belt Composite Conveyor Idler Rolls with RStandard tubes. See "Product Advantages".

Manufacturing and Distribution

Our RStandard roller tubes are currently manufactured at our leased 5,200 square metre (56,000 square foot) Calgary production facility. This facility currently has pultrusion lines capable of producing sufficient quantities of RStandard tubes required during the market entry stage of our business plan for our RStandard tube product. As market demand increases for our RStandard roller tubes, we intend to enter into arrangements with one or more experienced third-party manufacturers to manufacture our RStandard tubes for us.

IV.

PRODUCT DEVELOPMENT

Our competitive advantage comes from the unique properties of our Version resin systems and our composite development and engineering expertise. We create load-bearing composite products using our proprietary materials and skills that deliver significant competitive advantages to our customers compared to the same products made with conventional materials such as wood, steel and concrete.

Our Version Resin System

Our Version resin system is the foundation of our business because it gives us important competitive advantages in both traditional composite applications and new applications not possible with other composites. Composites using our Version resin can often be produced more economically than competing materials for three main reasons:

1.

composites are, by definition, a combination of fibreglass and resin. Our Version resin offers transverse strengths, the strength of the composite as measured perpendicular to the fibre direction (a resin-dominated property), that are two to three times greater than those of many other resins. These exceptional transverse strengths allow engineers to design composite parts using more economical combinations of reinforcing fibres, which reduces overall unit input costs;

2.

our Version resin affords significant improvements in manufacturing productivity due to the chemical reaction dynamics (kinetics) of polyurethanes. For example, in the pultrusion process, our Version resin allows pulling (production) speeds up to 30 percent faster compared to using traditional polyester resins. This translates into lower unit input costs. In addition, production problems due to cracking and warping of profiles from thermal stresses and shrinkage of traditional resins may be avoided; and







---





3.

the production of composites using our Version resin is more environmentally friendly than other resins because our Version resin does not emit volatile organic compounds or hazardous airborne pollutants during the manufacturing process, which is not the case with the most widely used polyester and vinyl-ester based resins. The resulting limits on production due to workplace quality or health issues and environmental regulations imposed on traditional resin systems do not exist for our Version resins.

In addition, new product designs, using our Version resin, may perform functions that are not physically or economically possible using other materials, including composites made with other resins. Products made with our Version resin outperform competing products, are cost effective in strength applications and have greater impact resistance than composites made with other resins. Benefits of products made with our Version resin include:

·

excellent elongation and impact properties which allows the products to be nailed, drilled, screwed (using common screw fasteners without pre-drilling) or punched (on a punch press) to create holes of any size and shape  this is not possible with other composites;

·

lightweight;

·

superior strength and stiffness;

·

improved impact resistance;

·

higher load-bearing capacity;

·

excellent wear properties and elastic memory;

·

oil, solvent, grease and gasoline resistance;

·

abrasion and weather resistance; and

·

readily accept the introduction of colour pigmentation during processing and the application of paint to the finished product.



Composite Development and Engineering

Our business model is based on exploiting the competitive advantages of our Version resin system through our product development and composite engineering capabilities. Our product development begins with the identification and screening of a potential product, using the following criteria:

(i)

the product must provide potential significant economic and performance advantages compared to competing products;

(ii)

the product must have an addressable market size, in that it must be sufficiently large to warrant the allocation of our resources for the period required for full product development;

(iii)

the time to penetrate the marketplace with the product must be satisfactory and achievable in our estimation; and

(iv)

the competitive advantages of the product must permit non-commodity positioning which is defendable for a period of time to produce significant economic returns for us.



For products that pass our screening criteria, we design, engineer, prototype and test the product to determine whether it meets our original screening hypothesis. These activities are undertaken by ourselves or in concert with third parties. These highly specialized development activities involve specialized chemical knowledge as well as specialized composite engineering and production knowledge. Our decision to work alone or with others is driven primarily by the specific expertise required for the application being developed.

Commercialization

As potential product applications move through product development, we evaluate the market potential and screen manufacturing and distribution partners for the product. We proceed with product commercialization if the product continues to produce an acceptable economic return for us and we are able to enter into acceptable arrangements with manufacturing and distribution partners. The benefit of engaging third party manufacturing and distribution partners is that we can reduce product commercialization risk and increase the speed and likelihood of successful market penetration of the product while preserving a meaningful share of the product's margins for our shareholders.







---







V.

RAW MATERIAL INPUTS

Glass fibre and chemicals represent the majority of the cost to produce our composite products. Currently the fibre used in our composite products is E-glass fibre manufactured primarily from silica. We presently source E-glass fibre on the open market.

We are able to use numerous suppliers to acquire the chemicals required to produce our Version resin. In our opinion, we are not at risk of non-supply from any one supplier, as we have the capability to switch suppliers for all major chemical components of our Version resin. The risks we face relate to the pricing of the chemical components. We believe we are able to obtain price discounts by utilizing one supplier for a number of our required chemicals, thereby increasing the volume of chemicals purchased from one source and increasing the price discount that we receive from the supplier. Should we ever face a supply shortage from a supplier, we believe we will be able to find alternative suppliers of raw chemical inputs. We are continuously reviewing raw material alternatives in an effort to improve the price and performance of our raw materials.

Our leased Calgary production facility is fully equipped with blending and mixing equipment and storage facilities to produce enough Version resin for our product development and supply our manufacturing partners with bulk Version resin. In addition, we have entered into a third party mixing arrangement to enhance our supply chain flexibility and reduce costs overall.

We do not believe that our blending of resin compounds is subject to any seasonal cycles or disruptions. Most of the raw material chemicals used to manufacture thermoset resins are commodities with pricing directly dependent on supply, demand and the cost of the underlying raw materials, in particular, the petroleum industry. These raw material chemicals are available from a number of suppliers worldwide. Currently, we source the chemicals to produce our Version resins on the open market. Consequently, we are susceptible to market price fluctuations. Any increase in the price of these underlying chemicals tends to affect all resin manufacturers equally.

VI.

INTELLECTUAL PROPERTY

Our intellectual property is critical to our business. We protect our intellectual property using a combination of patent protection, trademarks, non-disclosure agreements and physical security measures. Our intellectual property includes the formulation of our Version resins, our proprietary product designs and our proprietary production equipment and processes.

Patent Applications and Patents

We generally seek intellectual property protection by applying for patents in Canada, the United States and other countries, either directly or by way of a Patent Cooperation Treaty ("PCT") Application. The PCT Application process gives us the opportunity to have patent coverage on a global basis in over 120 member countries and allows us to maintain priority dates for filing, yet it offsets into the future, the need to select specific jurisdictions where protection will be required. Maintaining priority filing dates with a PCT Application means the patent commencement date in the individual member jurisdictions later selected by us reverts back to the date of our original patent application in Canada or the United States, as applicable. This patent application process provides us with maximum flexibility during the formative stages of our new technologies.

The Canadian Intellectual Property Office granted and issued on December 4, 2007 a patent with respect to "A Two Component Chemically Thermoset Composite Resin Matrix for Use in Composite Manufacturing Processes" under Canadian Patent No. 2,310,166. In addition, Canadian patent No. 2,274,328 with respect to "Method of Manufacturing Composite Tubular Parts Through Filament Winding" was issued August 23, 2005.

A US Patent with respect to "A Two Component Chemically Thermoset Composite Resin Matrix for Use in Composite Manufacturing Processes" has been issued under United States Patent No. 6,420,493 B1. We have filed additional patent applications in respect of additional resin systems, filament winding technology, pultrusion technology and related line equipment technology. We will continue to file PCT Applications as warranted and will make country selections within the parameters of the PCT process when we identify market demand.







---







Trademarks

We obtained registration for the trademark Version in the Canadian Intellectual Property Office, the United States Patent and Trademark Office, the European Community Trademarks Office, the Commonwealth of Australia Trademark Office and the Korean Intellectual Property Office. The trademark Version is used in association with synthetic resins for use in the manufacture of moulding compounds.

We have been awarded additional trademarks for various composite products and marketing slogans and phrases such as RStandard, RS, Innovators in Composites, and Stronger, Lighter, Greener. In addition, we have applied for trademark and logo mark protection to cover other various marketing slogans and phrases. As we develop further products, additional trademarks will be filed as warranted to protect our various interests.

Confidentiality and Security

In addition to our patent and trademark applications, we have taken steps to preserve our related intellectual property, including know how and trade secrets, by implementing a Confidentiality and Non-Disclosure Policy. The policy provides that we enter into confidentiality agreements with all of our employees, directors, officers and consultants. The policy also provides that we enter into comprehensive non-disclosure agreements with all parties testing or working with our Version resin system or our proprietary products made with Version resin, and all parties working at our RStandard utility pole production facility. We also take physical security precautions in respect of our Version resin formulations and product designs.

RISK FACTORS

An investment in our securities involves a high degree of risk and should be considered speculative. You should carefully consider the risks and uncertainties described below, as well as other information contained or incorporated by reference in this Annual Information Form, before making any investment. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial could turn out to be material and may adversely affect our business. If any of the following risks occur, our business, financial condition and results of operations could be seriously harmed and you could lose all or part of your investment. Further, if we fail to meet the expectations of the public market in any given period, the market price of our Common Shares could decline.

Risks Related to Our Financial Condition

Our audited consolidated financial statements for the fiscal year ended December 31, 2007 have been prepared on a "going concern basis".

Our audited consolidated financial statements for the fiscal year ended December 31, 2007, in respect of which this Annual Information Form has been prepared, have been prepared on a "going concern basis", which is described more fully in note 1 of the consolidated financial statements. In accordance with Canadian generally applied accounting principles, and based upon key factors listed herein, we believe such a note in our consolidated financial statements is appropriate and our independent auditors agree.

The application of "going concern" depends upon our ability to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. To date, we have not recorded a profit from operations and have derived virtually all of our working capital from the sale of our securities. We have experienced erratic revenue trends over the course of our history and, at times, deficiencies in working capital. Our business also faces many known and unknown risks, including those described in this Annual Information Form that could hinder our ability to continue as a going concern.

We will require additional financing.

In March 2007, we completed a private placement of 31,338,889 Common Shares for proceeds of $31.3 million, which proceeds are being used to fund the repayment of $1.4 million of our unsecured promissory notes issued on January 12, 2007,  the restructuring costs related to the relocation of our RStandard utility pole manufacturing to the facilities of Global in Tilbury, Ontario, the start-up costs and capital expenditures required to start manufacturing our RStandard roller tubes and for general working capital purposes. These funds will be required to fund our operations, including our business development, sales and marketing, and administrative activities until we achieve levels of production, revenue and cash-flow sufficient to fund our operating costs.

However, in order to continue our expansion and growth, we will need to raise additional funds from lenders and equity markets in the future. We may be unable to raise additional capital on commercially reasonable terms to finance our growth. Our ability to arrange such financing in the future will depend on our business performance as well as the prevailing capital market conditions. If we are unable to raise additional funds when needed, our business will be adversely affected. In addition, if we issue Common Shares in order to obtain additional financing, control of our company could change and shareholders will suffer additional dilution.







---







Risks Related to Our Business

We have a history of losses and we cannot provide assurance that we will operate profitably in the future.

We have a limited operating history. Our RStandard utility poles are in the market penetration stage of our business plan and our RStandard roller tubes are in the market entry stage of our business plan. Consequently, we are subject to the risks associated with early stage companies, including uncertainty of revenues, markets and profitability, and the need to raise additional funding. We are committing, and for the foreseeable future will continue to commit, significant financial resources to marketing, product development and research. Our business and prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the early stage of development, particularly companies in relatively new and evolving markets such as composites. We have not earned profits to date and cannot provide assurance that we will achieve, or be able to sustain, profitability in the future. A significant portion of our financial resources will continue to be directed to the development of our products and to marketing activities. Our success will ultimately depend on our ability and our distribution partners' ability to generate revenues from sales of our product or sales from end products incorporating our products, such that our administration, product development and marketing activities may be financed by revenues from operations instead of outside financing. Future revenues may be insufficient to generate the required funds to continue such administration, business development and marketing activities.

Competition in the markets for our products and for end products incorporating our products is intense. We and our distribution partners may not be able to compete effectively in these markets, and we and our distribution partners may lose current customers and fail to attract new customers.

We and our distribution partners may not be able to compete successfully against current and future competitors. The market for composite products and non-composite alternative products is highly competitive. The level of competition is likely to increase as current competitors improve their offerings and as new participants enter the market. We and our distribution partners compete with substantially larger companies whose products are proven and well established in the marketplace. Many of the potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, sales, marketing, technical and other resources than we or our distribution partners do. Our and our distribution partners' competitors may enter into strategic or commercial relationships on terms that increase their competitiveness. Additionally, competitors have research and development capabilities that may allow them to develop new or improved products that may compete with product lines which we or our distribution partners market and distribute. These competitive pressures may restrict our and our distribution partners' target markets, reduce our and our distribution partners' market share, require us and our distribution partners to drop sales prices and require that we and our distribution partners curtail or abandon our products or end products incorporating our products. Any of these would result in reduced operating margins and limit our ability to compete effectively and generate additional revenues.

Our and our distribution partners' products may not be accepted by our and our distribution partners' potential customers.

Our products and our distribution partners' end products incorporating our products are new to established and conservative markets. While we believe that our products and our distribution partners' end products incorporating our products will provide customers with significant advantages, there can be no assurance that we or our distribution partners will be able to profit from the development or manufacture of our products or end products incorporating our products as planned, or that we or our distribution partners will be successful in completing sales of our products or end products incorporating our products to potential customers. Our ability or the ability of our manufacturing/distribution partners to successfully commercialize our products or end products incorporating our products will depend in part on the acceptance of the products by potential customers. Most of the customers will be in a testing or preliminary stage of utilizing our products or end products incorporating our products and may encounter delays or other problems in the introduction of the products. We cannot predict when a customer that is in a testing or a preliminary use phase will adopt a broader use of the products. In addition, customers may need to adopt a comprehensive sales, marketing and training program in order to effectively integrate the products. The failure of customers to purchase our products or end products incorporating our products or delays in product acceptance or implementations would have a material adverse effect on our business, results of operations and financial condition. Any unfavourable publicity concerning us or our manufacturing/distribution partners or any of our products or any of the end products of our manufacturing/distribution partners' could have an adverse effect on our or their ability to achieve customer acceptance and to commercialize our products or their end products, which could have a material adverse effect on our business, results of operations and financial condition.







---







Our business is highly reliant on third party distributors.

A key element of our business model is that, during the market entry stage of our business plan, we will partner with strategic third party distributors to introduce our product or end products which incorporate our product, to market, raise customer awareness and distribute the product for customer trials and initial orders. We engage such partners in an effort to benefit from such partners' infrastructure, resources, reputations and expertise in achieving our growth objectives. An example of the implementation of this element of our business plan is the Distribution Agreement which we entered into with HD Supply Utilities to act as our exclusive distributor of our RStandard transmission and distribution poles in the Territory. A further example of this is the Supply Agreement that we entered into with FMC Technologies to supply our RStandard roller tubes to FMC Technologies's Material Handling Solutions business for use in their new line of composite Link-Belt® Conveyor Idler Rolls. Our business is therefore dependent upon the development and deployment by third parties of their distribution abilities. There can be no assurance that these distributors will be able to meet our distribution needs in a satisfactory and timely manner, or that we can obtain additional distributors when and if needed. Although we believe alternative distributors are available, an inability of our company to develop alternative distributors quickly or cost-effectively could materially impair our ability to distribute our products. Our reliance on third party distributors involves a number of additional risks, including reduced control over supply schedules, sales margins, and early termination of, or failure to renew, contractual arrangements. Although we believe that these distributors have an economic incentive to perform such distribution for us, the amount and timing of resources to be devoted to these activities is not within our control, and there can be no assurance that distribution problems will not occur in the future. A significant sales price decrease, an interruption in sales by one or more of such distributors, or the inability to obtain additional distributors when and if needed, could have a material adverse effect on our business, results of operations and financial condition.

Our business is highly reliant on third party manufacturers.

A key element of our business model is that, during the market penetration stage of our business plan, we will engage experienced third party manufacturers to meet growing customer demand for our products. An example of this is our RStandard utility pole  product which recently entered into the market penetration stage of our business plan at which time we entered into the Manufacturing and Licensing Agreement with Global which provides the framework whereby Global moved the two production cells from Calgary, Alberta to Tilbury, Ontario and upgraded and re-commissioned the first production cell and will upgrade and re-commission the second production cell as well as related additions for use in their production of our RStandard utility poles under license from us. During 2008, we anticipate entering into licenses with one or more experienced third parties, as required, to manufacture greater quantities of our RStandard roller tubes to position us to meet growing customer demand. Consequently, we rely largely on third party outsourcing for the manufacture of our products. Our business is therefore dependent upon the development and deployment by third parties of their manufacturing abilities. There can be no assurance that these manufacturers will be able to meet our manufacturing needs in a satisfactory and timely manner, or that we can obtain additional manufacturers when and if needed. Although we believe alternative manufacturers are available, an inability of our company to develop alternative suppliers quickly or cost-effectively could materially impair our ability to manufacture and sell our products. Our reliance on third party manufacturers involves a number of additional risks, including the absence of guaranteed capacity and reduced control over the manufacturing process, delivery schedules, production yields and costs, and early termination of, or failure to renew, contractual arrangements. Although we believe that these manufacturers will have an economic incentive to perform such manufacturing for us, the amount and timing of resources to be devoted to these activities is not within our control, and there can be no assurance that manufacturing problems will not occur in the future. A significant price increase, an interruption in supply from one or more of such manufacturers, or the inability to obtain additional manufacturers when and if needed, could have a material adverse effect on our business, results of operations and financial condition.

Global may default on their loans which our company has guaranteed.

In order to facilitate Global completing a $6.1 million debt financing pursuant to the Manufacturing and Licensing Agreement, our company provided a $4.0 million guarantee on a full recourse basis to Globals lenders and a $2.1 million limited recourse guarantee to Globals lenders, which guarantee is collateralized with our RStandard utility pole manufacturing equipment and related additions. If Global Composite equipment defaults on the loans we will be called on the guarantees.







---







Delays in reaching adequate rates and efficiencies in production could impair the profitability of our products.

Our ability or the ability of our manufacturing partners to produce products that are cost effective depends on reaching efficient production levels. In addition, our or our manufacturing partners' production process results in the wasting of materials and supplies which must be minimized to produce cost-effective products. The failure to reach adequate production levels and efficiencies would impair our ability or the ability of our distribution partners to profitably market our products or end products incorporating our products and would have a material adverse effect on our business, results of operation and financial condition.

We cannot control the cost of our raw materials.

Our principal raw materials are glass fibres and chemicals. The prices for these raw materials are subject to market forces largely beyond our control, including energy costs, chemical feed stocks, market demand and freight costs. The prices for these raw materials have varied significantly and may vary significantly in the future. We may not be able to adjust our product prices, especially in the short-term, to recover the costs of increases in these raw materials. Our future profitability may be adversely affected to the extent we are unable to pass on higher raw material and energy costs to our customers.

We depend upon senior management and key personnel. Any loss of their services could negatively affect our business. Our failure to retain and attract such personnel could harm our business, operations and product development efforts.

Our success depends, to a significant extent, on the performance of a number of our senior officers and other key employees. We do not anticipate having key person insurance in place in respect of any of our senior officers or other personnel. To the extent that the services of any of our key personnel become unavailable, we will be required to retain other qualified persons. We may not be able to find a suitable replacement for any such person. The loss of the services of key persons could have a material adverse effect on our business, financial condition and results of operations.

Our products require sophisticated research and development, marketing and sales, and technical customer support. Our success depends on our ability to attract, train and retain qualified research and development, marketing and sales, and technical customer support personnel. Competition for personnel in all these areas is intense and we may not be able to hire sufficient personnel to achieve our goals or support the continued growth in our business. If we fail to attract and retain qualified personnel, our business, operations and product development efforts would suffer.

Interruptions of supplies from our key suppliers may affect our results of operations and financial performance.

Interruptions or shortages of supplies from our key suppliers of raw materials could disrupt production or impact our ability to increase production and sales. We use a limited number of sources for most of the raw materials that we use. We do not have long-term or volume purchase agreements with most of our suppliers, and may have limited options in the short-term for alternative supply if these suppliers fail, for any reason including their business failure or financial difficulties, to continue to supply us with materials or components. Moreover, identifying and accessing alternative sources may increase our costs.

The concentration of some of our production assets exposes us to risks of loss of significant production from a single event.

The majority of our production is or will be generated from central manufacturing facilities. Any single event causing an interruption to these operations could result in the loss of production and materially affect our results of operation. We carry insurance to compensate us for physical damage arising from most circumstances including certain boiler and machinery coverage. We believe our manufacturing partners will carry similar insurance coverage.

Third parties may infringe upon or misappropriate our intellectual property, which could impair our ability to compete effectively and negatively affect our profitability.

Our success depends upon the protection of our technology, trade secrets and trademarks. We cannot determine whether future patent or trademark applications will be granted. Our current intellectual property or any future intellectual property that we may develop could be challenged, invalidated or circumvented and may not necessarily provide us with any competitive advantage.







---







Our profitability could suffer if third parties infringe upon our intellectual property rights or misappropriate our technology and other assets. To protect our rights to our intellectual property, we rely on a combination of trade secret protection, trademark law, confidentiality agreements and other contractual arrangements, which may be inadequate to deter infringement or misappropriation. We may be unable to detect the unauthorized use of our intellectual property.

Litigation may be necessary to enforce our intellectual property rights, protect trade secrets, determine the validity and scope of the proprietary rights of others, or defend against claims of infringement or invalidity. Intellectual property laws provide limited protection. Moreover, the laws of some foreign countries do not offer the same level of protection for intellectual property as the laws of Canada and the United States. Litigation may result in substantial costs and diversion of resources, which may limit the development of our business.

Our products or our manufacturing/distribution partners' end products incorporating our products may infringe on the intellectual property rights of others, which could increase our costs and negatively affect our profitability.

Our commercial success may depend, in part, on our ability and the ability of our manufacturing/distribution partners to avoid infringing on patents issued to others. Although we are not aware of any action or threatened action alleging patent infringement or improper use of proprietary information by us, if we have to defend any such claims we could incur substantial costs and our management resources could be diverted.

If we or our manufacturing/distribution partners were found to be infringing any third party patents, we or they could be required to pay damages, alter our or their products or processes, obtain licenses or cease certain activities. We cannot be certain that if we or they required licenses for patents held by third parties that they would be made available on terms acceptable to us or them, if at all. The inability to obtain licenses may prevent us or our manufacturing/distribution partners (whose end products incorporate our products) from offering products and services to customers, which may limit our revenue.

If we are unable to manage our growth effectively, our revenues may not increase, our cost of operations may rise and we may remain unprofitable.

Growth in our business and operational activities may strain our human and productive resources. This, in turn, will require us to continue to implement and improve our internal processes, systems and controls and to hire, train and manage new employees. We may be unable to manage such growth effectively, which could have a material adverse impact on our business, operations and prospects. Our management, personnel or systems may be inadequate to support our operations, and we may be unable to achieve the increased levels of revenue required to offset increased levels of operating expenses associated with this growth.

We must develop new products and technology and enhancements to our existing products and technology to remain competitive. If we fail to do so, we may lose market share to competitors.

Our markets are susceptible to technological advances and the introduction of new products. Further, our markets are subject to changing industry standards, market trends and customer preferences, and to competitive pressures which can, among other things, necessitate revisions in pricing strategies, price reductions and reduced profit margins. Our performance will depend, in part, on our ability to enhance our existing products, develop new proprietary technology that addresses the sophisticated and varied needs of our prospective customers and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of technology entails significant technical and business risks. If we are unsuccessful in using new technologies effectively or adapting our products to customer requirements or emerging industry standards, we may lose market share and our revenues may decline. While we believe that our products and end products incorporating our products will be competitive, we cannot provide assurance that our products or our manufacturing/distribution partners' end products incorporating our products will be commercially viable or that further modification or additional products will not be required in order to meet demands or to make changes necessitated by developments made by competitors which might render our products or our manufacturing/distribution partners' end products incorporating our products less competitive, less marketable or even obsolete over time.







---







The loss of strategic alliances could make our products and our distribution partners' end products that incorporate our products less appealing and useful to customers.

Our growth and marketing strategies are based, in part, on seeking out and forming strategic alliances and working relationships with manufacturers and distributors. To the extent that the strategic alliances negotiated by us are exclusive or restricted as to location or technological environment they will limit our flexibility to broaden our distribution by increasing the number of strategic alliances and working relationships. We cannot provide assurance that existing strategic alliances and working relationships will not be terminated or modified in the future, nor can we provide assurance that new relationships, if any, will afford us the flexibility to broaden our distribution.

We or our manufacturing/distribution partners whose end products incorporate our products may encounter product deficiencies that could be detrimental to our reputation.

Difficulties in product design, performance and reliability could result in lost revenue, delays in customer acceptance of our products or our manufacturing/distribution partners' end products or lawsuits, and would be detrimental, perhaps materially, to our market reputation. Serious defects are frequently found during the period immediately following the introduction of new products or enhancements to existing products. Our products and the products incorporated therein from third parties are not error free. In addition, our manufacturing/distribution partners' end products that incorporate our and other third party products are not error free. Undetected errors or performance problems may be discovered in the future. Moreover, known errors which might be considered minor may be considered serious by customers. If our or our manufacturing/distribution partners' internal quality assurance testing or customer testing reveals performance issues and/or desirable feature enhancements, we or they could postpone the development and release of updates or enhancements to current products, future products or improvements in products. We and our manufacturing/distribution partners may not be able to successfully complete the development of planned or future products in a timely manner, or to adequately address product defects, which could harm our business and prospects. In addition, product defects may expose us to liability claims, for which we may not have sufficient liability insurance. A successful suit against us could harm our business and financial condition.

Exchange rate fluctuations may harm our results of operations.

We do not engage in any hedging or currency trading activities. Our business activities are conducted primarily in U.S. and Canadian dollars and our assets and liabilities are denominated primarily in Canadian dollars. A substantial portion of our sales and most of our raw material purchases are denominated in U.S. dollars, while most of our administrative costs are denominated in Canadian dollars. As a result, changes in the exchange rate between these two currencies could negatively impact our profitability and our financial position.

Dependence on our third party licensees.

A key element to our international market strategy is to license our RStandard utility pole technology to companies selected for their presence and capability in targeted regional markets. Examples of this are our agreements to introduce and supply our RStandard modular composite utility poles to Australia and New Zealand, China and Brazil. There is no assurance that our existing international partners in these countries or any future licensees or international partners will be able to successfully sell our RStandard poles such that we will earn royalty income or income from the supply of raw materials to them to produce our RStandard poles.

Risks associated with our and our licensees' international operations may have a material adverse effect on our business, results of operations and our financial condition.

We are directly or through licensees pursuing international business opportunities, including in Brazil, China, Australia and New Zealand, and certain European Union countries. Sales by us or through our licensees to international customers are subject to a number of risks and uncertainties including, but not limited to, complications in both compliance with and unexpected changes in foreign government laws, regulations and standards, import and export license requirements, tariffs and other trade barriers, potential adverse tax consequences, fluctuations in currency exchange rates, exchange controls, difficulty in collecting accounts receivable, difficulty in staffing and managing foreign operations, potential political and economic instability, events of international terrorism, uncertainties of laws and enforcement relating to protection of property rights including intellectual property rights, unauthorized copying of our proprietary technologies, uncertainties in local commercial practices, uncertainties in local accepted business practices and standards which may not be similar to accepted business practices and standards in Canada and which may create unforeseen business or public relations situations, and other risk factors depending on the country involved. There can be no assurance that these factors will not be experienced by us, our licensees or our partners in the future or that they will not have a material adverse effect on our business, results of operations and our financial condition.







---







Some of our directors are engaged in other activities which may pose potential conflicts of interest.

Certain of our directors and officers are engaged in, and will continue to engage in, other business activities on their own behalf and on behalf of other companies and, as a result of these and other activities, such directors and officers may become subject to conflicts of interest. Conflicts, if any, will be subject to the procedures and remedies of the ABCA. See "Conflicts of Interest". These conflicts of interest could result in some of our directors or officers competing against us.

We are responsible for the indemnification of our officers and directors.

Our corporate by-laws provide that we shall indemnify our directors and officers under certain circumstances, against all costs, charges and expenses including, without limitation, legal fees and amounts paid to settle an action or satisfy a judgment, reasonably incurred by them in respect of any action or proceeding in which any of the them is made a party by reason of them being or having been a director or officer of us. The indemnification of our directors and officers could result in substantial expenditures, which we may be unable to recoup.

Risks Related to Our Securities

There may be volatility in our share price.

The market price for our Common Shares could be subject to wide fluctuations. Factors such as announcements of quarterly variations in operating results, technological innovations or the introduction of new products by our competitors, as well as market conditions in the industries in which we operate, may have a significant impact on the market price of our Common Shares. The stock market has from time to time experienced extreme price and volume fluctuations, which have often been unrelated to the operating performance of particular companies.

We do not anticipate paying dividends in the foreseeable future.

We have not paid dividends on our Common Shares and do not anticipate paying such dividends in the foreseeable future.

DESCRIPTION OF CAPITAL STRUCTURE

Our authorized share capital consists of an unlimited number of Common Shares and an unlimited number of preferred shares, issuable in series (the "Preferred Shares"). The following is a general description of the material rights, privileges, restrictions and conditions attaching to each class of our shares.

Common Shares

Except for meetings at which only holders of another specified class or series of our shares are entitled to vote separately as a class or series, each holder of a Common Share is entitled to receive notice of, to attend at and to vote at all meetings of our shareholders. Subject to the rights of the holders of Preferred Shares, the holders of Common Shares are entitled to receive dividends if, as, and when declared by our directors. Subject to the rights of the holders of Preferred Shares, the holders of Common Shares are entitled to share equally in our remaining property upon our liquidation, dissolution or winding-up.







---







Preferred Shares

We are authorized to issue an unlimited number of Preferred Shares. The Preferred Shares may be issued from time to time in one or more series, each consisting of a number of Preferred Shares as determined by our Board of Directors who may also fix the designations, rights, privileges, restrictions and conditions attaching to the shares of each series of Preferred Shares. There are no Preferred Shares presently issued and outstanding. The Preferred Shares of each series shall, with respect to payment of dividends and distribution of assets in the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, rank on a parity with the Preferred Shares of every other series and shall be entitled to preference over the Common Shares and the shares of any other class ranking junior to the Preferred Shares. The Preferred Shares of any series may also be given other preferences, not inconsistent with our articles, over the Common Shares and any of our other shares ranking junior to the Preferred Shares of a series.



Unsecured Convertible Debentures

On October 6, 2005, we completed the private placement of $25,000,000 principal amount of unsecured convertible debentures (the "Debentures") due October 7, 2010 and bearing interest at 8.5% per annum payable semi-annually on June 30 and December 31 of each year (each an "Interest Payment Date"). The principal amount of the Debentures is convertible at the holder's option into Common Shares at a conversion price of $2.90 per share at any time prior to the close of business on the earlier of October 6, 2010 and the business day immediately preceding the date specified by us for redemption of the Debentures. The holder of a Debenture surrendered for conversion on this basis shall not be entitled to receive accrued and unpaid interest in respect thereof for the period up to the date of conversion from the date of the latest Interest Payment Date. The Debentures are redeemable by us, in whole or from time to time in part, at any time after October 6, 2007, on not more than 60 days and not less than 30 days prior notice, at a redemption price equal to their principal amount plus accrued and unpaid interest, if any, provided that the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange (the "TSX") for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is given exceeds $3.63. On redemption or maturity, we may, at our option, on not more than 60 days and not less than 40 days prior notice and subject to regulatory approval, elect to satisfy our obligation to repay the principal amount of the Debentures by issuing and delivering that number of freely tradeable Common Shares obtained by dividing the principal amount of the Debentures by 95% of the weighted average trading price of the Common Shares on the TSX for the 20 consecutive trading days ending five trading days preceding the date fixed for redemption or maturity, as the case may be. Upon a change of control involving the acquisition of voting control or direction over 66 2/3% or more of the issued and outstanding Common Shares, we will be required to make an offer to purchase the Debentures then outstanding at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest.









---





MARKET FOR SECURITIES

Our Common Shares are listed for trading on the TSX under the symbol "RS". The following table sets forth the high and low sales prices (which are not necessarily the closing prices) and the trading volumes for the Common Shares on the TSX as reported by the TSX for the periods indicated:

|               |                 |         |          
|-------------- | --------------- | ------- | ---------
|               | Price Range ($) | Trading
|Period         | High            | Low     | Volume   
|               |                 |         |          
|2007           |                 |         |          
|January        | 1.29            | 0.68    | 7,165,325
|February       | 1.31            | 0.82    | 5,332,946
|March          | 1.20            | 0.95    | 6,224,680
|April          | 1.40            | 1.00    | 4,044,491
|May            | 1.34            | 1.02    | 4,228,682
|June           | 1.70            | 1.23    | 3,842,507
|July           | 2.04            | 1.46    | 4,448,574
|August         | 1.91            | 1.10    | 3,135,943
|September      | 1.52            | 1.19    | 2,134,302
|October        | 1.74            | 1.38    | 2,404,501
|November       | 1.60            | 1.20    | 1,710,988
|December       | 1.59            | 1.21    | 2,976,210
|               |                 |         |          
|2008           |                 |         |          
|January        | 1.60            | 1.01    | 2,666,701
|February       | 1.19            | 0.90    | 2,822,590
|March (1  12) | 1.14            | 1.01    | 1,643,801





Our Common Shares are also quoted in the United States on the Over The Counter Bulletin Board Market under the trading symbol "RSSYF". The following table sets forth the high and low sales prices in US$ (which are not necessarily the closing prices) and the trading volumes for the Common Shares on the Over The Counter Bulletin Board Market as reported by the Over The Counter Bulletin Board Market for the periods indicated:

|               |                   |         |          
|-------------- | ----------------- | ------- | ---------
|               | Price Range (US$) | Trading
|Period         | High              | Low     | Volume   
|               |                   |         |          
|2007           |                   |         |          
|January        | 1.08              | 0.588   | 3,650,707
|February       | 1.108             | 0.70    | 1,604,100
|March          | 1.01              | 0.80    | 881,915  
|April          | 1.21              | 0.886   | 1,750,923
|May            | 1.24              | 0.925   | 1,681,400
|June           | 1.60              | 1.153   | 1,502,525
|July           | 1.95              | 1.30    | 1,512,166
|August         | 1.83              | 1.05    | 964,489  
|September      | 1.54              | 1.179   | 592,981  
|October        | 1.79              | 1.451   | 917,918  
|November       | 1.75              | 1.20    | 782,914  
|December       | 1.65              | 1.22    | 565,464  
|               |                   |         |          
|2008           |                   |         |          
|January        | 1.557             | 0.9965  | 724,107  
|February       | 1.20              | 0.935   | 420,892  
|March (1  12) | 1.20              | 0.935   | 562,702  









---







DIVIDEND RECORD AND POLICY

Our current policy is to retain profits for future growth. As a result, no dividends have been paid on our shares during the four most recently completed financial years. Our dividend policy is reviewed periodically by our Board of Directors and is subject to change, depending on our earnings, financial requirements and other factors, as appropriate. As at the date hereof, we do not intend to change our dividend policy. There are no restrictions that could prevent us from paying dividends.

HUMAN RESOURCES

We had 70 full-time employees at December 31, 2007, 63 of which were located in Calgary, Alberta and the remainder in other locations.

DIRECTORS AND EXECUTIVE OFFICERS

Name, Occupation and Security Holding

The following table sets forth certain information in respect of our directors and executive officers.

|                                          |                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------------------------------------- | ----------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name, Province and
Country of Residence   | Position(s) and Offices Held with RS            | Principal Occupations During the Five Preceding Years                                                                                                                                                                                                                                                                                                                                                                      
|Wilmot L. Matthews (2)(3)
Ontario, Canada | Chairman and Director                           | President of Marjad Inc. (a private investment company).                                                                                                                                                                                                                                                                                                                                                                   
|Paul B. Giannelia
Alberta, Canada         | President, Chief Executive Officer and Director | President and Chief Executive Officer of RS since December 2006. Chief Executive Officer of RS Technologies, a former division of RS, from January 2004 to December 2006. From August 1977 to October 2003, President and Chief Executive Officer of SCI Group of Companies (a private infrastructure company).                                                                                                            
|Brian A. Felesky (2)
Alberta, Canada      | Director                                        | Corporate Director with Felesky Flynn LP (a law firm specializing in tax matters).                                                                                                                                                                                                                                                                                                                                         
|James K. Gray (3)
Alberta, Canada         | Director                                        | Corporate Director and former Chairman and Chief Executive Officer of Canadian Hunter Exploration Ltd. (a natural gas company).                                                                                                                                                                                                                                                                                            
|Dwayne D. Hunka (3)
Alberta, Canada       | Director                                        | Co-owner and senior officer of Waiward Steel Fabricators Ltd. (a private steel fabrication company) since 1978.                                                                                                                                                                                                                                                                                                            
|David A. Williams (2)
Ontario, Canada     | Director                                        | President of Roxborough Holdings Limited (a private investment company) since February 1995.                                                                                                                                                                                                                                                                                                                               
|Robert I. Schaefer(5)
Alberta, Canada     | Chief Financial Officer and Corporate Secretary | Chief Financial Officer (since August 2005) and Corporate Secretary (since December 2005) of RS. Vice President, Business Development with ENMAX Corporation (an electricity transmission, distribution and energy supply and services company) from January 2004 to May 2005. Vice President, Marketing and Development of Mirant Corporation (a merchant power and natural gas company) from June 2000 to September 2003.

Notes:

(1)

All of our directors have been appointed to hold office until the next annual general meeting of our shareholders or until their successor is duly elected or appointed, unless their office is earlier vacated. Mr. Hunka has been a director since May 2, 1996. Mr. Williams has been a director since December 20, 2004. Messrs. Matthews, Giannelia, Felesky and Gray have been directors since February 21, 2007.

(2)

Member of the Audit Committee.

(3)

Member of the Compensation, Nominating and Corporate Governance Committee.

(4)

We do not have an Executive Committee.

(5)

Mr. Schaefer resigned from RS on December 20, 2007 effective March 14, 2008.







---









As at the date of this Annual Information Form, our directors and executive officers as a group, beneficially owned, or controlled or directed, directly or indirectly, in the aggregate, 13,239,238 Common Shares, representing approximately 9.8% of the outstanding Common Shares.

David A. Williams was a director of Octagon Industries Inc. ("Octagon"), a reporting issuer in the Province of British Columbia and Alberta. On May 29, 2001, the British Columbia Securities Commission issued a cease trade order against Octagon for its failure to file an annual report for the fiscal year ended December 31, 2000, which cease trade order was revoked on August 28, 2001. On June 12, 2001, Octagon's trustee sent a proposal to unsecured creditors of Octagon (the "Proposal") pursuant to the Bankruptcy and Insolvency Act. A majority of the unsecured creditors approved the Proposal at a general meeting of the unsecured creditors held on June 25, 2001. Following Court approval, the Proposal was binding on Octagon's creditors. Octagon ceased operations and was dissolved by the British Columbia Ministry of Finance effective August 15, 2003.

Governance of the Corporation

Our Board of Directors is responsible for our governance. They have established the following committees:

Audit Committee.The Audit Committee has, as it mandate, the responsibility for assisting our Board oversight of: (i) the integrity of our financial statements and the audits thereof; (ii) our accounting and financial reporting processes; (iii) our compliance with legal and regulatory requirements; (iv) the qualifications and independence of our external auditor; and (v) the performance of our external auditor and internal audit function.

Compensation, Nominating and Corporate Governance Committee.The Compensation, Nominating and Corporate Governance Committee has, as its mandate, the responsibility for: (i) reviewing matters relating to the human resource policies and compensation of our directors, officers and employees in the context of the budget and business plan of our company and formulating and making recommendations to our Board in respect of compensation issues relating to our directors, officers and, to the extent determined appropriate, our employees; (ii) recommending suitable candidates as nominees for election or appointment as directors, recommending the criteria governing the overall composition of our Board and governing the desirable individual characteristics for our directors; and (iii) developing the approach of our company to matters concerning corporate governance and, from time to time, reviewing and making recommendations to our Board as to such matters.

AUDIT COMMITTEE INFORMATION

Composition of the Audit Committee

Our Audit Committee is comprised of David A. Williams (Chairman), Brian A. Felesky and Wilmot L. Matthews. The following chart sets out the assessment of each Audit Committee member's independence, financial literacy and relevant educational background and experience supporting such financial literacy. For the purposes of Multilateral Instrument 52-110, an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer's financial statements.







---







|                                     |             |                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |  | 
|------------------------------------ | ----------- | -------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | 
|Name and Municipality of Residence   | Independent | Financially literate | Relevant Education and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|David A. Williams,
Toronto, Ontario  | Yes         | Yes                  | Mr. Williams, the Chairman of the Audit Committee, has been the owner and President of Roxborough Holdings Limited, a private investment company, since January 1993. From 1969 to 1993, he held senior management positions with Beutel Goodman & Company, a large institutional money management firm. Mr. Williams is a director of a number of public companies and serves on the audit committees of Newport Partners Income Fund, Calvalley Petroleum Inc. and Western Copper Corporation. Mr. Williams received a Bachelors degree in Business from Bishops University in 1963 and a Masters of Business Administration from Queen's University in 1964.                                                                                                                                                                                    
|Brian A. Felesky
Calgary, Alberta    | Yes         | Yes                  | Mr. Felesky is a senior tax lawyer involved in structuring public company re-organizations, acquisitions and spin-offs. He serves or has served on a number of reporting issuer boards and is currently the Chairman of the audit committee for Epcor Power L.P. and is a member of the audit committee for Suncor Energy Inc. Mr. Felesky received a Bachelor of Arts degree and a Bachelor of Laws degree from the University of Alberta.                                                                                                                                                                                                                                                                                                                                                                                                        
|Wilmot L. Matthews,
Toronto, Ontario | Yes         | Yes                  | Mr. Matthews is a Chartered Accountant who has been involved in all aspects of investment banking by serving in various positions with Nesbitt Burns Inc. and its predecessor companies from 1964 until his retirement in September 1996, most recently as Vice Chairman and director. He has served on numerous audit committees, including as chairman of the audit committee of Renaissance Energy Ltd. and for numerous years as a member of the audit committee of Burns Fry Ltd. He is also a former member of the audit committee of Husky Energy Ltd. and is currently the Chairman of the audit committee of WestJet Airlines Ltd. Mr. Matthews received his Bachelor of Arts in Math, Physics and Chemistry from the University of Toronto and his Master of Science in Economics from the London School of Economics in London, England.



Audit Committee Charter

The charter of our Audit Committee is attached as Schedule "A" to this Annual Information Form.

Pre-Approval of Policies and Procedures

Under the Audit Committee Charter, the Audit Committee is required to pre-approve or approve (if pre-approval is not required by law) the appointment of the external auditor to provide any audit service or non-prohibited non-audit service to us and, if desired, establish detailed policies and procedures for the pre-approval of audit services and non-prohibited non-audit services by the external auditor. The Audit Committee may delegate this ability to one or more of its members to the extent permitted by applicable law provided that any pre-approvals granted pursuant to such delegation must be detailed as to the particular service to be provided, may not delegate Audit Committee responsibilities to management and must be reported to the full Audit Committee at its next scheduled meeting.

The Audit Committee has determined that in order to ensure the continued independence of the auditors, only limited non-audit related services would be provided to us by KPMG LLP and in such case, only with the prior approval of the Audit Committee.







---



















External Auditor Service Fees

The following table sets forth the audit service fees billed by our external auditor, KPMG LLP, for the periods indicated:

|                                    |                       |                                            
|----------------------------------- | --------------------- | -------------------------------------------
|Type of Fees and Fiscal Year Ended  | Aggregate Fees Billed | Nature of Services Performed               
|Audit Fees                          |                       |                                            
|Fiscal Year ended December 31, 2007 | $476,016              | Audit of consolidated financial statements 
|Fiscal Year ended December 31, 2006 | $444,500              | Audit of consolidated financial statements 
|                                    |                       |                                            
|Audit  Related Fees                |                       |                                            
|Fiscal Year ended December 31, 2007 | $Nil                  |                                            
|Fiscal Year ended December 31, 2006 | $Nil                  |                                            
|                                    |                       |                                            
|Tax Fees                            |                       |                                            
|Fiscal Year ended December 31, 2007 | $Nil                  |                                            
|Fiscal Year ended December 31, 2006 | $Nil                  |                                            
|                                    |                       |                                            
|All Other Fees                      |                       |                                            
|Fiscal Year ended December 31, 2007 | $Nil                  |                                            
|Fiscal Year ended December 31, 2006 | $13,589               | Services in connection with equity offering



CONFLICTS OF INTEREST

Certain of our directors are associated with other companies or entities, which may give rise to conflicts of interest. In accordance with the ABCA, directors who have a material interest in any person who is a party to a material contract or proposed material contract with us are required, subject to certain exceptions, to disclose that interest and abstain from voting on any resolution to approve that contract. In addition, the directors are required to act honestly and in good faith with a view to our best interests. We are not aware of any existing or potential material conflicts of interest between us and any of our directors or officers.

LEGAL PROCEEDINGS

There are no material legal proceedings to which we are a party or of which any of our property is the subject, nor are any such proceedings known to us to be contemplated except as follows:

1.

Bazalt filed a Statement of Claim in the District Court for Warsaw, Poland on November 23, 2006 seeking payment from our company in the amount of PLN20,000 (approximately $8,000), plus default interest and costs in connection with our failure to make advances under a loan facility agreement between Bazalt and our company. We, through our counsel, filed an objection in the District Court of Warsaw on January 15, 2007 seeking to dismiss the claim and for costs in the proceedings. In addition, on February 16, 2007, we counterclaimed against Bazalt in the District Court for Warsaw claiming return of monies advanced under the same loan agreement in the amount of US$750,000. The counterclaim file has been transferred to the Provincial Court in Lodz, Poland as that is the proper forum to hear this matter. On November 7, 2007, the Regional Court of Lodz issued a verdict against Bazalt, awarding our company US$776,465.75 plus interest. Our lawyers in Poland have started enforcement proceedings against the building and the land of Bazalt in order to recover the award;







---







2.

Inline Fiberglass Ltd. ("Inline") commenced a proceeding against our company and our wholly-owned subsidiary, Resin International, by Notice of Action on December 21, 2006 in the Ontario Superior Court of Justice. The Notice of Action and subsequently prepared Statement of Claim were served on our company on January 26, 2007. Inline claims in its Statement of Claim general damages in the amount of $600 million and punitive damages in the amount of $1 million for breach of contract, breach of confidence, breach of fiduciary obligations and conversion of Inline's property in relation to alleged agreements for the manufacture and sale of rollers for industrial applications and the technology associated with such manufacture. Inline alleges that we have appropriated to ourselves various orders, customers and other prospects for such rollers as well as Inline's production technology. In addition, Inline claims against us general damages in the amount of $50 million for breach of an agreement for the purchase and sale of shares in a Serbian company, alleging that the failure of Resin International to pay the balance of the purchase price in shares in the Serbian company resulted in a loss of business opportunities. In both cases, Inline has claimed interest and costs on a substantial indemnity basis. Our legal counsel filed a Statement of Defence and a Counterclaim on December 21, 2007 with the Ontario Superior Court of Justice. In our counter we assert:

(d)

damages for breach of contract in the amount of US$400,000;

(e)

pre-judgment and post judgment interest at the prime rate plus two percent from the date we deposited funds with Inline Fiberglass and in the alternative, pre-judgement interest and post judgment interest on the funds advanced pursuant to the Courts of Justice Act(Ontario);

(f)

cost of the claim and the counterclaim; and

(g)

such further and other relief as to the Court may seem just.

We intend to vigorously defend Inlines action and pursue our counterclaims. Although no discoveries have yet taken place in the action, management of our company is of the view that the claim of Inline is without merit.

3.

Stanley Rokicki ("Rokicki") and Bazalt commenced a proceeding against our company by Notice of Action on December 22, 2006 in the Ontario Superior Court of Justice. A Notice of Action and Statement of Claim were served on our company on January 26, 2007. In the Statement of Claim, the Plaintiffs claim general damages in the amount of $50 million, special damages in the amount of $1,125,000 plus interest and costs on a substantial indemnity basis for alleged breaches of a memorandum of understanding between Rokicki and our company and a loan facility agreement between Bazalt and our company. The Plaintiffs allege that our failure to advance the balance of cash payments under the memorandum of understanding has resulted in the inability of Bazalt to fill commercial orders. Our legal counsel filed a Statement of Defence and Counterclaim on December 21, 2007 with the Ontario Superior Court of Justice. In our counterclaim we claim:

(a)

should the Memorandum of Understanding be found to be legally binding then our company claims as against Rokicki the following relief:

(i)

damages for breach of contract in the amount of US$750,000;

(ii)

pre-judgement and post judgement interest pursuant to the Courts of Justice Act, (Ontario);

(iii)

cost of the claim and the counterclaim; and

(iv)

such further and other relief as to the Court may seem just.

(a)

In the alternative, if Memorandum of Understanding is not legally binding then our company claims as against Rokicki the following relief:

(i)

damages for misrepresentation inducing breach of contract in the amount of US$750,000;

(ii)

pre-judgement and post judgement interest pursuant to the Courts of Justice Act, (Ontario);

(iii)

cost of the claim and the counterclaim; and

(iv)

such further and other relief as to the Court may seem just.

We intend to vigorously defend Rokickis action and pursue our conterclaims. Although pleadings have not closed and no discovery has yet taken place, management of our company is of the view that the claim by Rokicki is without merit.







---







4.

We started arbitration proceedings against Industrial Service & Machine Inc., operating as McClean Anderson, a division of Industrial Service & Machine Inc. ("McClean Anderson") on October 20, 2006 for breach of contract, negligent misrepresentation and breach of duties of care. We were bound to an arbitration clause in an agreement between us and McClean Anderson. Under the Rules of Arbitration of the International Chambers of Commerce an advance cost is payable for the arbitration in equal shares by the parties. We paid our share of the cost, but McClean Anderson refused to pay its share. As a result of McClean Andersons breach of its agreement to arbitrate, our legal counsel filed a claim against McClean Anderson in the Court  of Queens Bench of Alberta on June 15, 2007 for:

(a)

an interim injunction and permanent injunction directing McClean Anderson to provide all outstanding deliverables including but not limited to all necessary tools, including all software and source codes to enable the programmable components of the filament winding systems to be fully accessible and usable on an ongoing basis to our companys personnel;

(b)

an Order for specific performance requiring McClean Anderson to perform all, or certain of its contractual obligations as directed by the Court;

(c)

a declaration that our company may commence, prosecute and seek damages in an action before the Court;

(d)

a declaration that McClean Anderson intended to cause harm to our company without any lawful justification and disentitling McClean Anderson from relying upon any provisions of the agreements with our company which purport to limit the damages for which McClean Anderson is liable;

(e)

damages in the sum of $27,823,196, or such amount as may be proven at trial;

(f)

costs of the action; and

(g)

such further and other relief as the Court deems equitable and advisable.

McClean Andersons motion to stay the proceedings in the Alberta Courts and to refer the parties back to arbitration was heard on November 20, 2007 and was unsuccessful. McClean Anderson filed a Notice of Appeal on December 9, 2007, but the Appeal was dismissed on March 10, 2008. McClean Anderson has not filed a Statement of Defence or a counterclaim.



INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

There are no material interests, direct or indirect, of any director or executive officer of our company, any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of any class or series of our company's outstanding voting securities, or any associate or affiliate of any of the foregoing persons or companies, in any transaction during the year ended December 31, 2007 or during the current financial year that has materially affected or will materially affect our company, other than as disclosed elsewhere in this Annual Information Form.

TRANSFER AGENT AND REGISTRAR

Computershare Trust Company of Canada is the transfer agent and registrar of our Common Shares and Debentures and is the trustee of the Debentures. The registers of transfers of our Common Shares and Debentures are located in Toronto, Ontario and Calgary, Alberta. We are the transfer agent and registrar of our outstanding warrants and broker warrants at our principal office located in Calgary, Alberta.







---







MATERIAL CONTRACTS

Other than contracts which we entered into in the ordinary course of business, the only contracts that are material to us and that were entered into within the most recently completed financial year, or before the most recently completed financial year, and which are still in effect are:

1.

the Technology Transfer Agreement and Cost Sharing Agreement with Resin International referred to under "Corporate Structure";

2.

the Distribution Agreement with HD Supply Utilities referred to under "Business of the Corporation  II. RStandard Utility Poles  Marketing, Sales and Distribution";

3.

the Manufacturing and Licensing Agreement with Global referred to under "Business of the Corporation  II. RStandard Utility Poles  Manufacturing"; and

4.

the trust indenture dated as of October 6, 2005 between us and Computershare Trust Company of Canada providing for the issue of the $25 million principal amount of Debentures on October 6, 2005 referred to under "Description of Capital Structure  Unsecured Convertible Debentures".

ESCROWED SECURITIES

To our knowledge, none of our securities are held in escrow or subject to a contractual restriction on transfer.

PRIOR SALES

There is no class of our securities that is outstanding but not listed or quoted on a marketplace other than the following:

1.

$25 million principal amount of Debentures, the terms of which are disclosed under "Description of Capital Structure  Unsecured Convertible Debentures";

2.

on January 12, 2007, we issued 2,500,000 warrants which comprised part of 5,000 units which were issued at a price of $1,000 per unit, each warrant entitling the holder thereof to acquire one Common Share at an exercise price of $1.00 per share until July 14, 2008. As at the date of this Annual Information Form, the 2,500,000 warrants are outstanding;

3.

on January 12, 2007, as part of the consideration for their services in connection with the immediately foregoing private placement, we issued agents broker warrants to purchase an aggregate of 625,000 Common Shares at an exercise price of $0.86 per share until July 14, 2008. As at the date of this Annual Information Form, the 625,000 broker warrants are outstanding; and

4.

on March 29, 2007, as part of the consideration for their services in connection with a private placement of 31,338,889 Common Shares, we issued agents broker warrants to purchase an aggregate of 1,400,000 Common Shares at an exercise price of $1.00 per share until March 31, 2008. As at the date of this Annual Information Form, 925,000 of the broker warrants are outstanding.







---







INTERESTS OF EXPERTS

Names of Experts

The only person or company who is named as having prepared or certified a report, valuation, statement, or opinion described or included in a filing, or referred to in a filing, made under National Instrument 51-102 by us during, or relating to, our most recently completed financial year, and whose profession or business gives authority to the  report, valuation, statement or opinion made by the person or company, is KPMG LLP, Chartered Accountants, our independent auditors. KPMG LLP, Chartered Accountants, have performed the external audit of our consolidated financial statements for the fiscal year ended December 31, 2007.



Interests of Experts

KPMG LLP is independent of our company within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Alberta.

ADDITIONAL INFORMATION

Additional information relating to us including the materials listed in the preceding paragraphs may be found on SEDAR at www.sedar.com or through our website at www.grouprsi.com.

Additional information, including our directors' and officers' remuneration and indebtedness, principal holders of our securities and our securities authorized for issuance under equity compensation plans is contained in our information circular for our annual and special meeting of shareholders to be held on May 23, 2007.

Additional financial information is also provided in our consolidated financial statements and management's discussion and analysis for the financial year ended December 31, 2007.







---







SCHEDULE "A"

RESIN SYSTEMS INC.

AUDIT COMMITTEE

MANDATE AND TERMS OF REFERENCE

Role and Objective

The Audit Committee (the "Committee") is a committee of the board of directors (the "Board") of Resin Systems Inc. ("RS" or the "Corporation") to which the Board has delegated its responsibility for the oversight of the nature and scope of the annual audit, the oversight of management's reporting on internal accounting standards and practices, the review of financial information, accounting systems and procedures, financial reporting and financial statements and has charged the Committee with the responsibility of recommending, for approval of the Board, the audited financial statements, interim financial statements and other mandatory disclosure releases containing financial information.

The primary objectives of the Committee are as follows:

1.

to assist directors in meeting their responsibilities (especially for accountability) in respect of the preparation and disclosure of the financial statements of RS and related matters;

2.

to provide better communication between directors and external auditors;

3.

to enhance the external auditor's independence;

4.

to increase the credibility and objectivity of financial reports; and

5.

to strengthen the role of the independent directors by facilitating in depth discussions between directors on the Committee, management and external auditors.

MEMBERSHIP OF COMMITTEE

1.

The Committee will be comprised of at least three (3) directors of RS or such greater number as the Board may determine from time to time and all members of the Committee shall be "independent" (as such term is used in Multilateral Instrument 52-110  Audit Committees "MI 52-110") unless the Board determines that the exemption contained in MI 52-110 is available and determines to rely thereon. "Independent" generally means free from any business or other direct or indirect material relationship with RS that could, in the view of the Board, reasonably interfere with the exercise of the member's independent judgment.

2.

The Board may from time to time designate one of the members of the Committee to be the Chair of the Committee.

3.

All of the members of the Committee must be "financially literate" (as defined in MI 52-110) unless the Board determines that an exemption under MI 52-110 from such requirement in respect of any particular member is available and determines to rely thereon in accordance with the provisions of MI 52-110. Being "financially literate" means members have the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the RS's financial statements.







---







4.

At least one member of the Committee must be an "Audit Committee Financial Expert". "Audit Committee Financial Expert" means a person who has the following attributes:

(a)

an understanding of generally accepted accounting principles and financial statements;

(b)

the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;

(c)

experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by RS's financial statements, or experience actively supervising one or more persons engaged in such activities;

(d)

an understanding of internal controls and procedures for financial reporting; and

(e)

an understanding of audit committee functions;

acquired through any one or more of the following:

(a)

education and experience as a principal financial officer, principal accounting officer, controller, public accountant or external auditor or experience in one or more positions that involve the performance of similar functions;

(b)

experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, external auditor or person performing similar functions; or

(c)

experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or other relevant experience.

MANDATE AND RESPONSIBILITIES OF COMMITTEE

It is the responsibility of the Committee to:

1.

Oversee the work of the external auditors, including the resolution of any disagreements between management and the external auditors regarding financial reporting.

2.

Satisfy itself on behalf of the Board with respect to RS's internal control systems:

·

identifying, monitoring and mitigating business risks; and

·

ensuring compliance with legal, ethical and regulatory requirements.



3.

Review the annual and interim financial statements of RS and related management's discussion and analysis ("MD&A") prior to their submission to the Board for approval. The process should include but not be limited to:

·

reviewing changes in accounting principles and policies, or in their application, which may have a material impact on the current or future years' financial statements;

·

reviewing significant accruals or other estimates;

·

reviewing accounting treatment of unusual or non-recurring transactions;

·

ascertaining compliance with covenants under loan agreements;

·

reviewing disclosure requirements for commitments and contingencies;

·

reviewing adjustments raised by the external auditors, whether or not included in the financial statements;

·

reviewing unresolved differences between management and the external auditors; and

·

obtain explanations of significant variances with comparative reporting periods.







---







4.

Review the financial statements, prospectuses and other offering documents, MD&A, annual information forms ("AIF") and all public disclosure containing audited or unaudited financial information (including, without limitation, annual and interim press releases and any other press releases disclosing earnings or financial results) before release and prior to Board approval. The Committee must be satisfied that adequate procedures are in place for the review of RS's disclosure of all other financial information and will periodically assess the accuracy of those procedures.

5.

Review and approve the disclosure of audit committee information required to be included in the AIF of the Corporation prior to its filing with regulatory authorities.

6.

Meet privately with the external auditor as frequently as the Committee feels is appropriate to fulfill its responsibilities, which will not be less frequently than annually, to discuss any items of concern to RS or the external auditor, including:

(i)

all critical accounting policies and practices to be used by RS;

(ii)

all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor; and

(iii)

any illegal act that may have occurred and the discovery of which is required to be disclosed to the Committee pursuant to the United States Securities Exchange Act of 1934.

7.

With respect to the appointment of external auditors by the Board:

·

recommend to the Board the external auditors to be nominated;

·

recommend to the Board the terms of engagement of the external auditor, including the compensation of the auditors and a confirmation that the external auditors will report directly to the Committee;

·

on an annual basis, review and discuss with the external auditors all significant relationships such auditors have with the Corporation to determine the auditors' independence within the meaning of the federal securities legislation administered by the United States Securities and Exchange Commission and of the Independence Standards of the Canadian Institute of Chartered Accountants, and ensure that the external auditors are in compliance with any independence requirements adopted by the Public Company Accounting Oversight Board; and, confirm that the external auditors have complied with applicable laws with the rotation of certain members of the audit engagement team;

·

when there is to be a change in auditors, review the issues related to the change and the information to be included in the required notice to securities regulators of such change; and

·

review and pre-approve or approve (if pre-approval is not required by law) the appointment of the external auditor to provide any audit service or non-audit service to RS or its subsidiaries and, if desired, establish detailed policies and procedures for the pre-approval of audit services and non-audit services by the external auditor. The Committee may delegate this ability to one or more members to the extent permitted by applicable law provided that any pre-approvals granted pursuant to such delegation must be detailed as to the particular service to be provided, may not delegate Committee responsibilities to management and must be reported to the full Committee at its next scheduled meeting. The Committee shall consider the impact on the independence of the external auditors of any non-audit services to be provided to RS or its subsidiaries by such auditors.

8.

Review with external auditors (and internal auditor if one is appointed by RS) their assessment of the internal controls of RS, their written reports containing recommendations for improvement, and management's response and follow-up to any identified weaknesses. The Committee will also review annually with the external auditors their plan for their audit and, upon completion of the audit, their reports upon the financial statements of RS and its subsidiaries.







---







9.

Review disclosures made to the Committee by the Chief Executive Officer and the Chief Financial Officer during their certification process for applicable securities law filings about any significant deficiencies and material weaknesses in the design or operation of RS's internal control over financial reporting which are reasonably likely to adversely affect RS's ability to record, process, summarize and report financial information, and any fraud involving management or other employees who have a significant role in RS's internal control over financial reporting.

10.

Review the adequacy of the internal controls that have been adopted by RS to safeguard assets from loss and unauthorized use and to verify the accuracy of the financial records and any special audit steps adopted in light of material control deficiencies.

11.

Review the controls and procedures that have been adopted to confirm that material information about RS and its subsidiaries that is required to be disclosed under applicable law or stock exchange rules is disclosed and to review the public disclosure of financial information extracted or derived from RS's financial statements and periodically assess the adequacy of these procedures.

12.

Establish a procedure for:

·

the receipt, retention and treatment of complaints received by RS regarding accounting, internal accounting controls or auditing matters; and

·

the confidential, anonymous submission by employees of RS of concerns regarding questionable accounting or auditing matters.

13.

Review and approve RS's hiring policies regarding partners and employees and former partners and employees of the present and former external auditors of RS.

The Committee has authority to communicate directly with the internal auditors (if any) and the external auditors of the Corporation. The external auditors shall be required to report directly to the Committee. The Committee will also have the authority to investigate any financial activity of RS. All employees of RS are to cooperate as requested by the Committee.

The Committee may also retain persons having special expertise and/or obtain independent professional advice to assist in filling their responsibilities at such compensation as established by the Committee and at the expense of RS without any further approval of the Board.

Meetings and Administrative Matters

1.

At all meetings of the Committee every question shall be decided by a majority of the votes cast. In case of an equality of votes, the Chairman of the meeting shall be entitled to a second or casting vote.

2.

The Chair will preside at all meetings of the Committee, unless the Chair is not present, in which case the members of the Committee that are present will designate from among such members the Chair for purposes of the meeting.

3.

A quorum for meetings of the Committee will be a majority of its members, and the rules for calling, holding, conducting and adjourning meetings of the Committee will be the same as those governing the Board unless otherwise determined by the Committee or the Board.

4.

Meetings of the Committee should be scheduled to take place at least four times per year. Minutes of all meetings of the Committee will be taken. The Chief Financial Officer will attend meetings of the Committee, unless otherwise excused from all or part of any such meeting by the Chairman.

5.

The Committee will meet with the external auditor at least once per year (in connection with the preparation of the year-end financial statements) and at such other times as the external auditor and the Committee consider appropriate.







---







6.

Agendas, approved by the Chair, will be circulated to Committee members along with background information on a timely basis prior to the Committee meetings.

7.

The Committee may invite such officers, directors and employees of the Corporation as it sees fit from time to time to attend at meetings of the Committee and assist in the discussion and consideration of the matters being considered by the Committee.

8.

Minutes of the Committee will be recorded and maintained and circulated to directors who are not members of the Committee or otherwise made available at a subsequent meeting of the Board.

9.

The Committee may retain persons having special expertise and may obtain independent professional advice to assist in fulfilling its responsibilities at the expense of the Corporation.

10.

Any members of the Committee may be removed or replaced at any time by the Board and will cease to be a member of the Committee as soon as such member ceases to be a director. The Board may fill vacancies on the Committee by appointment from among its members. If and whenever a vacancy exists on the Committee, the remaining members may exercise all its powers so long as two (2) members remain on the Committee. Subject to the foregoing, following appointment as a member of the Committee, each member will hold such office until the Committee is reconstituted.

11.

Any issues arising from these meetings that bear on the relationship between the Board and management should be communicated to the Chairman of the Board by the Committee Chair.







---



























MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2007



The following discussion of the financial condition and results of operations of Resin Systems Inc. (RS or the Company) should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2007 and the annual information form of the Company dated March 12, 2008 for a complete understanding of the financial position and results of operations of the Company.  The information in this document is provided as of March 12, 2008 and is stated in thousands of Canadian dollars unless otherwise indicated.



Certain information set forth in this MD&A, including management's assessment of the Company's future plans and operations, contains forward-looking statements which are based on the Company's current internal expectations, estimates, projections, assumptions and beliefs, and which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as "anticipate", "believe", "plan", "estimate", "expect", "predict", "intend", "will", "may", "could", "would", "should" and similar expressions intended to identify forward-looking statements. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the Company's lack of revenues and unpredictability of future revenues; the uncertainty of the profitability of existing and contemplated products of the Company; the Companys future capital requirements; the Companys future labour requirements; competition from established competitors with greater resources; the uncertainty of developing a market for the Companys products or for third party products incorporating its products; the Company’s reliance on third parties to manufacture and sell its RStandardTM products and to manufacture and sell a line of rollers based on its RStandard composite roller tubes; the Company’s reliance on third party licensees in international markets; the risks associated with rapidly changing technology; the Company's reliance on third parties to supply raw materials to it so it may make its VersionTM resin and RStandard composite roller tubes; intellectual property risks, risks associated with international operations, foreign exchange rate fluctuations and changes in general economic, market and business conditions.  Many of these risks and uncertainties are described in the Company's annual information form for the year ended December 31, 2007 and other documents the Company files with the Canadian securities authorities and the United States Securities and Exchange Commission. The forward-looking statements are made as of the date hereof and the Company assumes no obligation to update or revise such statements to reflect new events or circumstances unless otherwise required to by applicable securities laws.



Additional information relating to the Company, including the Companys annual information form for the year ended December 31, 2007 is available on the SEDAR website at www.sedar.com, the EDGAR website at www.sec.gov and on the Companys website at www.grouprsi.com.









---





Mission and Vision

RS is a technology innovator that develops advanced composite products for infrastructure markets. This new generation of products is not only structurally superior to products made with old world materials such as wood, steel and concrete, its also lighter, more durable and longer-lasting. The company has entered the North American market with its modular utility poles and conveyor roller tubes as its two flagship products, and identifies a growing list of additional innovative products.



RS designs, engineers and markets its products worldwide, while outsourcing its manufacturing and distribution.



Business Strategy

The Company is headquartered in Calgary, Alberta. Using its competitive advantages, its Version resin system and its composite products development and engineering expertise, the Companys business model is to develop products that have large and addressable markets with uniform requirements globally and where the benefits of RSs proprietary materials provide economic and performance advantages over conventional materials. RSs business model is comprised of the following stages:

(i)

Product Screening screening new product opportunities that have large and addressable markets with uniform requirements globally and where the benefits of the Companys proprietary materials and processes provide significant economic and performance advantages compared to conventional materials;

(ii)

Product Development product engineering and development, and product prototyping and testing;

(iii)

Market Entrypartnering with strategic third party distributors to introduce the product to market, raise customer awareness and distribute the product for customer pilot projects and initial orders.  During this stage, the Company will produce the product in small quantities and the product will continue to be refined and tested to meet the markets needs; and

(iv)

Market Penetration engaging experienced third party manufacturers to meet growing customer demand.  During this stage, the Company will supply manufacturing partners with its proprietary VersionTM resin, oversee production and quality control and collaborate with distribution partners to provide technical product support and drive market demand for the product.

By developing products that pass the Company’s rigorous screening process, the Company believes it can achieve significant revenue growth and superior returns without significant capital and resource requirements. Further, because the Companys business model is based on partnering with experienced and established manufacturing and distribution partners, the Company believes it can achieve market penetration and its growth objectives faster because it benefits from its partners established infrastructure, resources, reputations and expertise.







---













Core Business Focus

The Companys primary business focus is commercializing its first two products:

(i)

RStandardTM utility pole is a light and durable modular pole that satisfies the most common heights and strengths of transmission and distribution pole needs of power utilities.  The product is in the market penetration stage of RSs business model;

(ii)

RStandard roller tube is a light and durable large-diameter tube used in roller assemblies for industrial bulk material handling equipment.  The product is in the market entry stage of the Companys business model.

Overview of 2007 results

2007 was characterized by the transformation of RSs leadership, business strategy and business focus. While the results of this transformation are expected to show fully in 2008, significant progress was made during the year.



RS began to show positive margins of 2 percent in the second half of 2007 compared to negative 23 percent in the four quarters of 2006 reflecting an improvement of 25 percent.

RSs 2007 operating results reflect the positive impact of the Companys restructuring. It lowered its cash expenditure rate for operations to approximately $1,100 per month in the third and fourth quarters of 2007 compared to $3,100 per month in the last half of 2006. The Company does not expect significant changes to these levels of expenditures in the foreseeable future.

RStandard Utility Poles

In January 2007, the Company signed a five-year distribution agreement (Distribution Agreement) with HD Supply Utilities, Ltd. (HD Supply Utilities) designating them as the exclusive distributor of RStandard utility poles in Canada, the United States, Mexico, Bermuda, the Bahamas and all the Caribbean Islands. Pursuant to the distribution agreement, HD Supply Utilities provided RS with an initial purchase order for RStandard poles with a value exceeding US$50 million.



The Company believes this agreement will enable an efficient and accelerated market penetration of RStandard poles. RS will benefit from HD Supply Utilitiess established reputation, customer base, industry relationships and distribution infrastructure.



In January 2007, the Company signed a letter of intent with Global Composite Manufacturing (Global), a corporation operating in Tilbury, Ontario and in August 2007 entered into an amended and restated manufacturing and licensing agreement reflecting substantially the same terms and conditions as reflected in the letter of intent.This agreement provides the framework whereby Global moved, upgraded and re-commissioned the existing RStandard utility pole manufacturing equipment previously used by RS, as well as related additions for use in Globals production of RStandard utility poles under license from the Company.







---









Globals original plans were to begin production in June 2007. However delays in the readiness of the Tilbury plant delayed the installation and subsequent start-up of manufacturing on the first production cell to August 2007 and commercial shipments of utility poles started in September.

During the fourth quarter of 2007, Global focused on achieving an efficient manufacturing process and reaching a three shift operation on the first production cell. In 2008, Global has shifted its attention to increasing production output on the first production cell as well as upgrading, installing and recommissioning the second production cell, completion of which is expected in the second quarter of 2008.



RStandard utility poles valued at $888 were shipped from Globals production facility in 2007 supplying utilities within North America and Australia.



During the production start-up period, the Companys focus with HD Supply Utilities was on sales force training and strategic planning, laying the foundation for product market penetration. With Globals production now anticipated to reach expected levels in the first half of 2008, HD Supply Utilities is expected to begin stocking distribution outlets and increasing its distribution efforts.



With the pricing provisions in the HD Supply Utilities and Global agreements, the Company anticipates stable and predictable margins during the term of these purchase arrangements as both selling price and production costs are fixed by the agreements.



The Company has focused considerable resources to support Global in establishing successful manufacturing operations in Ontario.  The Companys support for Global includes the prepayment of $3,500 to be applied against future utility pole deliveries which assisted Global in financing their start-up costs.  Pursuant to the terms of these prepayments, the Company expects these advances will be repaid through product deliveries and/or cash during the first half of 2008.



Subsequent to year-end, Global has completed a $6,100 financing as contemplated by the manufacturing and license agreement between Global and RS. Globals overall financing plan includes Ontario provincial government loans and grants.  RS has provided guarantees in the amount of $6,100 to Globals lenders in this financing:  $2,100 on a limited recourse basis collateralized by the RStandardutility pole manufacturing equipment, and $4,000 on a full recourse basis.  The guarantees would be called upon if Global fails to perform under its obligations to its lenders.



RStandard Composite Roller Tube 
(formerly VRollTM Composite Roller Tube)

In December 2006, RS entered into a multi-year exclusive supply agreement with FMC Technologies, Inc. ("FMC Technologies") of Houston, Texas, a leading manufacturer and distributor of material handling systems and conveyor rollers to the mining industry and operators of bulk material handling systems worldwide. Pursuant to the agreement, the Company will supply RStandard composite roller tubes to FMC Technologies's Material Handling Solutions business for use in its new line of composite Link-Belt® Conveyor Idler Rolls.  The agreement provides that RS will work with FMC Technologies exclusively in the area of composite conveyor rollers globally, except for the territories of Poland and Australia, subject to specified terms and conditions.



The Company and FMC Technologies completed the development of FMC Technologies's line of Link-Belt Composite Conveyor Idler Rolls made with RStandard composite tubes for above ground applications in early 2007 and received certification for use in underground applications from the U.S. Mining Safety and Health Administration in the third quarter 2007, adding a significant addressable market segment for the roller tube business line.







---









Over the second half of 2007, FMC Technologies undertook a variety of activities in preparation for full-scale production of composite rollers and the full market launch for Link-Belt Composite Conveyor Idler Rolls. These activities were expected to be completed in 2007. As a result of delays





by FMC Technologies in their assembly of the end-product composite idler rolls, the activities were delayed until the first quarter of 2008.



The Companys roller tube production capacity is being increased with the addition during the first quarter of 2008 of a higher tonnage pultruder. The new pultruder will allow RS to produce larger diameter roller tubes, start the planned production of pultruded utility poles, and will enhance the Companys ability to continue its research and development of new products. The Companys combined production capability is expected to be sufficient to supply the full range of tubes and profiles required for the roller tube and utility pole product lines during 2008.



With these efforts ongoing, the Company and FMC Technologies began their efforts to identify and deliver to paid-for pilot installations; marking the beginning of market introduction efforts. These activities continued into the first quarter of 2008, with more than 50 percent of identified pilot installations delivered to date. Regular orders from the pilots delivered during 2007 are expected to begin in the second quarter of 2008.



2008 Outlook and Plans

RStandard Utility Poles

RS can supply the most common transmission and distribution poles required by North American utilities with its market tested RStandard utility poles.  With its Distribution Agreement with HD Supply Utilities and its contract manufacturing capacity, RS believes that it is now in a position to more aggressively penetrate the North American market with its RStandard utility poles.

The Companys goals in 2008 include achieving the following important milestones for its utility pole product line:

·

continue to oversee operational improvements of the first cell of the RStandard utility pole manufacturing equipment by Global;

·

support and oversee the upgrade, recommissioning and operation of the second cell of the RStandard utility pole manufacturing equipment by Global;

·

support and oversee the engineering, construction, commissioning and operation of additional production cells to meet the growing market demand;

·

work with HD Supply Utilities pursuant to the Distribution Agreement to continue its North American market penetration for RStandard poles by adding key customers and increasing the number of repeat orders from existing customers;

·

continue to expand the RStandard utility pole product line based on the needs and experiences of utility customers; and

·

develop and commercialize additional products in its RStandard utility pole product line including, pultruded utility poles up to 12 metres (40 feet), pultruded crossarms and pultruded crossbraces for H-frame structures. The new pultruded utility pole will allow the Company to enhance its competitiveness in the distribution pole market and the crossarms and crossbraces will increase its competitiveness in the H-frame structure market, both significant market segments.

RS believes it is positioned to increase its market share of utility pole sales in the marketplace as its competitively priced RStandard pole product line provides significant competitive advantages for utility customers compared to conventional wood, steel and concrete poles products.







---











RStandard Roller Tubes

RS expects to be in a position to manufacture and supply its RStandard tubes in sufficient quantities to FMC Technologies for use in its new line of composite Link-Belt Conveyor Idler Rolls to support the continued introduction and eventual full market launch of the product to the mining industry and operators of bulk material handling systems.

The Companys goals in 2008 include achieving the following important milestones for its RStandard roller tube product line:

·

support FMC Technologies as it continues to introduce its composite Link-Belt Conveyor Idler Rolls to its strategic customers, continues to identify and deliver product to paid-for pilot projects, supply repeat customers and initiate the full market launch of the product;

·

manufacture initial quantities of RStandard tubes required by FMC Technologies during the market entry stage of its Link-Belt Conveyor Idler Rolls;

·

continue to develop its RStandard composite tubes based on the needs and experiences of customers; and

·

enter into licenses with experienced third parties, as required, to manufacture greater quantities of its RStandard roller tubes to position the Company to meet growing customer demand.

RS believes that FMC Technologies's composite Link-Belt Conveyor Idler Rolls made with RStandard tubes will be successfully introduced to the market because of the significant competitive advantages, including its excellent corrosion-resistance and low weight compared to conventional steel rollers.



RStandard roller tubes are currently manufactured at RSs leased 5,200 square metre (56,000 square foot) Calgary production facility.  This facility currently has pultrusion lines capable of producing approximately 300,000 roller tubes annually which is sufficient supply for the market entry stage of RStandard composite tubes. During the first quarter of 2008, RS expects its new high-tonnage pultruder to be fully commissioned providing incremental production of thirty percent, increasing production capacity by 90,000 tubes. As market demand increases, RS intends to enter into arrangements with one or more experienced third party manufacturers to manufacture RStandard tubes for the Company.



Management continues to be focused on expanding its RStandard utility pole and roller tube businesses outside North America. In addition, the Company has made significant progress with its  two current product lines, it will be able to reallocate resources to new product research and development, using its business model described earlier.

The Company plans to execute its strategy with existing human and financial resources. The Company has 70 personnel, involved in business development, product research and development, engineering, sales, marketing, product support, purchasing, manufacturing, finance and administration. The Company expects to be cashflow positive by the end of 2008 and expects that its current cash resources are sufficient to execute its business plan. Accelerated expansion or failure to achieve planned business progress may require additional equity funding.

Corporate

RS significantly lowered its operating costs for the year ended 2007 by 40 percent compared to 2006, reflecting the Companys restructuring focus. It lowered its cash expenditure from operations to approximately $1,100 per month in the third and fourth quarters of 2007 compared with $3,100 in the third and fourth quarters of 2006. It also lowered its operating losses to $25,796 compared to $43,914 in 2006. The Company does not expect significant changes to these levels of operating expenditures through 2008.



The outsourcing of RStandard utility pole manufacturing to Global and the related move and upgrading of the manufacturing operations has been the largest contributor to cost reductions over 2007, with manufacturing and product development costs dropping by $15,871 in 2007 versus 2006.  In addition, the Companys personnel and other cost reductions have resulted in savings of $2,798 over 2006.







---







Leadership Changes

As at February 21, 2007, the Companys board of directors was restructured with the addition of:



Wilmot L. Matthews, chairman and director

Brian A. Felesky, director

James K. Gray, director

Paul B. Giannelia, director



Cheryl FitzPatrick, senior vice-president, marketing and sales, retired in April 2007 and due to changes in the Companys business structure, she was not replaced. Rob Schaefer, chief financial officer and corporate secretary, is leaving the Company in March 2008 to pursue other interests. The Company has contracted an interim replacement, a senior Chartered Accountant whose considerable experience includes financial leadership for public companies, while it completes its search for a permanent replacement.



Key Performance Indicators

The Company measures its success using a number of key performance indicators, which are outlined below. The following key performance indicators are not measurements recognized in accordance with Canadian generally accepted accounting principles and should not be considered as an alternative to other measures of performance which are in accordance with Canadian generally accepted accounting principles:



1)

Revenue and End-Customer Growth The Company defines revenue growth as the increase in annual revenues from quarter to quarter. The Company defines end-customer growth as the increase in total utilities using its poles and users of conveyor idler rolls incorporating RSs roller tube from quarter to quarter. Both measures indicate the Companys success in the market entry and market penetration of its products.



2)

Gross Profit Percentage  The Company determines gross profit percentage by dividing gross profit by revenue and expressing it as a percentage.  Gross profit percentage reveals the Companys success in realizing economic value from its proprietary products.



3)

Funds From Operations  The Company defines funds from operations as Cash used in operations, as reflected in the Consolidated Statements of Cash Flows before change in non-cash operating working capital.  Management believes that the presentation of this non-generally accepted accounting principle measure provides useful information about the Companys ability to fund future operations.







---

























|                                                       |                          |                     |               |         |        
|------------------------------------------------------ | ------------------------ | ------------------- | ------------- | ------- | -------
|Selected Financial Information                         |                         
|Thousands of Canadian dollars except per share amounts |                         
|                                                       | Years Ended December 31, | Increase (Decrease)
|                                                       | 2007                     | 2006                | 2005          | 2007/06 | 2006/05
|Product Revenues                                       | $     987                | $     4,352         | $     1,061   | %       | %      
|(77)                                                   | 310                     
|Net Loss                                               | $ (23,359)               | $ (43,411)          | $ (21,007)    | 46      | (107)  
|Net Loss Per Share                                     | $     (0.19)             | $     (0.48)        | $     (0.26)  | 63      | (85)   
|Funds from operations(1)(2)                            | $   (15,198)             | $   (36,268)        | $    (19,459) | 58      | (86)   
|                                                       |                          |                     |               |         |        
|Total assets                                           | $   26,515               | $   16,615          | $   35,519    | 60      | (53)   
|Total long-term liabilities                            | $   18,538               | $   17,544          | $   15,864    | 6       | 11     
|Working capital                                        | $   14,800               | $   (2,826)         | $   17,698    | 624     | (116)  



(1)

Funds from operations is defined as Cash used in operations, as reflected in the Interim Consolidated Statements of Cash Flows before change in non-cash operating working capital.  Management believes that the presentation of this non-generally accepted accounting principle measure provides useful information about the Companys ability to fund future operations.

(2)

Funds from operations is not a recognized measure under Canadian generally accepted accounting principles. Investors are cautioned that funds from operations should not be construed as an alternative to net earnings or loss determined in accordance with generally accepted accounting principles as an indicator of the financial performance of the Company or as a measure of the Companys liquidity and cash flows.  The Companys method of calculating funds from operations may differ from other issuers and may not be comparable to similar measures presented by other issuers.



Product revenue decreased from 2006 as a result of the shutdown of RStandard pole production in Calgary and the focus on commissioning Globals new RStandard pole manufacturing facility in Tilbury during the year.  Commercial shipments from the new RStandard pole production facility started in September 2007.  Product revenue during the year represents sales of RStandard utility poles of $888 and sales of RStandard roller tubes to FMC Technologies of $65.



Net loss decreased by $20,052 to a net loss of $23,359 in 2007 because of the shutdown of RStandard pole production in Calgary. Manufacturing and product development expenses decreased by $15,871. This decrease resulted from significantly lower manufacturing and product development costs incurred by the RStandard utility pole product line and a reduction in personnel costs. Restructuring costs incurred in 2007 were minimal compared to the $2,682 incurred in 2006 as restructuring activities were completed by February 2007.







---









Working capital increased by $17,626 which can be attributed to $33,308 of net proceeds raised from the common share offering in the first quarter of 2007. Working capital increases were offset by the use of $15,198 in cash to fund operations and the use of $720 for purchases of property, plant and equipment related to the Calgary production facility.





Long-term liabilities increased by $994 from December 31, 2006 largely due to the accretion of the debt portion of unsecured convertible debenture issued in October 2005.



Cost reductions were offset by an increase in general and administrative costs of $370 resulting from $3,277 in non-cash charges related to stock-based compensation awards granted in the year. Included in the total stock-based compensation is $3,018 relating to the president and chief executive officer, and the chief financial officer and corporate secretarys stock-based compensation.  These stock-based compensation awards were granted to officers of the Company to greater align their interest with shareholders interests. Also, contributing to the improvement in funds from operations year-over-year is the net gain embedded in Companys foreign currency contracts of $1,515, described below.



The largest purchasers of utility poles in the North American region purchase poles in U.S. dollars. Additionally, the most significant manufacturing costs of RStandard poles are raw materials, which are also routinely denominated in U.S. dollars. As a result, the Company negotiated its raw materials contracts, its contract for the manufacture of RStandard utility poles with Global, and its contract with HD Supply Utilities for the distribution of RStandard utility poles in U.S. dollars in order to insulate the Company to the largest degree possible from the effects of foreign currency exchange rate changes. During the period, the Company signed a definitive agreement with Global, which included fixed U.S. dollar prices for the manufacturing of RStandard poles and the sale of resin. Section 3855  Financial Instruments  Recognition and Measurement requires that the Company revalue the embedded foreign currency component of this contract based on forward foreign currency exchange rates at each period end. The fair value calculated using notional quantities per the Global agreement, management estimates and third party information, resulted in an unrealized foreign currency gain of $1,515 for the year.  The fair value of the foreign currency contracts will be valued quarterly resulting in a foreign exchange gain or loss recorded which will be dependent on the variability of foreign exchange rates over the period. The effect of foreign currency movements on the contracts for the purchase of raw materials and the sale of RStandard poles to HD Supply Utilities are not reflected in this revaluation as this treatment is not permitted under Canadian generally applied accounting principles.



|                              |                          |                      |           
|----------------------------- | ------------------------ | -------------------- | ----------
|Revenue                       |                          |                     
|Thousands of Canadian dollars |                          |                     
|                              | Years Ended December 31, | Increase            
|                              | 2007                     | 2006                 | (Decrease)
|                              |                          |                      | %         
|Product Revenues              | $                 987    | $              4,352 | (77)      
|Other income                  | 901                      | 379                  | 138       
|Total                         | $               1,888    | $             4,731  | (60)      



Revenues for the year were modest due to the shutdown of RStandard pole production in Calgary and the focus on commissioning Globals new RStandard pole manufacturing facility in Tilbury during the year. Commercial shipments from the new RStandard pole production facility started in September 2007. Product revenue in the year represents sales of RStandard utility poles and sales of RStandard roller tubes to FMC Technologies for use in Link-Belt Composite Idler Rolls for identified paid for pilot installations.







---







Other income is primarily comprised of interest income of $794 and a gain on the sale of discontinued product of $107.



In 2007, the gross product margins were ($17) or negative 2 percent compared to margins of ($999) or negative 23 percent in 2006.  Almost all sales for the first nine months of the year came from inventory



produced in Calgary prior to the move of pole manufacturing, which is valued close to current sales prices.  This, combined with warranty replacement costs of ($35) and freight on shipments of ($59) from Calgary in the first and second quarters of 2007 that RS chose to absorb for strategic reasons explain the negative margins recorded for the year. In the fourth quarter of 2007, cost of goods sold included $36 which related to the gain on foreign currency embedded derivative.  This adjustment to cost of goods sold relates to the change in the USD exchange rate since the amended and restated manufacturing and licensing agreement with Global was signed in August 2007, resulting in a reduction of gross margin for the quarter.

|                                                |                            |                    |           
|----------------------------------------------- | -------------------------- | ------------------ | ----------
|Operating Expenses                              |                            |                   
|                                                | Years Ended December 31,   | Increase          
|Thousands of Canadian dollars                   | 2007                       | 2006               | (Decrease)
|                                                |                            |                    | %         
|Manufacturing start-up and  product development | $                    5,944 | $           21,815 | (73)      
|General and administrative                      | 8,829                      | 8,459              | 4         
|Financing charges                               | 5,126                      | 4,086              | 25        
|Marketing and business development              | 2,287                      | 3,250              | (30)      
|Restructuring charges                           | 179                        | 2,682              | (93)      
|Write-down of property, plant and equipment     | 1,497                      | -                  | -         
|Amortization of property, plant and equipment   | 1,917                      | 2,623              | (27)      
|Total Operating Expenses                        | $               25,779     | $         42,915   | (40)      



Manufacturing and Product Development

Manufacturing and product development expenses decreased from $21,815 to $5,944 in 2007 due to the shutdown of RStandard pole manufacturing in Calgary in February 2007 and the related reductions in materials and labour costs that were being incurred during 2006 to establish production in Calgary.  Manufacturing and product development includes utility pole product development costs, composite roller tube manufacturing and development costs, and engineering, and research and development overhead costs.



For 2007, RStandard pole product development costs were $3,325 compared to $17,562 in the same period of 2006.  RStandard utility pole product development costs in the period resulted from activities directed at product improvement, the commissioning of manufacturing at Globals facility and the testing of product produced in Global's new manufacturing facility.



RStandard roller tube manufacturing and product development costs were $539 in 2007 compared to $nil in the same period of 2006.  Composite roller tube costs relate to the development of various sizes and types of roller tubes required by the market, production of samples and product testing.  During 2007 RS developed and produced product samples that increase the roller tubes conductivity for use underground and developed two new roller sizes. The conductive tube and the new roller tube sizes open new market segments for the roller tube business line.





Engineering and research and development overhead costs were $2,080 in 2007 compared to $4,253 in the same period of 2006, with decreases due primarily to personnel-related cost reductions related to the Companys restructuring.







---











General and Administrative

General and administrative expenses increased by $370 to $8,829 in 2007 due to non-cash charges of $3,481 related to stock-based compensation awards (described below) offset by personnel-related cost reductions due to the Companys restructuring.



During 2007, RS established, following shareholder approval, new stock option and restricted share unit plans, and entered into executive employment agreements with the president and chief executive officer, and the chief financial officer and corporate secretary.  These agreements provide the terms and conditions of employment for these executives, including base and incentive compensation; severance pay in the event of termination without just cause; modified vesting of certain unvested stock options and the one-time issuance of certain stock options and restricted share units.  As a result, 3,000,000 new options were issued to officers vesting over a period of three years, 1,000,000 previously unvested options were changed to vest immediately and 824,000 restricted share units were granted which also vested immediately.



Restructuring Charges

The Company undertook significant restructuring efforts in 2006 and early 2007. While the majority of related charges were recorded in 2006, charges include dismantling and cleaning of $107 and asset impairment of $72 were recorded in the current year.



Restructuring charges in 2006 were $2,682 resulting from the consolidation of production, and research and development operations in Calgary and severance related to the reduction of staff in order to transition the manufacturing of RStandard poles to Global and to improve overall operating efficiency. Charges included the decommissioning of property, plant and equipment totalling $1,779, workforce reduction cost of $495, dismantling and cleaning costs of $277 and taxes, utilities and lease costs of $131.



Financing Charges

Finance charges increased by $1,040 to $5,126 in 2007 due to costs of $816 associated with the promissory note and equity financings in the first quarter of 2007.  The Company also incurs interest charges on its convertible debenture.



Marketing and Business Development

Marketing and business development expenses decreased to $2,287 in 2007 from $3,250 in 2006 due primarily to personnel-related cost reductions. Marketing and business development expenses include costs for product and technical support provided to HD Supply Utilities and FMC Technologies as well as other business development activities.







---







Amortization of Property, Plant and Equipment

Amortization charges decreased by $706 to $1,917 compared to 2006 as a result of equipment sold or written-off offset by amortization of property, plant and equipment additions over the course of 2007 for the Calgary production facility.



Liquidity and Capital Resources

The Company's main source of cash flow has been through the issuance of equity securities. This dependence on issuing securities to fund its cash flow needs has resulted in management including a "Future Operations" note in the financial statements.  The going concern concept is dependent on the ability of an entity to realize its assets and discharge its liabilities and commitments in the normal course of business.

RS entered fiscal 2007 with $1,199 in cash and raised $33,177 from the issuance of short-term notes and common shares. To date, the Company has maintained spending levels in line with its forecasts. Further, the Company expects to be cashflow positive by the end of 2008 and expects that its cash resources are in line with its forecasts and are sufficient to execute its business plan.

RSs authorized share capital consists of an unlimited number of common shares and an unlimited number of preferred shares issuable in series whose designation, rights, privileges, restrictions and conditions are determined when issued.



Share capital consists of the following common shares and warrants:

|                                              |               |                  |          |         |               
|--------------------------------------------- | ------------- | ---------------- | -------- | ------- | --------------
|                                              | Common Shares |                  | Warrants
|(Common share and warrant numbers in 000s)  | Number        | Amount           |          | Number  | Amount        
|Balance, December 31, 2006                    | 96,100        | $        73,660  |          | 3,389   | $        1,172
|Issued for cash, net of issue costs           | 35,000        | 33,177           |          | -       | -             
|Warrants issued                               | -             | -                |          | 2,500   | 544           
|Broker warrants attributed to financing costs | -             | (593)            |          | 2,025   | 754           
|Stock options exercised                       | 980           | 1,016            |          | -       | -             
|Restricted share units issued                 | 824           | 1,302            |          |         |               
|Warrants exercised                            | 100           | 142              |          | (100)   | (42)          
|Warrants expired                              | -             | -                |          | (3,389) | (1,172)       
|Balance, December 31, 2007                    | 133,004       | $        108,704 |          | 4,425   | $        1,256



Stock options  outstanding options:



|                                                     |              
|---------------------------------------------------- | -------------
|                                                     | Number of    
|Options held by employees/non-employees  (in 000s) | stock options
|Outstanding, December 31, 2006                       | 5,699        
|Granted                                              | 3,220        
|Exercised                                            | (980)        
|Forfeited                                            | (1,197)      
|Outstanding, December 31, 2007                       | 6,742        









---







As at March 12, 2008, the Company has 134,936 common shares and 12,088 warrants, options outstanding and restricted share units outstanding.

Funds used in operations during 2007 totalled $15,198 including $2,125 related to debenture interest. In addition, RS prepaid $3,500 to Global during the period, which is expected to be repaid by product deliveries and/or cash during 2008.  The Company plans to finance its continuing operations from cash on hand until it reaches positive operating cashflow. Accelerated expansion or failure to achieve planned sales and production levels may require additional equity funding.



Capital expenditure program

The Company plans on investing approximately $872 in 2008 on capital equipment related to RStandard roller tube production and to support research and development activities, after which time it will have the production capacity needed to meet its near term demand for rollers and pultruded



utility products. Capital expenditures required during the next fiscal year will be financed through cash reserves. RSs pole manufacturing partner is responsible for capital expenditures related to the pole business.



Contractual obligations

In 2006, RS entered into agreements to lease plant and office space in three locations; one for office space with an initial term to June 30, 2011 with two five-year renewal options, one for manufacturing operations with an initial term to September 30, 2016 with two five-year renewal options and one for research and development facilities with an initial term to June 30, 2011.  During 2007, the research and development facilities were subleased for a term to June 30, 2011. The minimum rent payable for each of the next five years and thereafter is as follows:



Summary of Commitments by Year

|                          |                       |          |          |         |         |            |            
|------------------------- | --------------------- | -------- | -------- | ------- | ------- | ---------- | -----------
|                          | Expected Payment Date |         
|Obligation                | 2008                  | 2009     | 2010     | 2011    | 2012    | Thereafter | Total      
|(in $'000's)              |                       |          |          |         |         |            |            
|Operating Leases          | $ 782                 | $    792 | $    797 | $   645 | $   468 | $   1,797  | $   5,281  
|Capital Leases            | $   71                | Nil      | Nil      | Nil     | Nil     | Nil        | $        71
|Long term payable         | $ 384                 | Nil      | Nil      | Nil     | Nil     | Nil        | $      384 
|Convertible    Debentures | $2,125                | $  2,125 | $26,624  | Nil     | Nil     | Nil        | $30,874    



On October 6, 2005, the Company issued $25,000 principal amount of unsecured convertible debentures due October 7, 2010 and bearing interest at 8.5% per annum payable semi-annually each June 30 and December 31.  The holders of the debentures have the option to convert the principal amount of the debenture into common shares at a conversion price of $2.90 per share at any time prior to the maturity date or the business day preceding the Company exercising its redemption option on the debentures. This conversion price was more than the market price of the Companys common shares at the commitment date.



The debentures are redeemable by the Company at any time after October 6, 2007 at a redemption price equal to the principal amount plus accrued and unpaid interest provided that the weighted average trading price of the common shares exceeds $3.63 for the twenty consecutive trading days ending five trading days prior to the date of which notice of redemption is given. On redemption or maturity, the Company may elect to repay the principal amount plus accrued and unpaid interest on the debentures by issuing and delivering common shares in the amount of the debenture principal plus accrued and unpaid interest divided by 95% of the weighted average trading price of the common shares for the twenty consecutive trading days ending five trading days preceding the date fixed for redemption or maturity.







---







Subsequent to year-end, Global completed its $6,100 in financing, in connection with the manufacturing and license agreement between Global and RS.  Global received Ontario provincial government loans and grants as part of their overall financing plan.  RS provided guarantees to the lenders in this financing, with $2,100 on a limited recourse basis collateralized by the RStandardutility pole manufacturing equipment, and $4,000 on a full recourse basis.  The guarantees would be called upon if GCM fails to perform under its obligations to its lenders.  As at year-end, the Company has guaranteed $500.



The Company has no material debt obligations falling due in 2008 and does not expect any significant payment obligations under contractual commitments during 2008 over and above those included in operating cash expenditures.



The Company has no off balance sheet financing.



Summary of Results by Quarter

The following table highlights RS's performance for the quarterly reporting periods from 
March 31, 2006 to December 31, 2007:



|                                                                                                                                                                                                                                                                                                                                                                                   |          |          |         |          |            |            |          |         |  |  | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | -------- | ------- | -------- | ---------- | ---------- | -------- | ------- |  |  | 
|                                                                                                                                                                                                                                                                                                                                                                                   | 2007     | 2006    
|                                                                                                                                                                                                                                                                                                                                                                                   | Dec      | Sept     | Jun(2)  | Mar      | Dec        | Sept       | Jun      | Mar    
|(Thousands of Canadian dollars except per share amounts)                                                                                                                                                                                                                                                                                                                           |          |          |         |         
|Product Revenue                                                                                                                                                                                                                                                                                                                                                                    | $    695 | $    102 | $    54 | $    136 | $    1,124 | $    2,059 | $    353 | $   816
|Net Loss                                                                                                                                                                                                                                                                                                                                                                           | (6,559)  | (3,120)  | (7,389) | (6,291)  | (11,939)   | (12,794)   | (10,589) | (8,089)
|Basic and diluted loss per common share                                                                                                                                                                                                                                                                                                                                            | (0.05)   | (0.02)   | (0.06)  | (0.07)   | (0.13)     | (0.14)     | (0.12)   | (0.09) 
|Total cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                    | 10,162   | 14,790   | 21,464  | 26,094   | 1,199      | 4,040      | 11,074   | 13,246 
|Total assets                                                                                                                                                                                                                                                                                                                                                                       | 26,515   | 32,468   | 33,960  | 39,283   | 16,615     | 20,060     | 30,998   | 32,367 
|Total long-term debt (1)                                                                                                                                                                                                                                                                                                                                                           | 17,664   | 17,113   | 16,790  | 16,474   | 16,702     | 16,241     | 15,838   | 15,431 
|(1) Total long term debt is comprised of the unsecured convertible debenture and National Research Council advances.
(2) The Company revalued options that changed vesting criteria in the second quarter resulting in a reduction in non-cash based compensation expense of $674. This reduction represents a change to the Companys previously reported second quarter results.
|                                                                                                                                                                                                                                                                                                                                                                                  



Product revenue fluctuated in 2007 due to the shutdown of RStandard pole production in Calgary and the focus on commissioning Globals new RStandard pole manufacturing facility in Tilbury.



Net loss decreased for each of the quarter year over year due to the shutdown RStandard pole production in Calgary.



In order to fund the operations, the Company issued common shares for total net proceeds of $33,308 in the first quarter of 2007 resulting in a cash increase for the quarter. Due to the shutdown of RStandard pole production in Calgary and the focus to commission Globals new manufacturing facility in Tilbury, cash and total assets decreased quarter over quarter in 2007.  In the second half of 2007, RS prepaid $3,500 to Global which is expected to be repaid in the first half of 2008.







---









Fourth Quarter Results



|                              |                 |                     |      | 
|----------------------------- | --------------- | ------------------- | ---- | 
|Total Revenue                 |                 |                     |     
|Thousands of Canadian dollars |                
|                              | December 31,    | Increase (Decrease)
|                              | 2007            | 2006                |     
|                              |                 |                     | %   
|Product                       | $           695 | $             1,124 | (38)
|Other  income                 | 281             | 22                  | 1177
|Total                         | $           976 | $             1,146 | (15)



The Companys product revenue for the fourth quarter of 2007 was $695 compared to $1,124 during the same period of 2006. Commercial shipments from Globals production facility started in September 2007 resulting in higher 2007 fourth quarter sales than in previous quarters in 2007. Other income in the fourth quarter of 2007 relates to interest income.



|                                              |                                 |                     |  |       |  |  |  |  |  | 
|--------------------------------------------- | ------------------------------- | ------------------- |  | ----- |  |  |  |  |  | 
|Operating Expenses                            |                                 |                     |  |       | 
|                                              | Three Months Ended
December 31, | Increase (Decrease)
|Thousands of Canadian dollars                 | 2007                            | 2006                |  |       | 
|                                              |                                 |                     |  | %     | 
|Manufacturing and product development         | $             1,369             | $             5,160 |  | (73)  | 
|General and administrative                    | 1,284                           | 2,840               |  | (55)  | 
|Financing charges                             | 1,090                           | 1,041               |  | 5     | 
|Marketing and business development            | 602                             | 794                 |  | (24)  | 
|Restructuring charges                         | (1)                             | 913                 |  | (100) | 
|Write-down of property, plant and equipment   | 1,497                           | -                   |  | -     | 
|Amortization of property, plant and equipment | 288                             | 898                 |  | (68)  | 
|Total Operating Expenses                      | $             6,129             | $         11,646    |  | (47)  | 



Manufacturing and Product Development

Manufacturing and product development expenses for the quarter decreased by $3,791 to $1,369 in 2007 as a result of the shutdown of RStandard pole manufacturing in Calgary.



Restructuring Charges

Restructuring charges in the fourth quarter were insignificant compared to $913 in the fourth quarter of 2006 as RS had completed restructuring initiatives in early 2007.



General and Administrative

General and administrative expenses for the quarter decreased by $1,556 to $1,248 compared to the fourth quarter of 2006, mainly due to personnel related costs reductions related to the Companys restructuring.







---





Financing Charges

Financing charges for the fourth quarter are comparable to the same period in 2006.

Marketing and Business Development

Marketing and business development for the quarter decreased by $192 compared to the fourth quarter in 2006 due to personnel-related cost reductions.



Write-down of Property, Plant, and Equipment

In 2007, RS wrote down property, plant and equipment of $1,497, which consisted mainly of manufacturing equipment not deemed useful for further operations.







Amortization of Property, Plant, and Equipment

Amortization charges for the quarter decreased by $610 compared to the same period in 2006 due to equipments sold or written off during the year offset by additions over the year for the Calgary production facility.



New Accounting Pronouncements

On January 1, 2007, the Company adopted the new accounting pronouncement, Financial Instruments  Recognition and Measurement, Section 3855.  As a result, the Company no longer deferred financing costs separately on its balance sheet and instead records all security issuance costs as a reduction of the related security.  The effective interest method is then utilized to accrete the securitys carrying value back to its face amount. The resulting impact of this change was a reduction in deferred financing costs of $597, a reduction in the convertible debenture of $695 and a reduction in deficit of $98.  The adoption of this new pronouncement has been accounted for retroactively without restatement.



This section also stipulates that derivative financial instruments are recorded as financial assets or liabilities at fair value, including those derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contracts.  In accordance with the new standards, the Company has accounted for foreign currency embedded derivatives, resulting in a gain of $1,515 for the period ending December 31, 2007.



The new standard regarding hedges Hedges  Section 3865 specifies the circumstances under which hedge accounting is permissible and how hedge accounting may be performed. The Company does not have any hedges.



As per Comprehensive Income - Section 1530, unrealized gains and losses on financial instruments that are held as available-for-sale and changes in the fair value of cash flow hedging instruments are recorded in comprehensive income, net of tax, until recognized in earnings. As of December 31, 2007, the Company does not have any comprehensive income.



Two new Canadian accounting standards have been issued which, starting January 1, 2008, will require additional disclosure in the Companys financial statements about the Companys financial instruments as well as its capital and how it is managed. The Company does not expect any significant effect on its financial statements due to the application of these standards.





The Canadian Institute of Chartered Accountants issued new accounting standards for measurement and disclosure requirements for inventories, which are applicable for fiscal years beginning on or after January 1, 2008.  The Company does not expect any significant effect on its financial statements due to the application of these standards.







---









Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  The Company evaluates its estimates and assumptions on a regular basis, based on historical experience and other relevant factors.  Actual results could differ materially from the estimates and assumptions.  The following critical accounting policies are impacted by judgements, assumptions and estimates used in preparation of the December 31, 2007 consolidated financial statements.





Variable Interest Entities

In August 2007, the Company entered into an amended and restated manufacturing and licensing agreement with Global, a corporation operating in Tilbury.  This agreement provides the framework whereby Global is responsible to move, upgrade and re-commission existing RStandard utility pole manufacturing equipment as well as related additions for use in Globals production of RStandard utility poles under license from the Company.



Global is a variable interest entity as its total equity is not sufficient to finance its activities without additional credit facilities, which have been guaranteed by RS.  The Company has not consolidated Global because it has determined that it is not the primary beneficiary, as the equity holders of Global will receive the majority of Globals expected returns/losses.



Future Operations

The Company is in the commercialization stage of its composite product business and therefore, is subject to the risks associated with early stage companies, including uncertainty of revenues, markets and profitability and the need to raise additional funding. As a result, the consolidated financial statements have been prepared on a going concern basis in accordance with Canadian generally accepted accounting principles, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. The Company is committing, and for the foreseeable future will continue to commit, significant financial resources to marketing, product development and research. The Companys business must be considered in light of the risks, expenses and difficulties frequently encountered by companies in the early stage of development, particularly companies in relatively new and evolving markets such as composites. The Company has not earned profits to date and cannot provide assurance that it will achieve, or be able to sustain, profitability in the future.

To date, the Company has financed its activities through the issuance of shares, warrants and debentures to investors, and continues to operate as a going concern. Future financing maybe required in order to fund operating costs as they come due. The Companys success will ultimately depend on its ability to generate revenues from its product sales, so its operating costs may be financed by revenues from operations, instead of outside financing.  The outcome of these matters is uncertain and cannot be predicted at this time, but the Company has decreased its operating expenditures, increased its production of RStandard utility poles and roller tubes, and the Companys distribution partners are ramping up their market penetration plans. Accordingly, these consolidated financial statements do not reflect adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue to operate as a going concern.







---







Revenue Recognition

Revenue from product sales is recognized when there is persuasive evidence of an arrangement, delivery has occurred under the terms of the arrangement, the price is fixed or determinable, and collection is reasonably assured.



RS sells the majority of its products on a free carrier basis and the risk of loss is assumed by the customer once the product has left Globals plant.  For those less common situations where RS bears the risk of loss until the product has arrived at the customers location, the Company does not recognize the revenue associated with the transaction until confirmation of receipt of the goods is obtained. When the cost of freight has been added to the cost of the product it has been recorded separately in the books of record. RS has no further performance obligations other than its standard manufacturing warranty.



Inventories

Raw materials are stated at the lower of average cost and replacement cost. Finished goods are stated at the lower of average cost and net realizable value.



Impairment of Long-lived Assets

The Company performs an impairment test on long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company estimates the useful lives of capital based on the nature of the asset, historical experience and the terms of any related supply contracts.  The valuation of long-lived assets is based on the amount of future net cash flows that these assets are estimated to generate.  Revenue and expense projections are based on managements estimates, including estimates of current and future industry conditions.  A significant change to these assumptions could impact the estimated useful lives or valuation of long-lived assets resulting in a change to depreciation expense and impairment charges.



Research and Development

The Company is engaged in research and development work and the costs of such are expensed as incurred, unless they meet the criteria for deferral established by Canadian generally accepted accounting principles.  Management assesses the applicable criteria on an ongoing basis.  Research and development costs are reduced by any related government assistance and tax incentives.  Since inception, no amounts from research and development activities have been capitalized.



Stock-based Compensation Plans

The Company applies the fair-value method of accounting to all stock-based compensation arrangements for both employees and non-employees.  Compensation cost of equity-classified awards to employees is measured at fair value at the grant date and is expensed over the awards vesting period with a corresponding increase to contributed surplus.  Upon the exercise of the award, consideration received together with the amount previously recognized in contributed surplus is recorded as an increase to share capital.  Compensation cost of equity-classified awards to non-employees, initially measured at fair value and periodically remeasured to fair value until the non-employees performance is complete, are expensed over the vesting period. The Company accounts for actual forfeitures as they occur.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes.  Under this method, future tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.  A valuation allowance is recorded against any future income tax asset if it is more likely than not that the asset will not be realized.







---









Disclosure Controls and Procedures Update

Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company is accumulated and communicated to its management as appropriate to allow timely decisions regarding disclosure.  The Companys Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of December 31, 2007 that, as a result of the material weakness described below, disclosure controls and procedures are ineffective in providing reasonable assurance that material information is made known to them by others within the Company.

Internal Controls over Financial Reporting

The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in rules 13a-15(f) and 15-d-15(f) under the Securities Exchange Act of 1934 and in multilateral instrument 52-109.



RSs internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally applied accounting principles and includes those policies and procedures that:



·

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

·

provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally applied accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

·

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate  because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.



A material weakness, as defined by SEC rules, is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.  As of December 31, 2007, management has identified the following material weakness in the Companys internal control over financial reporting:



The Companys finance staff does not have sufficient technical accounting knowledge to address complex and non-routine accounting transactions that may arise.  Specifically, there is an inability to identify the existence of accounting issues arising from certain transactions completed by the Company.  As a result, material misstatements were identified in stock-based compensation expense and foreign currency embedded derivatives which were corrected prior to the issuance of the 2007 consolidated financial statements. This control weakness, which is pervasive in nature, results in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis.





As a result of the existence of the material weakness discussed above as of December 31, 2007, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2007, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.







---







Managements Current Plan for Remediating the Material Weakness

The Company will enhance its finance staff training and development. Additionally, the Company will increase the use of services of outside consultants who have expertise in complex accounting matters to assist in identifying and resolving complex issues. Management will also implement an improved consultation process with external auditors.



Changes in Internal Control Over Financial Reporting



During the fiscal year ended December 31, 2007, there were changes in the registrants internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the registrants internal control over financial reporting, as follows:



·

The registrant has enhanced controls surrounding month end reporting. One of the major enhancements is detailed management review of its monthly variance analysis comparing actual to budget.



Risk Factors

Market Acceptance

The rate and magnitude of product acceptance by customers is uncertain. Given their innovative design, the Companys products have the advantage of being a cost effective durable option which should allow its manufacturing and distribution partners to be able to compete effectively in these markets.



Supplies

The prices and availability of raw materials are subject to market forces largely beyond the Companys control, therefore RS has entered into fixed price contracts with suppliers for its significant raw material inputs. Interruptions of supplies may affect RSs results of operations.



Financial Conditions

To date, RS has not recorded a profit from operations and has derived virtually all of its working capital from the sale of its securities. The Company has experienced erratic revenue trends over the course of its history and, at times, deficiencies in working capital. RSs business also faces many known and unknown risks that could hinder its ability to continue as a going concern.  In the current year, the Company raised $33,177 from the issuance of short-term notes and common shares, in order to finance its current business plan. To date, the Company has maintained spending levels in line with its forecasts. Further, RS expects to be cashflow positive by the end of 2008 and expects that its cash resources are in line with its forecasts and are sufficient to execute its business plan.







---







Reliance on Third Party Manufacturer

RSs business is highly reliant on the development and deployment of third party manufacturers. There can be no assurance that its third party manufacturer will be able to meet the Companys manufacturing and distribution needs. To mitigate this risk, RS has retained the ability to develop technology and maintains all rights to the equipment and technology used in Globals manufacturing facility and has the right to take control of Globals manufacturing facility in the event of Globals default on their obligation to RS.

In order to facilitate Globals start-up, RS provided a $4,000 guarantee on a full recourse basis to Globals lenders and a $2,100 limited recourse guarantee to Globals lenders, which guarantee is

collateralized with its RStandard utility pole manufacturing equipment and related additions. If Global composite equipment defaults on the loans, RS will be called on the guarantees.

Proprietary Technology

RSs intellectual property could be challenged, invalidated or circumvented and may not provide us with any competitive advantage. The Company relies on a combination of trade secret protection, trademark laws, confidentiality agreements and other contractual arrangements. There can be no assurance that these protection methods will be adequate to prevent third party development of the same and similar technology.



Foreign Exchange

The Companys operating results are reported in Canadian dollars. The majority of the Companys supplies purchases and product sales are in U.S. dollar. The majority of the Companys operating costs are incurred in Canadian dollar. The Company is therefore susceptible to foreign currency gains and losses.



A detailed discussion of the Companys risk factors can be found in its annual information form for the year ended December 31, 2007 dated March 12, 2008.  This annual information form can be found on the Companys website at, the SEDAR website at www.sedar.com or the EDGAR website at www.sec.gov.







---





















Consolidated Financial Statements of





RESIN SYSTEMS INC.







Years Ended December 31, 2007 and 2006

















---









RESIN SYSTEMS INC.

Managements Report



Managements Responsibility for Consolidated Financial Statements



The accompanying consolidated financial statements of Resin Systems Inc. and all of the information included in this report are the responsibility of management and have been approved by the Companys Board of Directors.



The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles.  When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Financial statements are not precise since they include certain amounts based on estimates and judgments.  Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects.



In discharging its responsibilities, management maintains and relies upon a system of internal controls designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Companys assets are properly accounted for and adequately safeguarded.  Management has tested the effectiveness of internal controls.



Internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements.  The Board carries out this responsibility principally through its Audit Committee.



The Audit Committee of the Board of Directors, composed entirely of independent directors, meets regularly with management, as well as the external auditors, to discuss auditing, internal controls, accounting policy and financial reporting matters. The Committee reviews the financial statements with both management and the independent auditors and reports its finding to the Board of Directors before such statements are approved by the Board.



















Signed Paul Giannelia

signed Rob Schaefer



Paul Giannelia

Rob Schaefer

President, CEO

CFO









Calgary, Canada

March 12, 2008







---







AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Resin Systems Inc. (the Company) as at December 31, 2007 and 2006, and the consolidated statements of loss and deficit and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards.  With respect to the consolidated financial statements for the year ended December 31, 2007, we also conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended, in accordance with Canadian generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness ofthe Companys internal control over financial reporting as of December 31, 2007, based on criteria established inInternal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated as at March 12, 2008 expressed an adverse opinion on the effectiveness of the Companys internal control over financial reporting.



[rsform40f2007final002.jpg]

Chartered Accountants



Calgary, Canada

March 12, 2008

















---











COMMENTS BY AUDITORS FOR US READERS ON CANADA  US REPORTING DIFFERENCES

To the Board of Directors of Resin Systems Inc.:



In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Companys ability to continue as a going concern, such as those described in note 1 to the financial statements. Our report to the shareholders dated March 12, 2008 is expressed in accordance with Canadian reporting standards, which does not permit a reference to such events and conditions in the auditors report when these are adequately disclosed in the financial statements.

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of the Companys financial statements, such as the changes described in note 19 to the consolidated financial statements as at December 31, 2007 and for the year then ended. Our report to the shareholders dated March 12, 2008is expressed in accordance with Canadian reporting standards, which do not require a reference to such changes in accounting principles in the auditors' report when the changes are properly accounted for and adequately disclosed in the financial statements.



[rsform40f2007final003.jpg]

Chartered Accountants



Calgary, Canada

March 12, 2008











---















REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Resin Systems Inc.:



We have audited Resin Systems Inc.s (the Company) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and is included in Managements Annual Report on Internal Control Over Financial Reporting: The Companys finance staff does not have sufficient technical accounting knowledge to address complex and non-routine accounting transactions that may arise.  We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2007 consolidated financial statements, and this report does not affect our report dated March 12, 2008, which expressed an unqualified opinion on those consolidated financial statements.



In our opinion, because of the effect of the aforementioned material weakness on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.



[rsform40f2007final004.jpg]





Chartered Accountants



Calgary, Canada

March 12, 2008













---







RESIN SYSTEMS INC.

CONSOLIDATED BALANCE SHEETS

(Canadian Dollars)





|                                                |                                                      |   |        |           |   |        |         
|----------------------------------------------- | ---------------------------------------------------- | - | ------ | --------- | - | ------ | --------
|December 31, (in $'000's)                       |                                                      |   | 2007   |           |   | 2006  
|ASSETS                                          |                                                      |   |        |           |   |       
|Current assets                                  |                                                      |   |        |           |   |       
|                                                | Cash and cash equivalents                            |   | $      | 10,162    |   | $      | 1,199   
|                                                | Accounts receivable (note 6)                         |   |        | 2,277     |   |        | 985     
|                                                | Inventories (note 7)                                 |   |        | 1,297     |   |        | 2,218   
|                                                | Prepaid expenses and deposits (note 4)               |   |        | 2,893     |   |        | 263     
|                                                |                                                      |   |        | 16,629    |   |        | 4,665   
|Restricted cash and deposits (note 5)           |                                                      |   | 400    |           |   | 514   
|Foreign currency contract (note 17)             |                                                      |   | 1,515  |           |   | -     
|Property, plant and equipment (note 8)          |                                                      |   | 7,971  |           |   | 10,839
|Deferred financing costs (note 3,10)            |                                                      |   | -      |           |   | 597   
|                                                |                                                      |   | $      | 26,515    |   | $      | 16,615  
|LIABILITIES and SHAREHOLDERS' EQUITY/ (DEFICIT) |                                                      |   |        |           |  
|Current liabilities                             |                                                      |   |        |           |   |       
|                                                | Accounts payable and accrued liabilities             | $ | 963    |           | $ | 6,951 
|                                                | Other current liabilities (note 9)                   |   |        | 866       |   |        | 540     
|                                                |                                                      |   |        | 1,829     |   |        | 7,491   
|Convertible debentures (note 10)                |                                                      |   | 17,664 |           |   | 16,273
|Other long-term liabilities (note 9)            |                                                      |   | 874    |           |   | 1,271 
|                                                |                                                      |   |        | 20,367    |   |        | 25,035  
|                                                |                                                      |   |        |           |   |        |         
|Shareholders' equity (Deficit)                  |                                                      |   |        |           |   |       
|                                                | Share capital  (note 11(a))                          |   |        | 108,704   |   |        | 73,660  
|                                                | Warrants  (note 11(a))                               |   |        | 1,256     |   |        | 1,172   
|                                                | Equity component of convertible debentures (note 10) |   | 10,258 |           |   | 10,258
|                                                | Contributed surplus (note 11(f))                     |   |        | 6,432     |   |        | 3,731   
|                                                | Deficit                                              |   |        | (120,502) |   |        | (97,241)
|                                                |                                                      |   |        | 6,148     |   |        | (8,420) 
|Future operations (note 1)                      |                                                      |   |        |           |   |       
|Commitments (note 18)                           |                                                      |   |        |           |   |       
|Subsequent event (note 4)                       |                                                      |   |        |           |   |       
|                                                |                                                      |   | $      | 26,515    |   | $      | 16,615  



See accompanying notes to the consolidated financial statements.



On behalf of the Board:



Signed   Wilmot Matthews

Signed David Williams

Director

Director







---











RESIN SYSTEMS INC.

CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

(Canadian Dollars)





|                                                                    |                                                      |           |        |   |          |       
|------------------------------------------------------------------- | ---------------------------------------------------- | --------- | ------ | - | -------- | ------
|                                                                    |                                                      |           |        |   |          |       
|Years ended December 31, (in $'000's)                               |                                                      | 2007      |        |   | 2006    
|Product revenue (note 16)                                           | $                                                    | 987       |        | $ | 4,352   
|Cost of sales                                                       |                                                      | 1,004     |        |   | 5,351   
|                                                                    |                                                      |           | (17)   |   |          | (999) 
|Expenses                                                            |                                                      |           |        |   |         
|                                                                    | Financing charges (note 13)                          |           | 5,126  |   |          | 4,086 
|                                                                    | General and administrative                           |           | 8,829  |   |          | 8,459 
|                                                                    | Manufacturing and product development                |           | 5,944  |   |          | 21,815
|                                                                    | Marketing and business development                   |           | 2,287  |   |          | 3,250 
|                                                                    | Amortization of property, plant and equipment        |           | 1,917  |   |          | 2,623 
|                                                                    | Write-down of property, plant and equipment (note 8) |           | 1,497  |   |          | -     
|                                                                    | Restructuring charges (note 12)                      |           | 179    |   |          | 2,682 
|                                                                    |                                                      |           | 25,779 |   |          | 42,915
|Loss before undernoted items                                        |                                                      | (25,796)  |        |   | (43,914)
|Net gain on foreign currency contracts (note 17)                    |                                                      | 1,515     |        |   | -       
|Other income                                                        |                                                      | 901       |        |   | 379     
|Non-controlling interest                                            |                                                      | 21        |        |   | 124     
|Net loss                                                            |                                                      | (23,359)  |        |   | (43,411)
|Deficit, beginning of year                                          |                                                      | (97,241)  |        |   | (53,830)
|Adjustment due to adoption of new accounting pronouncement (note 3) |                                                      | 98        |        |   | -       
|Deficit, end of year                                                | $                                                    | (120,502) |        | $ | (97,241)
|Basic and diluted loss                                              |                                                      |           |        |   |         
|per common share                                                    | $                                                    | (0.19)    |        | $ | (0.48)  
|Basic and diluted weighted average number                           |                                                      |           |        |   |         
|of shares outstanding (000's)                                       |                                                      | 123,599   |        |   | 89,858  



See accompanying notes to the consolidated financial statements.



















---













RESIN SYSTEMS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Canadian Dollars)



|                                                                            |  |   |          |  |   |         
|--------------------------------------------------------------------------- |  | - | -------- |  | - | --------
|                                                                            |  |   |          |  |   |         
|Years ended December 31, (in $'000's)                                       |  |   | 2007     |  |   | 2006    
|Cash provided by (used in):                                                 |  |   |          |  |   |         
|Operating:                                                                  |  |   |          |  |   |         
|Net loss                                                                    |  | $ | (23,359) |  | $ | (43,411)
|Proceeds of tenant inducements                                              |  |   | -        |  |   | 330     
|Items which do not involve cash                                             |  |   |          |  |   |         
|Amortization of property, plant and equipment                               |  |   | 1,917    |  |   | 2,623   
|Financing charges                                                           |  |   | 2,902    |  |   | 1,914   
|Net unrealized gain on foreign currency contracts (note 17)                 |  |   | (1,515)  |  |   | -       
|Amortization of deferred gain on sale of property, plant and      equipment |  |   | (79)     |  |   | (87)    
|Write-down of property, plant and equipment (note 8)                        |  |   | 1,497    |  |   | -       
|Non-cash restructuring charges (note 12)                                    |  |   | 72       |  |   | 1,779   
|Stock based compensation (note 11 (b))                                      |  |   | 3,481    |  |   | 767     
|Non-controlling interest in net loss                                        |  |   | (21)     |  |   | (124)   
|Other non-cash items                                                        |  |   | (93)     |  |   | (59)    
|Change in non-cash operating working capital (note 15)                      |  |   | (8,989)  |  |   | 4,307   
|                                                                            |  |   | (24,187) |  |   | (31,961)
|Financing:                                                                  |  |   |          |  |   |         
|Issue of share capital                                                      |  |   | 30,245   |  |   | 18,374  
|Issue of promissory notes                                                   |  |   | 4,889    |  |   | -       
|Repayment of promissory notes                                               |  |   | (1,400)  |  |   | -       
|Repayments of other long-term liabilities                                   |  |   | (80)     |  |   | (80)    
|                                                                            |  |   | 33,654   |  |   | 18,294  
|Investing:                                                                  |  |   |          |  |   |         
|Purchase of property, plant and equipment                                   |  |   | (720)    |  |   | (3,497) 
|Restricted cash and deposits                                                |  |   | 114      |  |   | 1,001   
|Non-controlling interest                                                    |  |   | -        |  |   | 124     
|Change in non-cash investing working capital (note 15)                      |  |   | 102      |  |   | (722)   
|                                                                            |  |   | (504)    |  |   | (3,094) 
|Increase (decrease) in cash and cash equivalents                            |  |   | 8,963    |  |   | (16,761)
|Cash and cash equivalents, beginning of year                                |  |   | 1,199    |  |   | 17,960  
|Total cash and cash equivalent, end of year                                 |  | $ | 10,162   |  | $ | 1,199   
|                                                                            |  |   |          |  |   |         
|Cash                                                                        |  | $ | 393      |  | $ | 1,199   
|Cash equivalents                                                            |  |   | 9,769    |  |   | -       
|Total cash and cash equivalent, end of year                                 |  | $ | 10,162   |  | $ | 1,199   



See accompanying notes to the consolidated financial statement







---





1.  Nature of operations:



RS is a technology innovator that develops advanced composite products for infrastructure markets. This new generation of products is not only structurally superior to products made with old world materials such as wood, steel and concrete, its also lighter, more durable and longer-lasting. The company has entered the global market with its award winning utility poles and conveyor roller tubes as its two flagship products, and continues to identify a growing list of additional innovative products.

RS designs, engineers and markets its products worldwide, while outsourcing its manufacturing and distribution.



Future Operations



These consolidated financial statements have been prepared on a going concern basis in accordance with Canadian generally accepted accounting principles (Canadian GAAP), which assumes RS will realize its assets and discharge its liabilities and commitments in the normal course of business.  The application of the going concern concept is dependent upon the ability of RS to generate profitable operations and raise additional capital to support its ongoing development and operating activities.  For the 12 months ended December 31, 2007, RS reported a net loss of $23,359.  At December 31, 2007, RS had positive working capital of $14,800 and a deficit of $120,502.



These financial statements do not reflect any adjustments should RS be unable to continue as a going concern and therefore, be required to realize its assets and discharge its liabilities outside the normal course of business.



There can be no assurance that managements plans will be successful as such plans may be contingent upon new equity and debt funds from investors, as well as market acceptance of RSs products.



2.  Significant accounting policies:



These consolidated financial statements are prepared in accordance with Canadian  GAAP.  The impact of significant measurement differences between Canadian GAAP and generally accepted accounting principles in the United States of America (U.S. GAAP) on the consolidated financial statements is disclosed in Note 19.



The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the years.  Significant items subject to such estimates and assumptions include the carrying amount of property, plant and equipment; valuation allowances for receivables and inventories; valuation of forward currency contracts and valuation of stock-based compensation.  Actual results could differ from those estimates.



(a)  Basis of presentation:

These consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest in Bazalt Inwestycje Sp. z o.o. (Bazalt), a variable interest entity (VIE) in which the Company is the primary beneficiary.  All significant inter-company balances and transactions have been eliminated.











---







2.  Significant accounting policies (continued):



(b)  Cash and cash equivalents:

Cash and cash equivalents consist of cash in banks and short-term investments with original maturities of ninety days or less.

(c)  Inventories:

Raw materials are valued at the lower of average cost and replacement cost and finished goods are stated at the lower of average cost and net realizable value.

(d)  Property, plant and equipment:

Property, plant and equipment are stated at cost.  Equipment under construction is not amortized until it is substantially complete and ready for productive use.  Amortization is provided on a declining balance basis over the estimated useful lives as follows:



|                               |     
|------------------------------ | ----
|Asset                          | Rate
|Building                       | 4%  
|Equipment                      | 20% 
|Furniture and fixtures         | 20% 
|Automotive                     | 30% 
|Computer hardware and software | 50% 



Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or their estimated useful lives.



Repairs and maintenance costs are expensed as incurred.



(e)  Impairment of long-lived assets:

Long-lived assets, including property, plant and equipment, and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the assets exceeds the fair value of the asset.



(f)  Research and development:

Development costs related to specific projects that in the Companys view have a clearly defined future market are deferred and amortized on a straight-line basis commencing in the year following that in which the new development was completed.  All other research and development costs are charged to earnings in the year incurred.  Since inception, the Company has expensed all research and development costs incurred.



(g)  Revenue recognition:

Revenue from product sales is recognized when there is persuasive evidence of an arrangement, delivery has occurred under the terms of the arrangement, title has passed to the customer, the price is fixed or determinable and collection is reasonably assured.



RS sells the majority of its products on a free carrier basis and the customer assumes the risk of loss once the product has left Global Composite Manufacturing, Inc.s (Global) plant (note 4).  For those less common situations where RS bears the risk of loss until the product has arrived at the customers location, the Company does not recognize the revenue associated with the transaction until confirmation of receipt of the goods is obtained. RS has no further performance obligations other than its standard manufacturing warranty.







---









2.  Significant accounting policies (continued):



(h)  Income taxes:

The Company uses the asset and liability method of accounting for income taxes.  Under the asset and liability method, future income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on future income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of substantive enactment.  A valuation allowance is recorded against any future income tax asset if it is more likely than not the asset will not be realized.



(i)  Foreign currency translation:

RSs subsidiaries are integrated operations and are translated into Canadian dollars using the temporal method.  Accordingly, all monetary assets and liabilities are recorded at exchange rates in effect at the balance sheet date, non-monetary assets are recorded at historical exchange rates, and revenues and expenses are translated at the exchange rate in effect at the transaction date.



(j)  Stock-based compensation plans:

RS applies the fair-value method of accounting to all stock-based compensation arrangements, using the Black-Scholes option pricing model, for both employees and non-employees.  Compensation cost of equity-classified awards to employees are measured at fair value at the grant date and expensed over the awards vesting period with a corresponding increase to contributed surplus.  Upon the exercise of the award, consideration received together with the amount previously recognized in contributed surplus is recorded as an increase to share capital.  Compensation cost of equity-classified awards to non-employees, initially measured at fair value and periodically remeasured to fair value until the non-employees performance is complete, are expensed over the vesting period.  The Company accounts for actual forfeitures as they occur for unvested options.



The Company has a restricted share unit plan as described in note 11(d).  Compensation expense is equal to the fair market value of the shares on the grant date and will be recognized over the vesting period.



RS has a deferred share unit plan as described in note 11(e).  Director fees equal to the amount deferred are recorded.  The liability relating to the deferred share units are revalued quarterly based on the market value of the Companys common shares and the resulting adjustment is recorded in income.



(k) Per share amounts:

Per share amounts are computed by dividing net earnings (loss) by the weighted average shares outstanding during the year.  Diluted per share amounts are calculated using the treasury stock and if-converted methods.  The treasury stock method increases the diluted weighted average shares outstanding to include additional shares from the assumed exercise of stock options and warrants, if dilutive.  The number of additional shares is calculated by assuming that outstanding in-the-money stock options were exercised and that the proceeds from such exercises, including the unamortized stock-based compensation cost, were used to acquire shares of common stock at the average market price during the year.







---











2.  Significant accounting policies (continued):



The if-converted method assumes the conversion of convertible securities at the latter of the beginning of the reported period or issuance date, if dilutive.



(l) Comparative figures:

Certain comparative figures have been reclassified to conform to the financial statement presentation adopted in the current year.



3.

Adoption of new accounting pronouncement:



On January 1, 2007, the Company adopted the new accounting pronouncement, Financial Instruments  Recognition and Measurement, Section 3855.  As a result, the Company no longer defers financing costs separately on its balance sheet and instead records all security issuance costs as a reduction of the related security.  The effective interest method is then utilized to accrete the securitys carrying value back to its face amount. The resultant impact of this change was a reduction in deferred financing costs of $597, a reduction in the convertible debenture of $695 and a reduction in deficit of $98.  The adoption of this new pronouncement has been accounted for retroactively without restatement.



This section also stipulates that derivative financial instruments are recorded as financial assets or liabilities at fair value, including those derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contracts.  In accordance with the new standards, the Company has accounted for foreign currency embedded derivatives, resulting in a gain of $1,515 for the period ending December 31, 2007.  Note 17 provides additional details on the Companys contracts.



The new standard regarding hedges Hedges  Section 3865 specifies the circumstances under which hedge accounting is permissible and how hedge accounting may be performed. To date, the Company has not engaged in any hedging transactions.



As per Comprehensive Income - Section 1530, unrealized gains and losses on financial instruments that are held as available-for-sale and changes in the fair value of cash flow hedging instruments are recorded in comprehensive income, net of tax, until recognized in earnings. As of December 31, 2007, the Company does not have any items included in comprehensive income.



New accounting pronouncements:



Two new Canadian accounting standards have been issued which, starting January 1, 2008, will require additional disclosure in the Companys financial statements about the Companys financial instruments as well as its capital and how it is managed. The Company does not expect any significant effect on its financial statements due to the application of these standards.



The Canadian Institute of Chartered Accountants issued new accounting standards for measurement and disclosure requirements for inventories, which are applicable for fiscal years beginning on or after January 1, 2008.  The Company does not expect any significant effect on its financial statements due to the application of these standards.











---









4.   Global Composite Manufacturing Inc.:



In August 2007, the Company entered into a definitive agreement with Global, a corporation operating in Tilbury, Ontario.  This agreement provides the framework whereby Global was responsible to move, upgrade and re-commission existing RStandard utility pole manufacturing equipment as well as related additions for use in Globals production of RStandard utility poles under license from the Company.  RS advanced to Global the sum of $3,500 representing a prepayment for future product to be manufactured and delivered by Global to RS.  As at December 31, 2007, $865 has been repaid in product deliveries. Such prepayment is recorded in prepaid expenses and deposits.



RS leased its existing two production cells with a net book value of approximately $3.3 million to Global for a term of up to 10 years.  Global, through its own resources, has relocated and continues to upgrade the equipment.  RS will continue to own the equipment, all upgrades and all related technology.



Subsequent to year-end, RS has provided guarantees to the lenders in Globals financing, with $2.1 million on a limited recourse basis collateralized by the RStandardTMutility pole manufacturing equipment, and $4.0 million on a full recourse basis.  The guarantees would be called upon if Global fails to perform under its obligations to its lenders (note 18).  As at December 31, 2007, the Company had guaranteed $500.



Global is a variable interest entity as its total equity is not sufficient to finance its activities without these credit facilities, which have been guaranteed by RS.  The Company has not consolidated Global because it has determined that it is not the primary beneficiary as the equity holders of Global will receive the majority of Globals expected returns/losses.  RSs maximum exposure to Global is amount of the guarantees disclosed above.





5.  Restricted cash and deposits:



RS has established certain credit arrangements through its bank which are secured by cash of $345 (2006 - $405) held in a separate account.  The Company has classified Bazalts cash of nil (2006 - $80) as restricted cash as all distributions require the approval of the Company and the non-controlling interest in Bazalt.



Deposits of $55 (2006- $29) include long-term security deposits on property leases.





6.  Accounts receivable:



Included in accounts receivable is $382 (2006-$289) of GST receivable, $1,470 (2006-nil) due from Global for the sale of resin raw material and $425 (2006-$696) is related to operations.





7.  Inventories:



|                     |             |            
|-------------------- | ----------- | -----------
|December 31,         | 2007        | 2006       
|Raw materials        | $     485   | $     1,670
|Finished goods       | 729         | 548        
|Assets held for sale | 83          | -          
|                     | $     1,297 | $     2,218









---







In 2006, RS wrote down inventories $36.



8.  Property, plant and equipment:



|                               |              |                          |               
|------------------------------ | ------------ | ------------------------ | --------------
|                               |              |                          |               
|2007                           | Cost         | Accumulated amortization | Net book value
|Land                           | $         52 | $                -       | $         52  
|Building                       | 393          | 27                       | 366           
|Equipment                      | 8,928        | 3,199                    | 5,729         
|Furniture and fixtures         | 515          | 256                      | 259           
|Automotive                     | 226          | 100                      | 126           
|Computer hardware and software | 1,499        | 1,100                    | 399           
|Leasehold improvements         | 1,588        | 548                      | 1,040         
|                               | $   13,201   | $    5,230               | $   7,971     





|                               |              |                          |               
|------------------------------ | ------------ | ------------------------ | --------------
|2006                           | Cost         | Accumulated amortization | Net book value
|Land                           | $         52 | $                -       | $         52  
|Building                       | 393          | 23                       | 370           
|Equipment                      | 9,853        | 1,744                    | 8,109         
|Furniture and fixtures         | 509          | 199                      | 310           
|Automotive                     | 280          | 67                       | 213           
|Computer hardware and software | 1,380        | 874                      | 506           
|Leasehold improvements         | 1,522        | 243                      | 1,279         
|                               | $   13,989   | $    3,150               | $   10,839    



At December 31, 2007, the equipment and vehicles included assets under capital lease with a cost of $185 (2006  $436) and accumulated amortization of $55 (2006$149).  These amounts are being amortized on declining balance basis at a rate of 20%.



In 2007, RS wrote down property, plant and equipment of $1,497 (2006-nil) which consisted mainly of manufacturing equipment not deemed useful for further operations.











---







9.  Other liabilities:



|                                  |                                             |               |             
|--------------------------------- | ------------------------------------------- | ------------- | ------------
|                                  | 2007                                        | 2006         
|Current portion:                  |                                             |              
|                                  | Unsecured credit facility                   | $         82  | $        103
|                                  | NRC advances (a)                            | 384           | 203         
|                                  | Capital lease obligation (b)                | 74            | 92          
|                                  | Deferred sale leaseback gain (c)            | 88            | 88          
|                                  | Deferred lease inducement (d)               | 34            | 54          
|                                  | Deferred share unit liability (Note 11 (e)) | 204           | -           
|Total other current liabilities   | $       866                                 | $        540 
|                                  |                                             |               |             
|Long-term portion:                |                                             |              
|                                  | NRC advances (a)                            | $           - | $        226
|                                  | Capital lease obligation (b)                | -             | 71          
|                                  | Deferred sale leaseback gain (c)            | 601           | 679         
|                                  | Deferred lease inducement (d)               | 219           | 295         
|                                  | Other                                       | 54            | -           
|Total other long-term liabilities | $      874                                  | $     1,271  





(a) Pursuant to an agreement with the National Research Council (NRC), as amended, the Company received advances of $498 to develop its resins.  The advances of $498 plus a contingent 50% return on the advances of $249 are payable quarterly at a rate of 1.9% of the Companys gross revenue, as defined, for the period December 1, 2005 through November 30, 2010. If the advances of $498 have not been repaid by December 1, 2010, the Company is required to continue repayments of 1.9% of gross revenues until either the aggregate of the advances plus return of $747 is repaid or November 30, 2015.  The Company will recognize the contingent amount when conditions arise that will cause it to be repayable.



(b) These capital leases are payable in equal monthly installments of $8 (2006 - $13) including interest at 7.6%, due October 18, 2008.



(c)  The Company realized a gain of $906 on the sale and subsequent leaseback of property in 2005.  The gain was deferred and is being recognized over the term of the ten year lease.



(d) In 2006, the Company renegotiated two operating leases and received $330 in tenant inducements.  These inducements are being amortized over the term of the leases.





10. Convertible debentures and deferred financing costs:



On October 6, 2005, the Company issued $25,000 of unsecured convertible debentures due October 7, 2010 and bearing interest at 8.5% per annum payable semi-annually each June 30th and December 31st.



The holders of the debentures have the option to convert the principal amount of the debenture into common shares at a conversion price of $2.90 per share at any time prior to the maturity date or the business day preceding the Company exercising its redemption option on the debentures. This conversion price was more than the market price of the Companys shares at the issue date.







---











10. Convertible debentures and deferred financing costs (continued):



The debentures are redeemable by the Company at any time after October 6, 2007 at a redemption price equal to the principal amount plus accrued and unpaid interest provided that the weighted average trading price of the common shares exceeds $3.63 for the twenty consecutive trading days ending five trading days prior to the date of which notice of redemption is given. On redemption or

maturity, RS may elect to repay the principal amount plus accrued and unpaid interest on the debentures by issuing and delivering common shares in the amount of the debenture principal plus accrued and unpaid interest divided by 95% of the weighted average trading price of the common shares for the twenty consecutive trading days ending five trading days preceding the date fixed for redemption or maturity.



The debentures were bifurcated into a liability component of $14,129 and an equity component of $10,258  at inception.  The difference between the $25,000 due on maturity and the initial liability component is accreted and recorded as financing charges.  The accretion amount expensed and added to the debenture liability was $2,086 (2006 - $1,754).



The financing costs related to the debentures of $1,410 have also been bifurcated into a liability component and an equity component on a pro-rata basis based on carrying amounts.  The liability

component of $797 was originally recorded as deferred financing costs and is being amortized over the term of the debenture with the unamortized balance at December 31, 2006 being $597.  As a result of adopting the new accounting pronouncement (Note 3), there was a reduction in deferred financing costs of $597, a reduction in the convertible debenture of $695 and a reduction in deficit of $98.



The opening convertible debenture of $16,273 was reduced by $695 as a result of the adoption of the new accounting pronouncement and an accretion amount of $2,086 was added during 2007 resulting in an ending balance of $17,664.

















---







11.  Shareholders equity:



(a)

Authorized and issued share capital:

RSs authorized share capital consists of an unlimited number of common shares and an unlimited number of preferred shares issuable in series whose designation, rights, privileges, restrictions and conditions are determined when issued.

Share capital consists of the following common shares and warrants:



|                                                    |               |           |          |         |               
|--------------------------------------------------- | ------------- | --------- | -------- | ------- | --------------
|                                                    | Common Shares |           | Warrants
|(Common share and warrant numbers in 000s)        | Number        | Amount    |          | Number  | Amount        
|Balance, December 31, 2005                          | 84,278        | $  55,392 |          | 2,541   | $        1,021
|Issued for cash, net of issue costs                 | 8,979         | 12,584    |          | 2,800   | 938           
|Broker warrants attributed to share issue costs     | -             | (235)     |          | 589     | 235           
|Stock options exercised                             | 275           | 212       |          | -       | -             
|Warrants issued                                     | -             | -         |          | 99      | -             
|Warrants exercised                                  | 2,568         | 5,707     |          | (2,568) | (998)         
|Warrants expired                                    | -             | -         |          | (72)    | (24)          
|Balance, December 31, 2006                          | 96,100        | $  73,660 |          | 3,389   | $        1,172
|Issued for cash, net of issue costs(1)(2)           | 35,000        | 33,177    |          | -       | -             
|Warrants issued (1)                                 | -             | -         |          | 2,500   | 544           
|Broker warrants attributed to financing costs(1)(2) | -             | (593)     |          | 2,025   | 754           
|Stock options exercised                             | 980           | 1,016     |          | -       | -             
|Restricted share units issued                       | 824           | 1,302     |          |         |               
|Warrants exercised                                  | 100           | 142       |          | (100)   | (42)          
|Warrants expired                                    | -             | -         |          | (3,389) | (1,172)       
|Balance, December 31, 2007                          | 133,004       | $ 108,704 |          | 4,425   | $ 1,256       



(1)

In January 2007, RS completed a private placement of 5,000,000 units for net proceeds of $4,889.  Each unit consisted of $1 principal amount of unsecured promissory note (Promissory Note) and one-half common share purchase warrants expiring July 14, 2008.  The purchase warrants have an exercise price of $1.00 per share and were recorded at a fair value of $544 as calculated using the Black-Scholes pricing model.

A further 625,000 common share purchase warrants were granted to brokers expiring July 14, 2008.  The warrants have an exercise price of $0.86 per common share and were recorded at a fair value of $161 as calculated using the Black-Scholes pricing model.



(2)

In March 2007, RS completed a private placement of 31,339,000 common shares for net proceeds of $29,516.  Pursuant to the right of holders of Promissory Notes to participate in RSs subsequent equity financing, an additional 3,661,000 common shares were issued on

the surrender of $3,600 in principal amount of Promissory Notes and $61 in related accrued interest.  The remainder of the unsecured promissory note described in the above footnote were repaid from the net proceeds of the common share issue.







---







11.  Shareholders equity (continued):



A further 1,400,000 common share purchase warrants were granted to brokers expiring March 31, 2008.  The warrants have an exercise price of $1.00 and were recorded at a fair value of $593 as calculated using the Black-Scholes pricing model.



Warrants:

The following table summarizes information about the warrants outstanding as of December 31, 2007 (in 000s):



|                           |             |               
|-------------------------- | ----------- | --------------
|Price                      | Outstanding | Expiry        
|$1.00                      | 1,300       | March 31, 2008
|$0.86                      | 625         | July 14, 2008 
|$1.00                      | 2,500       | July 14, 2008 
|Balance, December 31, 2007 | 4,425       |               



(b) Stock based compensation:

During 2007, RS established, following shareholder approval, new stock option and restricted share unit plans, and entered into executive employment agreements with the chief executive officer and the chief financial officer.  These agreements provide the terms and conditions of employment for these executives, including base and incentive compensation, severance pay in the event of termination without just cause, modified vesting of certain unvested stock options and the one-time issuance of certain stock options and restricted share units.



As a result, 3,000,000 new options were issued to officers vesting over 3 years, 1,000,000 previously unvested options were changed to vest immediately, and 824,000 restricted share units were granted which vested immediately.



In 2007, RS recorded $1,975 (2006 - $767) in stock-based compensation expense relating to options granted to employees and non-employees.  The fair value of each option granted was estimated on the date of the grant using the Black-Scholes option-pricing model, non-employee options are revalued quarterly, with the following weighted average assumptions:



|                                           |       |      
|------------------------------------------ | ----- | -----
|Weighted average assumptions and results   | 2007  | 2006 
|                                           |       |      
|Risk free interest rate (%)                | 4.60  | 4.11 
|Expected life (years)                      | 4.94  | 3.43 
|Expected volatility (%)                    | 71.98 | 67.75
|Expected dividends ($)                     | -     | -    
|Weighted average grant-date fair value ($) | 0.88  | 0.84 



During 2007, the Company recorded stock based compensation expense of $3,481

which included: $1,863 calculated on options to employees, $112 calculated on options









---







11.  Shareholders equity (continued):

to non-employees, $1,302 as a result of the restricted share units and $204 for deferred share units.



(c) Stock options  outstanding options:



|                                          |               |                      
|----------------------------------------- | ------------- | ---------------------
|                                          | Number of     | Weighted average     
|Options held by employees (in 000s)     | stock options | exercise price       
|Outstanding, December 31, 2005            | 3,213         | $                1.07
|Granted                                   | 1,145         | 1.82                 
|Exercised                                 | (225)         | 0.55                 
|Change in grantee status to non-employees | (70)          | 1.45                 
|Forfeited                                 | (220)         | 2.05                 
|Outstanding, December 31, 2006            | 3,843         | $                1.26
|Granted                                   | 3,120         | 1.41                 
|Exercised                                 | (380)         | 0.53                 
|Forfeited                                 | (527)         | 1.90                 
|Outstanding, December 31, 2007            | 6,056         | $                1.33





|                                          |                         |                                
|----------------------------------------- | ----------------------- | -------------------------------
|Options held by non-employees (in 000s) | Number of stock options | Weighted average exercise price
|Outstanding, December 31, 2005            | 1,375                   | $                0.90          
|Granted                                   | 486                     | 1.45                           
|Exercised                                 | (50)                    | 0.37                           
|Change in grantee status from employees   | 70                      | 1.45                           
|Forfeited                                 | (25)                    | 0.34                           
|Outstanding, December 31, 2006            | 1,856                   | $                1.08          
|Granted                                   | 100                     | 1.63                           
|Exercised                                 | (600)                   | 0.61                           
|Forfeited                                 | (670)                   | 1.28                           
|Outstanding, December 31, 2007            | 686                     | $                1.38          



The following table summarizes information about the stock options outstanding as at December 31, 2007:

|            |             |               |             |      
|----------- | ----------- | ------------- | ----------- | -----
|Price range | outstanding | average years | Exercisable
|$           | 0.40-0.80   | 260           | 1.47        | 260  
|            | 0.81-1.20   | 2,393         | 3.22        | 2,273
|            | 1.21-1.45   | 2,595         | 3.83        | 786  
|            | 1.46-2.40   | 1,494         | 3.14        | 169  
|$           | 0.40-2.40   | 6,742         | 3.37        | 3,488





(d)  Restricted share unit plan

Under the Companys restricted share unit plan, the Company has granted 824,000 restricted share units, vesting immediately, to employees of the Company.  The units granted resulted in non-cash compensation expense of $1,302, valued at the stock price on the grant date.







---









11.  Shareholders equity (continued):



(e)  Deferred share unit plan

Under the Companys deferred share unit plan, directors have the option to take their fees in the form of deferred share units.  Currently, all directors have elected to take 100% of their compensation in the form of deferred share units.  On retirement from the Board, their deferred share units are paid at a cash value equivalent to the value of one common share to each deferred unit.   The liability for deferred share units are revalued to market on a quarterly basis, as at December 31, 2007 $204 is included in other current liabilities.



(f) Contributed surplus:

The following table reconciles the Companys contributed surplus:

|                              |              |            
|----------------------------- | ------------ | -----------
|                              | 2007         | 2006       
|Balance, beginning of year    | $      3,731 | $     3,009
|Stock-based compensation cost | 1,975        | 767        
|Stock options exercised       | (446)        | (69)       
|Expired warrants              | 1,172        | 24         
|Balance, end of year          | $     6,432  | $     3,731



12.  Restructuring charges:



On August 31, 2006, the Company announced the decision to close its Edmonton manufacturing facilities and consolidate all activities in Calgary.  Further in December 2006, the Company significantly curtailed and later shut down RStandard utility pole production at its Calgary manufacturing facility.  During the year, the Company incurred consequential restructuring charges as follows:



|                                         |               |            
|---------------------------------------- | ------------- | -----------
|                                         | 2007          | 2006       
|Workforce reduction                      | $           - | $       495
|Property, plant and equipment impairment | 72            | 1,779      
|Dismantling and cleaning charges         | 107           | 277        
|Taxes, utilities and lease costs         | -             | 131        
|Total restructuring charges              | $      179    | $    2,682 



Property, plant and equipment impairment charges of $72 (2006-$1,779) consisted of nil

(2006 - $1,474) for Edmonton equipment, and $72 (2006 - $305) for Calgary equipment not deemed useful for further operations.  The salvage value of the equipment net of disposal costs is deemed to be nil.



Upon consolidating activities in August 2006, the Company reduced its workforce by 56 employees and incurred workforce reduction charges of $289, from associated severance and benefit costs.



Upon the initial curtailment of utility pole production in Calgary, the Company reduced its workforce by 134 employees and by 22 additional employees in January 2007 on the final shut-down.  Workforce reduction charges of $206 were related to the cost of severance and benefits associated with the terminated employees.











---







13.  Financing charges:



Financing charges are comprised of:

|                                                  |               |              
|------------------------------------------------- | ------------- | -------------
|                                                  | 2007          | 2006         
|Debenture interest expense                        | $       2,125 | $       2,125
|Other interest expense                            | 99            | 47           
|Amortization of deferred financing cost (note 10) | -             | 160          
|Short-term financing accretion                    | 816           | -            
|Debenture accretion expense (note 10)             | 2,086         | 1,754        
|                                                  | $       5,126 | $       4,086





14.  Income taxes:



(a)

Expected tax rate:



In 2007, the Companys statutory income tax rate was approximately 32.12% (December 31, 2006  32.12%).  RSs recorded income tax expense (reduction) differs from the amounts computed by applying the statutory income tax rate to the loss before income taxes as a result of the following:

|                                                               |               |                
|-------------------------------------------------------------- | ------------- | ---------------
|                                                               | 2007          | 2006           
|Loss before income taxes                                       | $ (23,359)    | $ (43,411)     
|Computed "expected" tax reduction                              | (7,504)       | (13,943)       
|Change in valuation allowance                                  | 645           | 9,775          
|Change in tax rates                                            | 4,754         | 3,437          
|Non-deductible permanent difference  stock based compensation | 1,053         | 247            
|Other                                                          | 1,052         | 484            
|                                                               | $           - | $             -



(b)

Net future income tax assets:



The temporary differences that give rise to future income tax assets, none of which has been recorded in the financial statements, are as follows:



|                         |                                |                       |                 |                       |              |  |  |  |  |  | 
|------------------------ | ------------------------------ | --------------------- | --------------- | --------------------- | ------------ |  |  |  |  |  | 
|                         |                                | 2007                  | 2006           
|                         |                                | Temporary Differences | Tax effected    | Temporary Differences | Tax effected
|Future tax assets:       |                                |                       |                 |                      
|                         | Non-capital loss carry forward | $      91,841         | $    23,061     | $     79,194          | $  23,037   
|                         | Property, plant and equipment  | 14,690                | 3,689           | 11,205                | 3,249       
|                         | Other                          | 4,022                 | 1,010           | 2,948                 | 829         
|                         |                                | 110,553               | 27,760          | 93,347                | 27,115      
|                         |                                |                       |                 |                       |             
|Less valuation allowance | (110,553)                      | (27,760)              | (93,347)        | (27,115)             
|                         | $               -              | $            -        | $             - | $           -        









---









14.  Income taxes (continued):



Non-capital losses carried forward expire from 2009 through 2027 as follows:



|       |          
|------ | ---------
|Period | Amount   
|2009   | $   1,871
|2010   | 6,531    
|2014   | 10,427   
|2019   | 768      
|2025   | 20,398   
|2026   | 37,317   
|2027   | 14,529   
|Total  | $ 91,841 







15. Supplemental cash flow information:



Changes in non-cash working capital:

|                                         |                      |               |            
|---------------------------------------- | -------------------- | ------------- | -----------
|                                         |                      | 2007          | 2006       
|Accounts receivable                      | $     (1,292)        | $       (197)
|Inventories                              | 921                  | 321          
|Prepaid expenses and security deposits   | (2,630)              | (47)         
|Accounts payable and accrued liabilities | (5,988)              | 3,586        
|Other                                    | 102                  | (78)         
|Change in non-cash working capital       | $     (8,887)        | $       3,585
|                                         |                      |               |            
|Relating to                              |                      |              
|                                         | Operating activities | $     (8,989) | $     4,307
|                                         | Investing activities | 102           | (722)      







Interest and taxes paid and received:

|                  |           |            |     
|----------------- | --------- | ---------- | ----
|                  |           | 2007       | 2006
|                  |           |            |     
|Interest paid     | $   2,189 | $    1,082
|Interest received | 664       | 359       
|Cash taxes paid   | -         | -         









---







16.  Segmented information:



RSs activities comprise of one operating segment being the development, manufacturing and sales of composite products. The Company evaluates performance as one entity.  In 2007, revenue includes sales to customers in the United States of $508 (2006 - $1,054) and International of $407 (2006 - $243) with all other sales attributed to customers located in Canada.



The following table represents revenues by product categories:



|               |          |            
|-------------- | -------- | -----------
|Product        | 2007     | 2006       
|Utility poles  | $    888 | $     4,190
|Roller tube    | 65       | -          
|Other products | 34       | 162        
|Totals         | $    987 | $  4,352   



The following table represents sales to customers that individually represented 10% or more of the Companys total product revenue for the periods indicated:



|           |      |     
|---------- | ---- | ----
|Customers  | 2007 | 2006
|Customer A | -    | 50% 
|Customer B | -    | 14% 
|Customer C | 42%  | -   
|Customer D | 28%  | -   
|Totals     | 70%  | 64% 





17. Financial assets and financial liabilities:



At December 31, 2007 and 2006, the fair values of cash and cash equivalents, accounts receivable, restricted cash and deposits, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.  At December 31, 2007 and 2006, the carrying amounts of the capital lease obligations and the liability portion of the convertible debt approximate their fair values due to interest rates that reflect market rates.



As at December 31, 2007, the Company had modest exposure to interest rate risk to the extent that changes in market interest rates will impact the fair value of the liability and equity components of the convertible debentures with a fixed interest rate.



The Company does not engage in any hedging or currency trading activities.  Business activities are conducted primarily in U.S. and Canadian dollars and assets and liabilities are denominated primarily in Canadian dollars.  A substantial portion of sales and raw material and product purchases are denominated in U.S. dollars, while most of the administrative costs are denominated in Canadian dollars.  The effects of the foreign exchange changes are not significant and foreign exchange gains and losses are included in general and administrative expenses.  In 2007, the Company recorded realized foreign exchange loss of $40 (2006  gain of $17).



During the year, the Company signed a definitive agreement with Global, which included fixed U.S. dollar prices for the purchase of RStandard poles manufactured by Global and the sale of raw material to Global.  The denomination of these transactions in US dollars makes them embedded







---









17. Financial assets and financial liabilities (continued):



foreign currency derivatives. The Company revalues the embedded foreign currency component of

this contract based on foreign currency exchange rates at each period end. The fair value calculated using notional quantities per the agreement, management estimates and third party information resulted in an unrealized foreign currency gain of $1,515 for the year.  The fair value of the embedded foreign currency derivatives will be determined quarterly resulting in a foreign exchange gain or loss over the period.



The maximum exposure to credit risk is represented by the carrying amount of accounts receivable.  At December 31, 2007 and 2006, RS held no collateral or other security relating to accounts receivable.





18.  Commitments, contingencies and contractual obligations:



In 2006, RS entered into agreements to lease plant and office space in three locations; one for office space with an initial term to June 30, 2011, with two five-year renewal options, one for manufacturing operations with an initial term to September 30, 2016, with two five-year renewal options and one for research and development facilities with an initial term to June 30, 2011.  During 2007, the research and development facilities were subleased for a term to June 30, 2011. The minimum rent payable for each of the next five years and thereafter is as follows:



|           |               
|---------- | --------------
|Period     | Lease payments
|2008       | $782          
|2009       | 792           
|2010       | 797           
|2011       | 645           
|2012       | 468           
|Thereafter | 1,797         



Total minimum future payments have not been reduced by $1,277 of sublease rentals to be received in the future under the non-cancellable sublease.



During 2007, the Company signed a five-year agreement with HD Supply Utilities Ltd. to be the exclusive distributor of RSs RStandard transmission and distribution poles within Canada, the United States, Mexico, Bermuda, the Bahamas and all of the Caribbean Islands.  The agreement includes an initial purchase order for RStandard poles with a value exceeding U.S. $50 million of which purchases are to be made over a two year period after deliveries commence.  Shipments began in October 2007 and are expected to continue until January 2010.

The Company is subject to claims and contingencies related to lawsuits and other matters arising in the normal course of operations.  Management believes the ultimate liability, if any, arising from such claims or contingencies, is not likely to have a material adverse effect on the Companys results of operations or financial condition.









---







19. Reconciliation with United States generally accepted accounting principles:



The Companys consolidated financial statements are prepared in accordance with Canadian GAAP.  These principles differ in some material respects from U.S. GAAP as noted below.



|                                                 |                                                         |                    |       |  | 
|------------------------------------------------ | ------------------------------------------------------- | ------------------ | ----- |  | 
|                                                 |                                                         | 2007               | 2006 
|Statement of operations                          |                                                         |                   
|                                                 |                                                         |                    |      
|Net loss under Canadian GAAP                     | $     (23,359)                                          | $      (43,411)   
|Adjustments:                                     |                                                         |                   
|                                                 | Convertible debentures (a)                              | 1,806              | 1,643
|                                                 | Stock options granted to employees (b)(ii)              | 22                 | 27   
|                                                 | Stock options granted to non-employees (b)(iii)         | -                  | (9)  
|                                                 | Sale and leaseback of property, plant and equipment (c) | 18                 | (12) 
|                                                 |                                                         | 1,846              | 1,649
|Net loss and comprehensive loss under U.S. GAAP  | $     (21,513)                                          | $      (41,762)   
|Basic and diluted loss per share under U.S. GAAP | $         (0.17)                                        | $           (0.46)



|                                                  |                   |                  |     
|------------------------------------------------- | ----------------- | ---------------- | ----
|                                                  |                   | 2007             | 2006
|Shareholders' equity (Deficit)                    |                   |                 
|Shareholders' equity under Canadian GAAP          | $          6,148  | $        (8,420)
|Equity component of convertible debentures        | (10,258)          | (10,258)        
|Accretion not recorded for US GAAP                | 3,711             | 2,002           
|Adjustment for sale/leaseback on sale of property | (82)              | (100)           
|Shareholders' equity  under U.S. GAAP             | $           (481) | $      (16,776) 



(a) Convertible debentures:

Under U.S. GAAP, the convertible debentures issued in 2005 were determined to be conventional convertible debentures; accordingly, the conversion feature was not required to be assessed for bifurcation.  As a result, the accretion of $2,086 (2006  $1,754) of the liability component of the debenture to the maturity amount recorded under Canadian GAAP has been reversed for U.S. GAAP.  Under Canadian GAAP, there was a reduction in deferred financing costs of $597 resulting from the adopting of the new accounting pronouncement as described in note 3.  Under U.S. GAAP debt issuance costs are capitalized as an asset and amortized over the term of the debenture.



(b) Stock-based compensation:

i)

Effective January 1, 2006, RS adopted the Financial Accounting Standards Board

Statement 123R, Share-Based Payment, using the modified prospective method.  Statement 123R requires stock-based payments to employees to be recognized using the fair value method for the remaining portion of the requisite service under previously granted unvested awards outstanding on adoption as well as new awards.  Prior to January 1, 2006, the Company accounted for stock-based payment awards to employees using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations whereby stock-based compensation costs were recognized only if the grant-date fair value of the underlying shares exceeded the exercise price or upon certain modifications.  The Company had no cumulative effect adjustment to recognize on adoption of Statement 123R as







---











19. Reconciliation with United States generally accepted accounting principles (continued):



there were no unvested stock options outstanding on adoption which were previously recognized in the financial statements for periods prior to adoption.

Statement 123R also requires an estimate of the forfeiture rate upon adoption and through out the requisite service period of award whereas, under Canadian GAAP, the Company recognizes forfeitures as they occur which results in a reduction to stock-based compensation expense of $22 (2006- $27) for the year.



ii)

Under Canadian GAAP, the Company records the stock-based compensation expense provided to employees of $1,863 as a general and administrative expense.  Under U.S. GAAP, the Company must record the stock-based compensation costs in the same expense category which includes the employees cash compensation costs.  Under U.S. GAAP, the total stock-based compensation expense of $1,841 would be attributed to general and administrative expense of $2,023, product development expense of $28 and  marketing and business development reduction in expense of $210.



iii)

Under U.S. GAAP, share-based payment awards to non-employees are to be recognized using the fair value method based on the initial fair value of the awards granted and subsequently remeasured to fair value each balance sheet date until performance is complete.  This method is consistent with Canadian GAAP, as described in note 10(b).  However, under Canadian GAAP, RS did not adopt the fair value method for share-based awards granted to non-employees until September 1, 2002. As a result, the impact of using the fair value method under U.S. GAAP for stock options granted to non-employees prior to September 1, 2002, results in an additional compensation expense in 2007 of $nil (2006 - $9).



(c) Sale/leaseback on sale of property



Under Canadian GAAP, the Company realized a gain of $906 on the sale and subsequent leaseback of the property in 2005.  The gain was deferred and is being recognized over the term of the ten year lease.



Under U.S. GAAP, the sale and subsequent leaseback of the property did not qualify for leaseback accounting until the cancellation of the option to repurchase the property on September 14, 2006.  Accordingly, the Company applied the following accounting treatment under U.S. GAAP:



i)

The proceeds on sale of $4,000 as a financing obligation with the principal and interest portions of the lease payments of $1 and $394 respectively, being recorded as a reduction to the financing obligation and financing charges, respectively.



ii)

The carrying amount of property, plant and equipment of $3,060 remained on the balance sheet with amortization on the building from the date of sale of $72.



On expiry of the option in 2006, the Company recognized a gain of $967, representing the excess of the outstanding lease obligation of $3,990 over the carrying amount of the land and buildings of $3,023, which has been deferred and is being amortized over the remaining ten year lease term.







---







19. Reconciliation with United States generally accepted accounting principles (continued):



(d) Recently adopted accounting pronouncements



i)

FIN 48

On January 1, 2007, the Company adopted the provisions of FIN 48 that prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation requires that the Company recognize the impact of a tax position in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. In accordance with the provisions of FIN 48, any cumulative effect resulting from the change in accounting principle is to be recorded as an adjustment to the opening balance of deficit.



The Companys policy on interest and penalty related to tax is to record the amounts as interest expenses on the income statement.  There is no interest or penalty amounts recognized in current years consolidated statement of loss and deficit. In addition, the Company does not have unrecognized tax benefits that, if recognized, would affect the effective tax rate.



The adoption of FIN 48 did not result in a material impact on the Companys financial position or results of operations.



(e)  Accounting Pronouncements to be adopted in the future



i)

SFAS 157

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS157). SFAS 157 defines fair value, does not establish a framework for measuring fair value but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact these new standards will have on its consolidated financial statements.



ii)

SFAS 141(R) and SFAS 160

As of January 1, 2009, the Company will be required to adopt, for US GAAP purposes SFAS 141 (R), Business Combinations and SFAS 160, Noncontrolling Interests in Consolidated Financial Statements.

These statements dramatically change the way companies account for business combination and noncontrolling interests. Compared with their predecessors, SFAS 141 (R) and SFAS 160 will require:

·

Liabilities related to contingent consideration to be remeasured  at fair value in each subsequent reporting period;

·

An acquirer in preacquisition periods to expense all acquisition related costs; and

·

Noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of equity.

SFAS 141 (R) and SFAS 160 should both be applied prospectively for fiscal years beginning on or after December 15, 2008. The adoption of these standards will impact the Companys US GAAP accounting treatment of business combinations, if any, entered into after January 1, 2009.







---









ADDITIONAL DISCLOSURE

Certifications and Disclosure Regarding Controls and Procedures.

(a)

Certifications.  See Exhibits 99.1 and 99.2 to this Annual Report on Form 40-F.

(b)

Disclosure Controls and Procedures.  As of the end of the registrants fiscal year ended December 31, 2007, an evaluation of the effectiveness of the registrants disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) was carried out by the registrants management with the participation of the principal executive officer and principal financial officer.  Based upon that evaluation, the registrants principal executive officer and principal financial officer have concluded, based on the material weakness discussed below, that as of the end of that fiscal year, the registrants disclosure controls and procedures are ineffective to ensure that information required to be disclosed by the registrant in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the registrants management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.



(c)

Managements Annual Report on Internal Control Over Financial Reporting.



The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in rules 13a-15(f) and 15-d-15(f) under the Securities Exchange Act of 1934.  Management conducted an assessment of the effectiveness of its internal control over financial reporting, based upon the Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.



RSs internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:



·

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

·

provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

·

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.







---









Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate  because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.



A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.  As of December 31, 2007, management has identified the following material weaknesses in the Companys internal control over financial reporting:



The Companys finance staff does not have sufficient technical accounting knowledge to address complex and non-routine accounting transactions that may arise.  Specifically, there is an inability to identify the existence of accounting issues arising from certain transactions completed by the Company.  As a result, material misstatements were identified in stock-based compensation expense and foreign currency embedded derivatives which were corrected prior to the issuance of the 2007 consolidated financial statements. This control weakness, which is pervasive in nature, results in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis.



As a result of the existence of the material weakness discussed above as of December 31, 2007, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2007, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.



KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements and issued their report on RSs internal control over financial reporting. Refer Exhibit 99.6 hereto, which is incorporated by reference into this Annual Report on Form 40F.



(d)

Managements Current Plans for Remediating the Material Weakness.The Company will enhance its finance staff training and development. Additionally, the Company will increase the use of services of outside consultants who have expertise in complex accounting matters to assist in identifying and resolving complex issues. Management will also implement an improved consultation process with external auditors.



(e)

Changes in Internal Control Over Financial Reporting.  During the fiscal year ended December 31, 2007, there were changes in the registrants internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the registrants internal control over financial reporting, as follows:



·

The registrant has enhanced controls surrounding month end reporting. One of the major enhancements is detailed management review of its monthly variance analysis comparing actual to budget.







---













Notices Pursuant to Regulation BTR.



None.



Audit Committee Financial Expert.



The registrant does not have an audit committee financial expert on its audit committee as the current board has only been in place one year. The Company plans to recruit new board members in the future with the financial expert qualifications one of the recruiting considerations.



Code of Ethics.



The registrant has adopted a code of ethics (as that term is defined in Form 40-F) (the Code of Ethics) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.

The registrant will provide a copy of the Code of Ethics without charge, upon request, to anyone who requests it.  Copies of the Code of Ethics may be requested by contacting the registrants chief executive officer at the registrants principal office located at 400, 2421 37th Avenue NE, Calgary, Alberta, Canada, T2E 6Y7 (telephone: (403) 219-8000).

Since the adoption of the Code of Ethics, there have not been any amendments to the Code of Ethics or waivers, including implicit waivers, from any provision of the Code of Ethics.

Principal Accountant Fees and Services.

The following table provides information about the fees billed the registrant for professional services rendered by KPMG LLP during the fiscal year ended December 31, 2007 and the fiscal year ended December 31, 2006:

|                            |                              |                              
|--------------------------- | ---------------------------- | -----------------------------
|(Cdn$)                      | Year Ended December 31, 2007 | Year Ended December 
31, 2006
|Audit Fees                  | $476,016                     | $444,500                     
|Audit Related Fees
Tax Fees | $NIL
$NIL                    | $NIL
$NIL                    
|All Other Fees              | $NIL                         | $13,589                      
|Total                       | $476,016                     | $458,089                     

Audit Fees.  Audit fees consist of fees for the audit of the registrants annual financial statements or services that are normally provided in connection with statutory and regulatory filings or engagements.

All Other Fees.  Other fees consist of fees for services in connection with equity financing.







---







Pre-Approval Policies and Procedures.

All audit and permitted non-audit services to be provided by the registrants auditors are and will be pre-approved by the registrants Audit Committee.

None of the fees reported above under Principal Accountant Fees and Services were approved by the registrants Audit Committee pursuant to the de minimis exception provided by Rule 2-01(c)(7)(i)(C) of Regulation S-X.

Off-Balance Sheet Arrangements.

None.

Tabular Disclosure of Contractual Obligations.

The registrant has operating leases related to offices and plant facilities, as described in note 18 to the Consolidated Financial Statements for the fiscal year ended December 31, 2007 included as part of this Annual Report on Form 40-F.  At present, the only determinable future payments are those set forth below in the table.



|                          |        |                  |           |           |                  
|------------------------- | ------ | ---------------- | --------- | --------- | -----------------
|Caption
(in $000s Cdn)   | Total  | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years
|Operating Leases          | 5,281  | 782              | 1,589     | 1,113     | 1,797            
|Capital Leases            | 71     | 71               | --        | --        | --               
|Long-term payable         | 384    | 384              | --        | --        | --               
|Convertible Debentures(a) | 30,874 | 2,125            | 28,749    | --        | --               
|Total                     | 36,610 | 3,362            | 30,338    | 1,113     | 1,797            



(a)

The Convertible Debentures includes annual interest payments and the principal amount at maturity.  The convertible debentures may be converted into a fixed number of common shares by the holder, as well as redeemed by the Company by issuing and delivering a variable number of common shares in the amount of the debenture principal.  The details of these convertible debentures are described in note 8 to the Consolidated Financial Statements.







---









UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A.

Undertaking.

The registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Securities and Exchange Commission (the Commission) staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to:  the securities registered pursuant to Form   40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

B.

Consent to Service of Process.

The Company has filed a Form F-X in connection with the class of securities in relation to which the obligation to file this report arises.

Any change to the name or address of the agent for service of process of the registrant shall be communicated promptly to the Securities and Exchange Commission by an amendment to the Form F-X referencing the file number of the relevant registration statement.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 12, 2008.



Resin Systems Inc.

By:/s/ Paul Giannelia

Name: Paul Giannelia

Title:

President and Chief

Executive Officer









---







EXHIBIT INDEX



|        |                                                                                                                                                                                               
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit | Description                                                                                                                                                                                   
|        |                                                                                                                                                                                               
|99.1    | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                                                               
|99.2    | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|        |                                                                                                                                                                                               
|99.3    | Certification of Chief Executive Officer pursuant to 18 U.S.C section 1350                                                                                                                    
|        |                                                                                                                                                                                               
|99.4    | Certification of Chief Financial Officer pursuant to 18 U.S.C section 1350                                                                                                                    
|        |                                                                                                                                                                                               
|99.5    | Consent of KPMG LLP