UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





(Mark
      One)x
            
            Annual
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934For
      the fiscal year ended October 31, 2008o
            
            Transition
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934





Commission File Number
000-53425







CARBON CREDITS
INTERNATIONAL, INC.


(Exact
Name of Registrant as Specified in its Charter)




Nevada
                
                26-1240905(State
      of Incorporation)
                
                (IRS
      Employer Identification
Number)




2300
E. Sahara Avenue, Suite 800, Las Vegas, Nevada USA 89102  (Address
of principal executive offices)




Registrant’s
Telephone Number:


(888) 579-7771




Securities
registered pursuant to Section 12(g) of the Act:




Common
Stock, par value $0.0001 per share




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes o     No x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes o     No x





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes x     No o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  x





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





Large
      accelerated filer
                  o
                  Accelerated
      filer
                  oNon-accelerated
      filer
                  o
                  Smaller
      reporting company
                  x(Do
      not check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).


Yes o     No x


As of
January 29, 2009, there were 24,911,000 shares of the Registrant’s Common Stock
issued and outstanding.







1


TABLE
      OF CONTENTS
                                              PagePART IItem 1.
                                              
                                              Business
                                              3Item 1A.
                                              
                                              Risk
      Factors
                                              5Item 1B.
                                              
                                              Unresolved
      Staff Comments
                                              8Item 2.
                                              
                                              Properties
                                              9Item 3.
                                              
                                              Legal
      Proceedings
                                              9Item 4.
                                              
                                              Submission
      of Matters to a Vote of Security Holders
                                              9PART IIItem 5.
                                              
                                              Market
      for Registrant’s Common Equity, Related Shareholder Matters and Issuer
      Purchases of Equity Securities
                                              9Item 6.
                                              
                                              Selected
      Financial Data
                                              10Item 7.
                                              
                                              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                              10Item
      7A.
                                              
                                              Quantitative
      and Qualitative Disclosures About Market Risk
                                              12Item 8.
                                              
                                              Financial
      Statements and Supplementary Data
                                              13Item 9.
                                              
                                              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                              14Item 9A(T).
                                              
                                              Controls
      and Procedures
                                              14Item
      9B.
                                              
                                              Other
      Information
                                              14PART IIIItem 10.
                                              
                                              Directors,
      Executive Officers and Corporate Governance
                                              15Item 11.
                                              
                                              Executive
      Compensation
                                              16Item 12.
                                              
                                              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters
                                              18Item 13.
                                              
                                              Certain
      Relationships and Related Transactions, and Director
      Independence
                                              19Item 14.
                                              
                                              Principal
      Accountant Fees and Services
                                              20PART IVItem 15.
                                              
                                              Exhibits
      and Financial Statement Schedules
                                              20Signatures
                                              
                                              
                                              21










2




PART I





Item 1.
            Description
      of Business





Carbon
Credits International, Inc. (“CCII” “the Company”, “we”, “our”, or “us”) is
engaged in the business of marketing and distributing both branded and private
label power saving devices (PSDs) manufactured by Carbon Reducer Industries,
Sdn. Bhd., a Malaysian corporation (“CRI”), pursuant to an Exclusive
Distribution Agreement between our Company, as licensee, and CRI, as licensor,
which provides our Company with the exclusive worldwide right to market and
distribute products manufactured by CRI, including the right to enter into
sublicenses with third-party distributors.





Our
website may be found at www.carbonproreducer.com





PRODUCTS
AND SERVICES





All of
the energy savings products of which we became the exclusive world-wide licensee
to sell as of July 25, 2008, had previously been approved for sale in Asia, and
have been selling in Malaysia for over the past five years under a private brand
name. Recent Asian sales by third party agents prior to our obtaining the
exclusive license included the Kuala Lumpur International Airport and
sales to the Malaysian government where the products were installed in a 500
kilometer stretch of highway. These two installations resulted in revenue
sharing from energy savings by the sales agents of Radatech, the
predecessor to CRI.





Principal Products and
Services





We intend
to market and distribute three (3) main products detailed
below.  Each of these products are manufactured by CRI and marketed
and distributed by CCII pursuant to an Exclusive Distribution Agreement with CRI
dated July 25, 2008. Each product can be tailored accordingly, depending on the
load demands applicable to each particular requirement.




ReducerTM
Enersaver:





This
product is designed to operate on a mixed load set up and will save between
15%and 35%on each installed
electrical appliance. The device is connected directly to the clients
Distribution Board (DB).  This installation requires limited client
downtime. ReducerTM Enersaver can operate on 15A single phase supply up to 150A
three phase.  It works by continuously detecting the required load and
self adjusts its reactor coil and auto coil to provide an optimum supply to the
load.





ReducerTM
Motorsaver:





As the
name suggests, this product is designed for electric motors and is another
intelligent product from Reducer TM. We can supply anything from 1.5KW to 300KW
depending on the motor’s size. This is a powerful device with built in Soft
Starter, Variable Speed Devices, and a proprietary Load Detection Mechanism.
With this LDM in place, we can save between 25%and 35% on the motor
loss by adjusting the power factor of the motor to attain an efficiency of
between 0.95 and 0.99.  Once we have saved on the motor losses, we
then take advantage of the built in VSD to monitor the operational usage. With
this function, we can save a further 20% to 30% depending on the motor’s
sizing.





ReducerTM Street Light
Manager:





The
Street Light Manager is available in two models. The standard system can
achieve a minimum 24%saving. The second
option is our flagship model incorporating an intelligent system with “dimmer”
control, providing savings as high as 45%. The savings for both systems
will depend on the programming of our devices in accordance with local laws and
highway regulations.





The
product name, “Reducer” was inspired by our interest in removing the black or
wasted electrical current within any premises or applications, reducing excesses
in real power consumption. After we have audited the premises we can provide an
average energy saving of 15% to 35% off the actual energy bill. We plan to
install our Reducer products to all customers that are interested in savings on
their electrical power consumption through qualified electrical contractors that
will be trained by CRI personnel in the proper installation of the
products.





Our
Reducer appliances are compatible with over 95% of the electrical equipment
available on the market today. We have a product that is able to provide
consistent savings on a mixed load environment without requiring any physical
re-wiring to the existing distribution boards.





All of
the installations will require periodic visits by a qualified technician who
will determine the energy savings to date and replace any parts coming up for
replacement based on the installation or last repair/replacement date. CRI’s
basic warranty of 3 years covers all service and part replacements. For
additional consideration, the basic warranty can be extended to 10
years.






3




Item 1.
              Description of
      Business -
      continued
  PRODUCTS AND SERVICES
-
continued
 Marketing and
Distribution





We intend
to undertake our own direct marketing efforts to promote and sell our products
in the Asian market. Regarding brand awareness, we will launch global marketing
campaigns, regional advertisements, road shows, seminars and exhibitions to
educate and promote our Reducer power saving devices.  As our mission
statement says:





To
      become a prominent global player providing reliable and proven energy
      saving solutions.


To
      provide future safe solutions which optimize energy conservation
      increasing the efficiency of electrical
  appliances.


To
      enable our clients to harvest Carbon Credits under the guidance of the
      Clean Development Mechanism and the Kyoto Protocol
    Conference.





We also
intend to enter into sublicense agreements with qualified
sub-distributors in addition to having sales agents who will sell directly
for us based on a commission structure. These sublicense agreements may
require an initial license fee as well as a royalty based on gross sales.
Retaining exclusivity, we bill based upon a mutually agreeable annual or
semi-annual sales minimum.





Dependence on One or a Few
Major Customers





We do not
anticipate dependence on one or a few major customers for at least the next 12
months or the foreseeable future.





Patent, Trademark, License
& Franchise Restrictions and Contractual Obligations &
Concessions





We
distribute our products under license and all trademarks and
patents pending are the property of our licensor. We do not
intend to obtain any additional trademarks or patents. CCII has not entered into
any franchise agreements or other contracts that have given, or could give rise
to obligations or concessions.




Existing or Probable
Government Regulations





There are
no existing government regulations nor are we aware of any regulations being
contemplated that would adversely affect CCII’s ability to operate.





Research and Development
Activities and Costs





CCII has
not incurred any costs to date and has no plans to undertake any research and
development activities during the first year of operation. We do intend to pay
for all approvals needed to market our products worldwide including
the United Laboratories approvals.





Compliance With
Environmental Laws





We are
not aware of any environmental laws that have been enacted, nor are we aware of
any such laws being contemplated for the future, that address issues specific to
our business.





Facilities





We rent
executive office facilities in Las Vegas. This is a shared office facility which
offers office space and secretarial and administrative services for $294
monthly. We may cancel upon 30 days written notice. This location will serve as
our primary office for planning and implementing of our plan in the United
States. We will continue to use this space for our executive offices for the
foreseeable future.





We also
rent an office space at Level 20, Menara Standard Chartered, 30 Jalan Sultan
Ismail, Kuala Lumpur, Malaysia 50250. We rent this space on a month to month
basis at a minimum monthly rental rate of $125 per month. We may cancel upon 30
days written notice and our intention is to do so during 2009.  This
location will serve as our satellite office for planning and implementing of our
plan in Asia and other foreign countries.





Since
substantially all of our business is presently conducted from the homes of our
two officers, we approved a monthly rent to each of our two officers of $1,500
per month effective December 1, 2008.





Employees





CCII has
two employees at the present time. Mr. Schulte, and Mr. Braverman, who are
officers and directors, and are responsible for all planning, developing and
operational duties, and will continue to do so throughout the early stages of
our growth.





There is
no intention of hiring other employees until the business has been successfully
launched and we have sufficient, sustained revenues flowing to CCII from our
operations or have raised sufficient equity capital. Our officers and directors
will perform whatever work is required without paid compensation, until our
business is to the point of having available cash flow. Human resource planning
will be part of an ongoing process that will include regular evaluation of
operations and revenue realization.





4


Item 1.
              Description of
      Business -
      continued


RESEARCH
AND DEVELOPMENT





None





COST
AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS





None





AVAILABILITY
OF FILINGS





A copy of
this Annual Report on Form 10-K is located at the SEC’s Public Reference
Room at 100 F Street, NE, Washington, DC 20549. Information on the
operation of the Public Reference Room can be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy
and information statements and other information regarding our filings at
www.sec.gov.






Item 1A.
            Risk
      Factors





We have no operating history
and have maintained losses since inception, which we expect to continue into the
near term.





We were
incorporated on October 15, 2007 and only just recently commenced operations. We
have not realized any significant revenues to date. We have no operating history
at all upon which an evaluation of our future success or failure can be made.
Our cumulative net loss from inception (October 15, 2007) to October 31, 2008
was $(487,048).




Our
ability to achieve and maintain profitability and positive cash flow beyond the
near term is dependent upon:





●
                  our
      ability to further develop our  customer base for our products
      in Asia:●
                  the
      ability of our licensor to obtain UL approvals for our products to be sold
      in other countries;●
                  our
      ability to generate a customer base in other countries;●
                  the
      ability of CRI to furnish quality products at the level we require to
      support our global operations;●
                  our
      ability to control costs; and●
                  our
      ability to compete with other energy savings
  products.





Based
upon our proposed plans, we expect to incur operating losses through October 31,
2009, and be profitable thereafter. This forecast would improve if CRI
is able to obtain UL approval for our products which we plan on pursuing by
December 31, 2009.  There will be substantial costs and expenses
associated with the development and marketing of our products in North America
once UL approval is obtained for which revenues in that area will be initially
limited. Failure to generate revenues initially in North America will not cause
us to go out of business because we expect to sustain commissions in Asia
commencing January 2009, and ultimately adequate cash flows in the latter part
of 2009.





If we are unable to obtain
the necessary revenues and financing to implement our business plan we will not
have the money to pay our ongoing expenses and we may go out of business unless
we obtain sufficient funding from existing or new
shareholders.





Our
ability to successfully sell our products to generate operating revenues in
other countries depends on our ability to sustain overall profitability and cash
flows to implement our business plan. Given that we have a
limited operating history, limited present revenues and only losses to
date, we may not be able to achieve this goal, therefore we plan to
continue selling equity securities to be able to pay our operating costs. Should
this fail, we may go out of business.





At
October 31, 2008, we had $75,223 of cash.  As of the date hereof, we
have $46,200. Our budgeted operating cash expenditures for the next 12 months
through October 2009 including officers’ compensation are approximately $700,000
and our forecasted cash flows from gross profit is approximately $800,000.
Therefore, we presently have forecasted a positive cash position from pre tax
operations as of October 2009 of $100,000.  There are no estimated
U.S. income taxes through October 31, 2009 due to our net operating loss
carryforward.  However, we anticipate raising funds of approximately
$250,000 if we proceed with manufacturing in the United States, and additional
funds if we pursue energy savings performance contracts (ESPC) of $3,000,000 in
order for us to purchase products from CRI and share in the energy savings of
our customers for 10 years. These contracts and resulting revenue and cost of
products have not been included in the aforementioned budget. In addition, we
estimate needing additional working capital of $250,000 to pay our overhead
until such expenses can be paid for through recurring revenues.





How long
CCII will be able to satisfy its cash requirements depends on how quickly we can
generate revenues in Asia and other countries. Although there can be no
assurance at present, we plan to be in a position to generate cash flow from
revenues in North America in the fourth calendar quarter of 2009.





We plan
on selling additional equity securities to generate sufficient cash flows to
supplement our operating budget until operations support continuing cash flows.
The issuance of additional equity securities by us would result in a significant
dilution in the equity interests of our current stockholders depending on the
price we can sell such shares. The resale of shares by our existing stockholders
pursuant to this annual report may result in significant downward pressure on
the price of our common stock and cause negative impact on our ability to sell
additional equity securities.




5


Item 1A.
              Risk Factors -
      continued
 
 We have limited sales and
marketing experience.





Our
management has limited experience in marketing our proposed products and no
distribution system has yet been successfully tested. While we have plans for
marketing and sales, there can be no assurance that such efforts will be
successful or that we will be able to attract and retain qualified individuals
with marketing and sales expertise. Our future success will depend, among other
factors, upon whether our products can be sold at a profitable price and the
extent to which consumers acquire, adopt, and continue to use them. There can be
no assurance that our products will gain wide acceptance in our targeted markets
or that we will be able to effectively market our products.





If our estimates related to
expenditures and cashflow from operations are erroneous, and we are unable to
sell additional equity securities, our business could fall short of expectations
and you may lose your entire investment.





Our
financial success is dependent in part upon the accuracy of our management's
estimates of expenditures and cash flow from operations. If such estimates are
erroneous or inaccurate, we may not be able to carry out our business plan,
which could, in a worst-case scenario, result in the failure of our business and
you losing your entire investment.





We may not be able to
compete effectively against our competitors.





We are
engaged in a rapidly evolving field. Competition from other companies in the
same field is intense and is expected to increase. Many of our competitors have
substantially greater resources, research and development staff, sales and
marketing staff, and facilities than we do. In addition, other recently
developed technologies are, or may in the future be, the basis of competitive
products. There can be no assurance that others will not copy and/or sell our
products, or that our competitors will not develop technologies and products
that are more effective than those developed and being developed by us which
could render our technology and products obsolete or
noncompetitive.





Our Business Model may not
be sufficient to achieve success in our intended market





Our
survival is dependent upon the market acceptance of a narrow group of
products.  Should these products be too narrowly focused or should the
target market not be as responsive as we anticipate, we will not have in place
alternate products we can offer to ensure our survival.





Inability of Our Officers
and Directors to devote sufficient time to the operation of the business may
limit our success.





Presently,
our officers and directors allocate the majority of their time to the operation
of CCII’s business.  Since our officers and directors are currently
involved part time elsewhere, they may not be able to devote full time
availability to work for CCII. If our officers are not paid the compensation we
agreed to provide them due to our insufficient cash flows, their efforts on our
behalf may not warrant their continued attention on our behalf.





Should
the business develop faster than anticipated, our president/CEO and our CFO have
agreed to devote all of their time to our business, however, we may have to
retain other personnel to ensure that we continue in existence and remain a
going concern.




Issues
concerning our CTO and CRI





Our former CTO, whose
resignation was accepted on December 11, 2008, was the president and controlling
shareholder of CRI, the manufacturer of the energy savings products we presently
are licensed to sell.  It has not been demonstrated that CRI has the
capacity or willingness to support extensive sales and distribution of the
products we seek to sell, nor has
it clearly indicated the pricing structure it may
seek so that we can determine our selling prices and resulting
profitability. Until we
obtained the exclusive license to sell CRI products, they had their own sales
agents and distribution channels and manufactured similar products under private
label. To date there has been no attempt to interfere with this
structure. After our
exclusive license to distribute CRI products was signed on July 25, 2008, CRI
entered into a distributor agreement with Aspen Power in Malaysia without our
knowledge or subsequent consent, thereby violating our agreement and limiting
our relationship and control over the distributor. To date we have not taken any
action against CRI or Aspen Power to enforce our position, although we have the
legal right to do so.





Because
of the present structure of CRI, and our uncertainty as to their ability to
support worldwide sales, we believe it is in our best interests to have all of
the products we want to sell be manufactured in the Unites States so that we can
more easily and timely support sales in North America and other
countries.  To accomplish this, we will need to have CRI furnish us
the proprietary parts needed for these products which they have expressed a
willingness to do at some time in the future.






6


Item 1A.
              Risk Factors -
      continued
 We
need to retain key personnel to support our products and ongoing
operations.





The
development and marketing of our products will continue to place a significant
strain on our limited personnel, management, and other resources. Our future
success depends upon the continued services of our executive officers and other
needed key employees and contractors who have critical industry experience and
relationships that we rely on to implement our business plan. The loss of the
services of any of our officers would negatively impact our ability to sell our
products, which could adversely affect our financial results and impair our
growth.





Future  regulation
of “Green Technologies” and related products could restrict our business,
prevent us from offering our products or increase our cost of doing
business.





At
present there are few laws, regulations or rulings that specifically address the
use of “green technologies” and related products such as the products we sell.
We are unable to predict the impact, if any, that future legislation, legal
decisions or regulations may have on our business, financial condition, and
results of operations. The increasing growth of “green technology” and related
products heighten the risk that governments or other legislative bodies will
seek to regulate such technologies and/or related products, which could have a
material adverse effect on our business, financial condition and operating
results.





Our independent auditors’
report states that there is a substantial doubt that we will be able to continue
as a going concern.





Our
independent auditors, De Joya Griffith & Company, LLC, Certified Public
Accountants, state in their audit report, dated January 20, 2009 and included
with this annual report, that since we are a development stage company, have no
established source of revenue and are dependent on our ability to raise capital
from shareholders or other sources to sustain operations, there is a substantial
doubt that we will be able to continue as a going concern.





Investors will have little
voice regarding the management of CCII due to the large ownership position held
by our existing management and thus it would be difficult for new investors to
make changes in our operations or management, and therefore, shareholders would
be subject to decisions made by management and the majority
shareholders.





At the
present time our CFO directly owns 2 million shares of the total of
24,781,000  issued and outstanding shares of CCII’s common
stock  as of October 31, 2008, and our CEO and CFO own directly
8,000,000 shares of the total of 8,000,000 issued and outstanding shares of
CCII’s preferred stock. Thus, our two officers and directors are in a position
to continue to control CCII. Of these shares, Mr. Schulte, our CEO, President
and Director, owns 6,000,000 shares of our preferred stock, or 75%.




Dr.
Prabaharan Subramaniam, our former Chief Technology Officer, and former
Director, (resigned December 11, 2008) owns 7,607,500 shares of our common stock
(exclusive of the 1 million shares owned by a company which his wife controls),
or 30.69%and Ivan Braverman, our Secretary/Treasurer/CFO and Director owns
2,000,000 shares of our common stock, or 8.07%., and 2,000,000 shares of our
preferred stock, or 25%. Such control may be risky to the investor because the
entire Company's operations are dependent on a very few people who could lack
ability, or interest in pursuing CCII operations. In such event, our business
may fail and you may lose your entire investment. Moreover, new investors will
not be able to effect a change in the Company’s business or management unless
they acquire a sufficient number of shares to effect a change in
control.





Risks
Associated with our Common Stock





Difficulty for CCII
stockholders to resell their stock due to a lack of public trading
market





There is
presently no public trading market for our common stock, however it is
likely that an active public trading market can be established and
sustained in the near term.  We intend to have our common stock
quoted on the OTC Bulletin Board as soon as practicable.  However,
there can be no assurance that CCII’s shares will be quoted on the OTC Bulletin
Board.  Until there is an established trading market, holders of our
common stock may find it difficult to sell their stock or to obtain accurate
quotations for the price of the common stock.  If a market for our
common stock does develop, our stock price may be volatile.








7
  Item 1A.
              Risk Factors -
      continued
 Broker-dealers
may be discouraged from effecting transactions in our shares because they are
considered penny stocks and are subject to the penny stock
rules.




Rules 15g-1
through 15g-9 promulgated under the Securities Exchange Act of 1934 impose sales
practice and disclosure requirements on FINRA broker-dealers who make a market
in "penny stocks". A penny stock generally includes any non-Nasdaq equity
security that has a market price of less than $5.00 per share.  Our
shares currently are not traded on Nasdaq nor on any other exchange nor are they
quoted on the OTC/Bulletin Board or “OTCBB”.  We are presently working
with a broker-dealer to act as a market maker for our stock and they filed on
our behalf with FINRA an application on Form 211 for approval for our shares to
be quoted on the OTCBB. If we are successful in establishing a market maker and
successful in applying for quotation on the OTCBB, it is very likely that our
stock will be considered a “penny stock”. In that case, purchases and sales of
our shares will be generally facilitated by FINRA broker-dealers who act as
market makers for our shares.  The additional sales practice and
disclosure requirements imposed upon broker-dealers may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the shares and impede the sale of our shares in
the secondary market.





Under the
penny stock regulations, a broker-dealer selling penny stock to anyone other
than an established customer or "accredited investor" (generally, an individual
with net worth in excess of $1,000,000 or an annual income exceeding $200,000,
or $300,000 together with his or her spouse) must make a special suitability
determination for the purchaser and must receive the purchaser's written consent
to the transaction prior to sale, unless the broker-dealer or the transaction is
otherwise exempt.





In
addition, the penny stock regulations require the broker-dealer to deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the Commission relating to the penny stock market, unless the broker-dealer
or the transaction is otherwise exempt.  A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the registered
representative and current quotations for the securities.  Finally, a
broker-dealer is required to send monthly statements disclosing recent price
information with respect to the penny stock held in a customer's account and
information with respect to the limited market in penny stocks.





We became subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, which
required us to incur audit and legal fees in connection with the preparation of
such reports. These additional costs will negatively affect our ability to earn
a profit.





We became
a reporting Company on September 18, 2008, and were required to file periodic
reports with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, and the rules and regulations thereunder. In order to
comply with such requirements, our independent registered auditors will have to
review our financial statements on a quarterly basis and audit our financial
statements on an annual basis. Moreover, our legal counsel will have to review
and assist in the preparation of such reports. The costs charged by these
professionals for such services cannot be accurately predicted at this time,
however, the auditors have billed $11,250 for the October 31, 2008 audit of
which $5,000 was paid as of that date and the balance subsequently paid. The
incurrence of such costs will obviously be an expense to our operations, when
incurred.  Since our CFO’s background parallels that of our present
auditors, we should be able to anticipate the needs of our auditors and thereby
keep to a minimum, our ongoing audit and review costs.





Because we do not intend to
pay any dividends on our common stock, investors seeking dividend income or
liquidity should not purchase shares of our common stock.





We have
not declared or paid any dividends on our common stock since our inception, and
we do not anticipate paying any such dividends for the foreseeable future.
Investors seeking dividend income or liquidity should not invest in our common
stock.





Because we can issue
additional shares of common stock, purchasers of our common stock may incur
immediate dilution and may experience further dilution.





We are
authorized to issue up to 100,000,000 shares of common stock, of which
24,781,000 shares are issued and outstanding as of October 31,
2008.  We are authorized to issue up to 10,000,000 shares of preferred
stock, of which 8,000,000 shares are issued and outstanding as of October 31,
2008. Our Board of Directors has the authority to cause us to issue additional
shares of common stock and preferred stock, and to determine the rights,
preferences and privilege of such shares, without consent of any of our
stockholders. Consequently, the stockholders may experience more dilution in
their ownership of CCII in the future.




For the
services rendered by our CFO to date, we intend to award him the balance of the
preferred shares authorized (2 million shares) upontheimplementation
of anEquity
CompensationPlan
at some date in the future.






Item 1B.
            Unresolved
      Staff Comments





None








8




Item 2.
            Description
      of Property




We lease
on a month to month basis virtual executive suites in two locations, Las Vegas,
Nevada, and Kuala Lumpur, Malaysia, with average monthly rentals of $294 and
$135, respectively, as of October 31, 2008.  In December the Board of
Directors approved additional month to month rentals to our two officers of
$1,500 each as all operations are conducted by them at their residence offices.
We own no real estate.






Item 3.
            Legal
      Proceedings




From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business.  Our operations are subject to
federal, state and local laws and regulations. Currently, we are not involved,
or the subject of, any pending or existing litigation as defendants, however, we
may bring some legal action against Dr.Praba and/or CRI as discussed in the
subsequent event footnote in the accompanying financial statements.






Item 4.
            Submission
      of Matters to a Vote of Security
Holders





No
matters were submitted to a vote of our security holders during the fourth
quarter of 2008.







PART II





Item 5.
            Market
      for the Registrant’s Common Equity, Related Shareholders Matters and
      Issuer Purchases of Equity
Securities





Our
common stock is currently not quoted on any exchange.





Holders





As of
October 31, 2008, there were 110 holders of record of our Common
stock.





Dividends





We have
never declared or paid cash dividends on our common stock.  We anticipate
that in the future we will retain any earnings for the development and operation
of our business.  Accordingly, we do not anticipate declaring or paying any
cash dividends in the foreseeable future.





Equity
Compensation Plan Information





We
currently have no Equity Compensation Plan.





Unregistered
Securities Sold.





During
the year ended October 31, 2008 we issued 381,000 shares of common stock for
cash proceeds of $116,979 of which 46,000 shares totaling $14,253 had not been
issued as of December 31, 2008, but were issued by January 2,
2009.





Preferred
Stock





Our
Articles of Incorporation authorize the issuance of 10,000,000 shares of
preferred stock with a par value of $0.0001 per share. The terms of the
preferred shares are at the discretion of the board of directors. Currently
8,000,000 preferred shares are issued and outstanding and have the following
rights, preferences and privileges:




Ranking: Our Series A
Preferred Stock (“Class A Stock”) ranks, as to dividends and upon liquidation,
senior and prior to our common stock, par value $0.0001 per share (the “Common
Stock”) and to all other classes or class of stock issued by the Issuer, except
as otherwise approved by the affirmative vote or consent of the holders of a
majority of the shares of outstanding Class A Stock.





Liquidation Rights.
With respect to rights on liquidation, the Class A Stock shall rank senior and
prior to our Common Stock and to all other classes or series of stock issued by
us, except as otherwise approved by the affirmative vote or consent of the
holders of at least a majority of outstanding Class A Stock.





9
 
 Item 5.
              Market for the
      Registrant’s Common Equity, Related Shareholders Matters and Issuer
      Purchases of Equity Securities-
      continued
  Preferred Stock -
continued   Voting.  The
Class A Stockholders shall be entitled to four (4) votes for each share of Class
A Stock held on any matters requiring a shareholder vote of
CCII.





Conversion.  Any
Class A Stockholder shall have the right, at any time from the date of issuance,
to convert any or all of its Class A Stock into 4 shares of fully paid and
non-assessable shares of Common Stock for each share of Class A Stock so
converted.




Anti-takeover
provisions




There are
no Nevada anti-takeover provisions that may have the effect of delaying or
preventing a change in control.






Item 6.
            Selected
      Financial Data





The
following table sets forth certain selected financial data for the fiscal years
ended October 31, 2008 and 2007. The following selected financial data should be
read together with our financial statements and notes thereto as well as
“Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”





Balance
      Sheet:
                              
                              2008
                              
                              
                              2007Current
      assets
                              
                              $
                              77,400
                              
                              
                              $
                              65,138Total
      assets
                              
                              $
                              86,706
                              
                              
                              $
                              65,138Current
      liabilities
                              
                              $
                              73,292
                              
                              
                              $
                              12,314Working
      capital
                              
                              $
                              4,108
                              
                              
                              $
                              52,824Stockholders'
      equity
                              
                              $
                              13,414
                              
                              
                              $
                              52,824Loss
      per Share
                              
                              $
                              (.02
                              )
                              
                              $
                              
                              *





Statement
      of Operations:
                        
                        For
      the Year Ended
                          October 31,
      2008
                        
                        
                        For
      the Year ended
                          October
      31, 2007Revenue
                        
                        $
                        767
                        
                        
                        $
                        -Total
      operating expenses
                        
                        $
                        467,491
                        
                        
                        $
                        20,396Net
      loss
                        
                        $
                        (466,652
                        )
                        
                        $
                        (20,396
                        )





Less
      than $(0.01) per share


Item 7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations




The
following discussion should be read in conjunction with the financial statements
and related notes which appear elsewhere in this form. This discussion contains
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of various
factors, including various risks and uncertainties discussed below and elsewhere
in this prospectus, particularly under the heading Risk Factors.




We
completed our first full year of operations as of October 31, 2008. Our prior
year consisted of only 15 days and was largely devoted to fund raising after our
spin-off dated October 17, 2007 from our parent company, Carbon Credits
Industries, Inc.. We had no revenues and total expenses were $20,396 of which
officer compensation was $13,734.





During
our current year our most significant expense was also compensation for
management of $340,009 of which $313,443 was contributed back by our officers
and is recorded as a reduction in accrued liabilities and an increase in paid in
capital as of October 31, 2008.  The less significant amounts included
in general and administrative expenses for the current year were:




Travel
                        
                        $
                        50,966Stock
      registration costs
                        
                        
                        26,292Audit
      and review services
                        
                        
                        13,500Stock
      transfer fees
                        
                        
                        5,785All
      other
                        
                        
                        30,939Total
                        
                        $
                        127,482






10




Item 7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      -
      continued




Travel
included two international trips by our legal counsel and CFO to formalize our
initial and subsequent business strategy and by our CEO who had many trips to
interact with CRI and our former CTO in Malaysia.





During
the current year we accomplished the following:




1.
            We
      were successful in obtaining audited financial statements for our first
      year of existence at a cost of $11,500 which was required for us to
      include in our registration statement filed with the Securities and
      Exchange Commission on September 10,
2008.




2.
            Our
      registration statement on Form S-1 became effective on September 18, 2008,
      and we became a fully reporting company as a result. We filed our first
      quarterly report for the quarter ended July 31, 2008 at a cost of
      $2,000.




3.
            We
      entered into an exclusive worldwide distribution agreement on July 25,
      2008, with CRI which was recently amended to include commissions for any
      sales made by CRI for which we were not involved directly. Although we had
      no sales during the current fiscal year, we did earn $767 of commissions
      as a result of CRI selling demonstrator products to its new Malaysia
      distributor in August 2008.




4.
            We
      raised $98,619 in two private placements of our common stock in
      October during the fiscal year ended October 31, 2008, resulting in the
      issuance of 335,000 shares of common stock. We also received prior to
      November 1, 2008 another $15,180 for 46,000 shares of common stock for
      stock subscriptions dated in November and December 2008 which are
      reflected in equity as a payable.




5.
            We
      located a facility in Arizona from which we could ultimately
      manufacture our products for distribution in North
      America.  Initial start-up costs exclusive of materials are
      estimated to be $250,000. The manufacturing facility is close to the
      residence of our CFO who can oversee the manufacturing operations from its
      inception.




6.
            We
      had our first revenues consisting of $767 of CRI demonstrator sales to a
      distributor in August 2008.





Our focus
in the next 12 months will be to seek necessary working capital and funding
through private placement of our common stock, and to develop our sales network
in Asia. Our development plan focuses on direct marketing efforts by our
president/CEO in Thailand, the existing sales structure of CRI, and the
potential for selling other “green” products. Our marketing strategy is based on
reliable products, consistent quality and exceptional energy savings. We
estimate the necessary funding to implement this stage of the development plan
to be $3,500,000, of which the ESPC portion is $3,000,000. We believe our
continuing private placement of common stock be enhanced to provide for this
expected funding.




Our long
term business strategy is to manufacture our own products for sale outside Asia,
and to sell our products worldwide through sales agents and distributors. Our
products will include other “green” products whose required development fits
within our business plan and capability.




Liquidity
and Capital Resources




At
October 31, 2008, we had working capital of $4,108 and a cash balance of
$75,223. We anticipate the future cash flows from revenues will not be adequate
to fund our operations and business plan over the next twelve (12)
months.  We have no lines of credit or other bank financing
arrangements.  The Company has been able to meet its cash requirements
from private placements of its common stock and officer advances, however, only
a small portion of officers’ compensation was paid and the balance of their
accrued compensation through October 31, 2008, of $313,443 was contributed by
them to paid in capital.   We expect this situation may continue
for at least the near term.




In
connection with our business plan, management anticipates additional increases
in operating expenses and capital expenditures. We intend to finance these
increases from private placements of equity and future revenues from operations.
Our revenues will continue to come from commissions earned on sales of products
by CRI and direct sales by us to customers, however, if we are able to obtain
substantial cash
flows through private placements of our
common stock or
from distributors or other entities, and place those funds in energy savings
performance contracts (ESPC) with our customers or theirs from whom we
could
receive up to a 10 year stream of monthly revenues, we could
substantially increase our revenues
and resulting profitability. ESPC’s have been around for 20 years and are
often the vehicle of choice to finance companies who are otherwise unable to
provide their own funds for enhancement of their energy
improvements.





Significant
Accounting Policies





The
Company has adopted the following significant accounting
pronouncements:





Revenue
Recognition














11




Item 7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      -
      continued


Commission
Income





We earn
commissions on product sales pursuant to the amended exclusive worldwide license
agreement as further described below.  Such commissions are considered
earned and recorded at the time of shipment by CRI to its distributors, or
customers occur. By agreement, CRI is to pay our commissions 30 days after the
month in which CRI collects the entire sales amount from its distributors or
customers. To date all commissions have been earned from products shipped within
Malaysia.





Product
Sales





Our
product revenues, when earned, will result from either the direct sale of our
licensed products to customers or commissions earned from the sale of products
through CRI’s distributors or sales agents. To assist us in developing worldwide
sales, energy sharing arrangements, and commissions, we anticipate the ultimate
need to have licensed sales agents and/or distributors in many countries in the
future; however, because substantial revenues may be obtained by a relatively
large number of high energy use customers, we may avoid these arrangements in
certain locations for the near term. Our accounting policy for revenue
recognition will be to record sales and cost of sales upon shipment and after
installation of the products using the criteria set forth in EITF 00-21 for
deliverables, based on continuing performance criteria which would also be
applied to revenue sharing below.





Revenue
Sharing





As an
alternative to selling our licensed products to customers, we can achieve
revenues by sharing in the electrical energy savings our customers will have
using our products.  In this option, we would acquire and install the
products through third parties, capitalize and depreciate them, including all
associated costs. Initially we thought financing these products by using the
customer’s written energy sharing agreement would be possible. Due to the
current impact of a global recession and limited outside financing, we now
believe our best option for financing will be to raise these funds through
private placements of our own common stock.





Once
adequate financing is obtained, our licensed products could be installed and
maintained at our expense throughout the term of the energy sharing agreements,
which, in most cases, would be for a minimum of 10 years and possibly have a
residual energy sharing arrangement in perpetuity where we continue to maintain
the equipment.





Revenue
from energy sharing would be recognized in accordance with EITF 00-21, based on
continuing performance criteria. Associated costs of maintaining our products in
connection with revenue recognition would be classified as cost of revenue in
our statement of operations. Depreciation expense would be a separately stated
item under the caption of costs and expenses in our statement of
operations.





It has
been the experience of the manufacturer/licensor of our products that energy
sharing is the better option for larger companies, since they will have no
substantial out of pocket costs in achieving and maintaining their energy
savings, from which the products are paid for. Customers will be required to
support all incurred past and current energy costs as a basis for evaluating
potential energy savings amounts. Installations are designed to be inspected
every 6 months at which time updated energy costs are to be obtained as a basis
for adjusting shared savings amounts.





Allowance
for Doubtful Accounts





Our
accounts receivable currently are concentrated with one customer, CRI, resulting
from the recording of commissions earned on the shipment of products by CRI to
its customers or distributors as outlined under the above revenue recognition
policy. If collection is not made within a reasonable time following the date
collections are due, we will record an allowance for doubtful accounts based on
CRIs explanations and forecast of their payments to us.





Subsequent
to October 31, 2008, the entire balance owed by CRI of $767 was paid in full
within the credit terms.






Item 7A.
            Quantitative
      and Qualitative Disclosures About Market
Risk





The
Company is currently not a party to any market risk sensitive instruments, or
any derivative contracts or other arrangements that may reduce such market
risk.








12




Item
      8
            Financial
      Statements and Supplementary Data















CARBON
CREDITS INTERNATIONAL, INC


(A
Development Stage Company)


OCTOBER
31, 2008 and 2007







Report
      of Independent Registered Public Accounting Firm
                                F-1Balance
      Sheets
                                F-2Statements
      of Operations
                                F-3Statement
      of Stockholders’ Equity
                                F-4Statements
      of Cash Flows
                                F-5Notes
      to Financial Statements
                                F-6















13


De
Joya Griffith & Company, LLC


CERTIFIED
PUBLIC ACCOUNTANTS & CONSULTANTS














REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors and Stockholders


Carbon
Credits International, Inc.


Las
Vegas, Nevada.








We have
audited the accompanying balance sheets of Carbon Credits International, Inc. (A
Development Stage Company) as of October 31, 2008 and 2007, and the statements
of operations, stockholders’ deficit and cash flows for the year ended October
31, 2008, from inception (October 15, 2007) through October 31, 2007 and from
inception (October 15, 2007) through October 31, 2008. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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. We believe that our audit provides a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Carbon Credits International, Inc.
(A Development Stage Company) as of October 31, 2008 and 2007, and the results
of its operations and cash flows for the year ended October 31, 2008, from
inception (October 15, 2007) through October 31, 2008 and from inception
(October 15, 2007) through October 31, 2008 in conformity with generally
accepted accounting principles in the United States.





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered losses from operations and the Company has not
generated any revenue since inception, which all raise substantial doubt about
its ability to continue as a going concern. Management’s plans in regard to
these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.











/s/  De Joya Griffith
& Company, LLC 
 De Joya
Griffith & Company, LLC


Henderson,
Nevada


January
20, 2009


F-1


CARBON
CREDITS INTERNATIONAL, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


BALANCE
SHEETS


(Audited)





ASSETS
                          
                          October
      31, 2008
                          
                          
                          October
      31, 2007CURRENT
      ASSETSCash
                          
                          $
                          75,223
                          
                          
                          $
                          43,934Accounts
      receivable-affiliate
                          
                          
                          767
                          
                          
                          
                          -Prepaid
      expenses
                          
                          
                          1,410
                          
                          
                          
                          21,204Total
      current assets
                          
                          
                          77,400
                          
                          
                          
                          65,138EQUIPMENTComputer,
      net of accumulated depreciation of $272
                          
                          
                          2,182
                          
                          
                          
                          -OTHER
      ASSETSWebsite
      development costs
                          
                          
                          7,124
                          
                          
                          
                          -Total
      other assets
                          
                          
                          7,124
                          
                          
                          
                          -Total
      assets
                          
                          $
                          86,706
                          
                          
                          $
                          65,138LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESAccounts
      payable
                          
                          $
                          1,096
                          
                          
                          $
                          -Accrued
      liabilities
                          
                          
                          -
                          
                          
                          
                          8,354Shareholders'
      advances
                          
                          
                          72,196
                          
                          
                          
                          3,960Total
      current liabilities
                          
                          
                          73,292
                          
                          
                          
                          12,314STOCKHOLDERS'
      EQUITYClass
      A Convertible Preferred stock, $.0001 par value,10,000,000
      shares authorized,  8,000,000 issued and
    outstanding
                          
                          
                          800
                          
                          
                          
                          800Common
      stock, par value $.0001,100,000,000 sharesauthorized,
      24,781,000 shares issued and outstanding (2008)24,446,000
      shares issued and outstanding (2007)
                          
                          
                          2,478
                          
                          
                          
                          2,445Paid
      in capital
                          
                          
                          482,004
                          
                          
                          
                          69,975Stock
      subscriptions payable
                          
                          
                          15,180
                          
                          
                          
                          -Deficit
      accumulated during development stage
                          
                          
                          (487,048
                          )
                          
                          
                          (20,396
                          )Total
      stockholders' equity
                          
                          
                          13,414
                          
                          
                          
                          52,824Total
      liabilities & stockholders' equity
                          
                          $
                          86,706
                          
                          
                          $
                          65,138




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











F-2
  CARBON
CREDITS INTERNATIONAL, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


STATEMENTS
OF OPERATIONS


(Audited)





Year
      Ended October 31, 2008
                    
                    
                    Inception
      (October 15, 2007) to October 31, 2007
                    
                    
                    Cumulative
      from Inception (October 15, 2007) to October
    31,2008REVENUES
                    
                    $
                    767
                    
                    
                    $
                    -
                    
                    
                    $
                    767EXPENSESGeneral
      and administrative:Consulting
      fees
                    
                    
                    340,009
                    
                    
                    
                    13,734
                    
                    
                    
                    353,743Other
                    
                    
                    127,210
                    
                    
                    
                    6,662
                    
                    
                    
                    133,872Depreciation
                    
                    
                    272
                    
                    
                    
                    -
                    
                    
                    
                    272Total
      expenses
                    
                    
                    467,491
                    
                    
                    
                    20,396
                    
                    
                    
                    487,887OTHER
      INCOME-Interest
                    
                    
                    72
                    
                    
                    
                    -
                    
                    
                    
                    72NET
      LOSS
                    
                    $
                    (466,652
                    )
                    
                    $
                    (20,396
                    )
                    
                    $
                    (487,048
                    )NET
      LOSS PER SHARE - BASIC
                    
                    $
                    (0.02
                    )
                    
                    
                    *WEIGHTED
      AVERAGE NUMBER OF
                      COMMON
      SHARES OUTSTANDING - BASIC
                    
                    
                    24,619,806
                    
                    
                    
                    21,280,875*  less
      than $(.01) per share




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















































F-3


CARBON
CREDITS INTERNATIONAL, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


STATEMENT
OF STOCKHOLDERS’ EQUITY


FOR
THE PERIOD FROM INCEPTION (OCTOBER 15, 2007) TO OCTOBER 31, 2008


(Audited)





DeficitAccumulatedStock
                                        
                                        
                                        DuringPreferred
      Stock
                                        
                                        
                                        Common
      Stock
                                        
                                        
                                        Paid-in
                                        
                                        
                                        Subscriptions
                                        
                                        
                                        Development
                                        
                                        
                                        Total Stockholders'Shares
                                        
                                        
                                        Amount
                                        
                                        
                                        Shares
                                        
                                        
                                        Amount
                                        
                                        
                                        Capital
                                        
                                        
                                        Payable
                                        
                                        
                                        Stage
                                        
                                        
                                        EquityBalance,
      October 15, 2007
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Shares
      issued in a spin off, October 17, 2007 at par value
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        24,196,000
                                        
                                        
                                        
                                        2,420
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,420Shares
      issued for services on October 17, 2007 after spin off at par
      value
                                        
                                        
                                        8,000,000
                                        
                                        
                                        
                                        800
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        800Common
      stock issued for cash on October 24, 2007 at $0.28 per
    share
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        250,000
                                        
                                        
                                        
                                        25
                                        
                                        
                                        
                                        69,975
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        70,000Net
      loss
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (20,396
                                        )
                                        
                                        
                                        (20,396
                                        )Balance,
      October 31, 2007
                                        
                                        
                                        8,000,000
                                        
                                        
                                        
                                        800
                                        
                                        
                                        
                                        24,446,000
                                        
                                        
                                        
                                        2,445
                                        
                                        
                                        
                                        69,975
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (20,396
                                        )
                                        
                                        
                                        52,824Common
      stock issued for cash on November 26, 2007, at $.29 p/s
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        175,000
                                        
                                        
                                        
                                        17
                                        
                                        
                                        
                                        50,668
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        50,685Common
      stock issued in a private placement commencing October 22, 2008, at $.31
      per share
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        160,000
                                        
                                        
                                        
                                        16
                                        
                                        
                                        
                                        47,918
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        47,934Private
      placement proceeds received in October, 2008 for 46,000 shares of common
      stock @ $.33 per share, prior to subscriptions dated in October, November
      and December 2008
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        15,180
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        15,180Officers'
      compensation contributed to capital
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        313,443
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        313,443Net
      loss
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (466,652
                                        )
                                        
                                        
                                        (466,652
                                        )Balance
      October 31 2008
                                        
                                        
                                        8,000,000
                                        
                                        
                                        $
                                        800
                                        
                                        
                                        
                                        24,781,000
                                        
                                        
                                        $
                                        2,478
                                        
                                        
                                        $
                                        482,004
                                        
                                        
                                        $
                                        15,180
                                        
                                        
                                        $
                                        (487,048
                                        )
                                        
                                        $
                                        13,414




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


























F-4


CARBON
CREDITS INTERNATIONAL, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


STATEMENTS
OF CASH FLOWS


(Audited)





Year
      Ended October 31, 2008
                    
                    
                    Inception
                      (October
      15, 2007) to October 31, 2007
                    
                    
                    Cumulative
      from Inception (October 15, 2007) to October 31,2008OPERATING
      ACTIVITIESNet
      loss
                    
                    $
                    (466,652
                    )
                    
                    $
                    (20,396
                    )
                    
                    $
                    (487,048
                    )Adjustments
      to reconcile net loss to netCash
      used by operating activities:Depreciation
                    
                    
                    272
                    
                    
                    
                    -
                    
                    
                    
                    272Common
      stock issued issued at spin off
                    
                    
                    -
                    
                    
                    
                    2,420
                    
                    
                    
                    2,420Common
      stock issued for services
                    
                    
                    -
                    
                    
                    
                    800
                    
                    
                    
                    800Compensation
      expense accounted for as contributed capital
                    
                    
                    313,443
                    
                    
                    
                    -
                    
                    
                    
                    313,443Changes
      in operating assets and liabilities:(Increase)
      in accounts receivable-affiliate
                    
                    
                    (767
                    )
                    
                    
                    -
                    
                    
                    
                    (767
                    )Increase
      in accounts payable
                    
                    
                    1,096
                    
                    
                    
                    -
                    
                    
                    
                    1,096(Increase)
      decrease in prepaid expenses
                    
                    
                    19,794
                    
                    
                    
                    (21,204
                    )
                    
                    
                    (1,410
                    )Increase
      (decrease) in accrued liabilities
                    
                    
                    (8,354
                    )
                    
                    
                    8,354
                    
                    
                    
                    -Net
      cash used by operating activities
                    
                    
                    (141,168
                    )
                    
                    
                    (30,026
                    )
                    
                    
                    (171,194
                    )INVESTING
      ACTIVITIESWebsite
      development costs
                    
                    
                    (7,124
                    )
                    
                    
                    -
                    
                    
                    
                    (7,124
                    )Purchase
      of equipment
                    
                    
                    (2,454
                    )
                    
                    
                    -
                    
                    
                    
                    (2,454
                    )Net
      cash used by investing activities
                    
                    
                    (9,578
                    )
                    
                    
                    -
                    
                    
                    
                    (9,578
                    )FINANCING
      ACTIVITIESProceeds
      from sale of common stock
                    
                    
                    98,619
                    
                    
                    
                    70,000
                    
                    
                    
                    168,619Increase
      in shareholders' advances
                    
                    
                    69,103
                    
                    
                    
                    28,960
                    
                    
                    
                    98,063Proceeds
      received in advance of stock subscriptions
                    
                    
                    15,180
                    
                    
                    
                    -
                    
                    
                    
                    15,180Shareholder
      advances - repaid
                    
                    
                    (867
                    )
                    
                    
                    (25,000
                    )
                    
                    
                    (25,867
                    )Net
      cash provided by financing activities
                    
                    
                    182,035
                    
                    
                    
                    73,960
                    
                    
                    
                    255,995NET
      INCREASE IN CASH
                    
                    
                    31,289
                    
                    
                    
                    43,934
                    
                    
                    
                    75,223CASH,
      BEGINNING OF PERIOD
                    
                    
                    43,934
                    
                    
                    
                    -
                    
                    
                    
                    -CASH,
      END OF PERIOD
                    
                    $
                    75,223
                    
                    
                    $
                    43,934
                    
                    
                    $
                    75,223Supplemental
      Non-Cash Financing and Investing ActivitiesAccrued
      compensation contributed to capital
                    
                    $
                    313,443
                    
                    
                    $
                    -
                    
                    
                    $
                    313,443




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











F-5
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)






NOTE
      1
            DESCRIPTION,
      BACKGROUND AND BASIS OF OPERATIONS





History





CARBON
CREDITS INTERNATIONAL, INC., (“CCII”, “the Company”, “we”, “our” or “its”),
which was formed on October 15, 2007 as a Nevada corporation, was the result of
a spin off from Carbon Credits Industries, Inc. (CCI), our former parent
company, on October 17, 2007. 24,196,000 shares of common stock were issued to
the shareholders of CCI on a share for share basis ownership.  No
assets or liabilities were included in the spin off and there was no previous
history or operations of CCII.





The spin
off of CCII was done for the purposes of establishing a separate publicly held
entity to become the exclusive licensee for the world-wide marketing and sales
of electrical energy savings products manufactured presently in Malaysia by the
licensor, Carbon Reducer Industries SDN BHD, (CRI). CRI is a Malaysian
corporation, formed on November 29, 2007 by Hans J. Schulte (HJS) and Dr.
Prabaharan Subramaniam (Praba). The predecessor manufacturing company to CRI was
Radatech Corporation SDN BHD (Radatech), also a Malaysian corporation whose
stock was owned by HJS and Praba, the latter person being the sole inventor of
the energy savings products. A patent pending is currently on file by Praba.
After CRI was incorporated, it entered into a licensing agreement with
Radatech, enabling CRI to become the exclusive manufacturer of energy savings
products developed by Radatech.





We are in
the development stage as defined in SFAS No.7 “Accounting and Reporting by
Development Stage Enterprises”, and will remain a development stage enterprise
until significant revenues have been earned pursuant to our planned principal
operations. Our fiscal year end is October 31.





Going
Concern





The
Company has realized $767 of revenues since inception. As of October 31, 2008,
the Company has an accumulated deficit of $487,048, a working capital of $4,108
and a stockholders’ equity of $13,414.





Our
financial statements have been presented on the basis that we are a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.





Our
ability to continue in existence is dependent on our ability to develop our
business plan and to achieve profitable operations. Our business plan
involves our pursuing additional product approvals such as that provided by
United Laboratories, (UL) for all of the products we are licensed to sell or
use. This will enable us to have a worldwide customer base from which we can
ultimately obtain our potentially largest source of revenue, the sharing of
energy savings on a long-term basis.  Since we anticipate being unable
to achieve profitable operations and/or adequate cash flows in the near term, we
will have to continue to pursue additional equity financing through private
placements of our common stock.   The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





NOTE
      2
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Cash
and Cash Equivalents





The
Company considers all highly liquid investments with the original maturities of
three months or less to be cash equivalents.





Income
Taxes





The
Company uses the liability method of accounting for income taxes pursuant to
Statement of Financial Accounting Standards Board No. 109.  Under this
method, deferred income taxes are recorded to reflect the tax consequences in
future periods of temporary differences between the tax basis of assets and
liabilities and their financial amounts at year-end.  As of October
31, 2008, the Company had a net operating loss carry forward, however, due to
the uncertainty of realization, the Company has provided a full valuation
allowance for deferred tax assets resulting from this net operating loss carry
forward.














F-6
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)
 
 NOTE
      2
              SUMMARY OF
      SIGNIFICANT ACCOUNTING POLICIES -
      continued
  Earnings
(loss) Per Common Share





Basic
loss per common share has been calculated based upon the weighted average number
of common shares outstanding during the period in accordance with the Statement
of Financial Accounting Standards Board Statement No. 128, “Earnings per Share”.
Common stock equivalents are not used in the computation of loss per share as
their effect would be antidilutive.





Use
of Estimates in the Preparation of Financial Statements





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.  Actual results could differ from those
estimates and assumptions.





Fair
Value of Financial Instruments





Statement
of Financial Accounting Standards No. 107, “Disclosures about Fair Value of
Financial Instruments,” defines the fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties. The carrying values of our financial instruments, which
consists of current assets and liabilities approximate fair values due to the
short-term maturities of such instruments.





Research
and Development





As
licensee, we will not embark on any research or development activities, as such
activities will be provided by our licensor, CRI. However we agreed to pay for
all necessary approvals required within the countries we plan to sell our
licensed products.





Revenue
Recognition





Commission
Income





We earn
commissions on product sales pursuant to the amended exclusive worldwide license
agreement dated June 24, 2008, as further described below.  Such
commissions are considered earned and recorded at the time shipment by CRI to
its distributors, or customers occurs. By agreement, CRI is to pay our
commissions 30 days after the month in which CRI collects the entire sales
amount from its distributors or customers. To date all commissions have been
earned from products shipped within Malaysia.





Product
Sales





Our
product revenues, when earned, will result from either the direct sale of our
licensed products to customers or commissions earned from the sale of products
through CRI’s distributors or sales agents. To assist us in developing worldwide
sales, energy sharing arrangements, and commissions, we anticipate the ultimate
need to have licensed sales agents and/or distributors in many countries in the
future. However, because substantial revenues may be obtained by a relatively
large number of high energy use customers, we may avoid these arrangements in
certain locations for the near term. Our accounting policy for revenue
recognition will be to record sales and cost of sales upon shipment and after
installation of the products using the criteria set forth in EITF 00-21 for
deliverables, based on continuing performance criteria which would also be
applied to revenue sharing below.





Revenue
Sharing





As an
alternative to selling our licensed products to customers, we can achieve
revenues by sharing in the electrical energy savings our customers will have
using our products.  In this option, we would acquire and install the
products through third parites, capitalize and depreciate them, including all
associated costs. Initially we thought financing these products by using the
customer’s written energy sharing agreement would be possible. Due to the
current impact of a global recession and limited outside financing, we now
believe our best option for financing will be to raise these funds through
private placements of our own common stock.





Once
adequate financing is obtained, our licensed products could be installed and
maintained at our expense throughout the term of the energy sharing agreements,
which, in most cases, would be for a minimum of 10 years and possibly have a
residual energy sharing arrangement in perpetuity where we continue to maintain
the equipment.





F-7
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)
 
 NOTE
      2
              SUMMARY OF
      SIGNIFICANT ACCOUNTING POLICIES -
      continued
  Revenue Sharing -
continued
  Revenue
from energy sharing would be recognized in accordance with EITF 00-21, based on
continuing performance criteria. Associated costs of maintaining our products in
connection with revenue recognition would be classified as cost of revenue in
our statement of operations. Depreciation expense would be a separately stated
item under the caption of costs and expenses in our statement of
operations.





It has
been the experience of the manufacturer/licensor of our products that energy
sharing is the better option for larger companies, since they will have no
substantial out of pocket costs in achieving and maintaining their energy
savings, from which the products are paid for. Customers will be required to
support all incurred past and current energy costs as a basis for evaluating
potential energy savings amounts. Installations are designed to be inspected
every 6 months at which time updated energy costs are to be obtained as a basis
for adjusting shared savings amounts.





Allowance
for Doubtful Accounts





Our
accounts receivable currently are concentrated with one customer, CRI, resulting
from the recording of commissions earned on the shipment of products by CRI to
its customers or distributors as outlined under the above revenue recognition
policy. If collection is not made within a reasonable period of
time  following the date collections are due, we will record an
allowance for doubtful accounts based on CRIs explanations and forecast of their
payments to us.





Subsequent
to October 31, 2008, the entire balance owed by CRI of $767 was paid in full
within the credit terms.





Website
Development





During
2008, we began the development of a new website that reflected our new logo and
branding. We also added our upcoming line of products for reference. It was
completed and was accessible by October 31, 2008. According to SFAS 142, we
capitalized website development costs of $7,124, and will commence its
amortization over three years starting in November 2008.  Depreciation
expense for the years ended October 31, 2008 and 2007 was $272 and $0,
respectively.





Equipment





Equipment
is recorded at cost and is located in Bangkok, Thailand. Depreciation is
provided over the estimated useful lives of the related assets using the
straight-line method. The estimated useful life for equipment consisting of a
computer laptop acquired in June 2008, was 3 years.





Segment
Reporting





The table
below presents revenues, expenses, net loss, and total assets for reported
segments. The foreign segment was Asia:





From
inception (October 15, 2007) through October 31, 2008, we have concentrated our
foreign operations in Malaysia.


Revenues2008
                                                
                                                
                                                2007Asia-
      commissions
                                                
                                                $
                                                767
                                                
                                                
                                                $
                                                0Operating
      ExpensesAsia-(2008
      includes depreciation of $272)
                                                
                                                
                                                258,779
                                                
                                                
                                                
                                                7,587United
      States
                                                
                                                
                                                208,712
                                                
                                                
                                                
                                                12,809Total
      operating expenses
                                                
                                                
                                                467,491
                                                
                                                
                                                
                                                20,396Other
      income- U.S. interest
                                                
                                                
                                                72
                                                
                                                
                                                
                                                0Net
      (loss)Asia
                                                
                                                
                                                (258,012
                                                )
                                                
                                                
                                                (7,587
                                                )United
      States
                                                
                                                
                                                (208,640
                                                )
                                                
                                                
                                                (12,809
                                                )Total
                                                
                                                $
                                                (466,652
                                                )
                                                
                                                $
                                                (20,396
                                                )Total
      AssetsAsia-
      (2008 capital expenditures were $2,454)
                                                
                                                $
                                                4,359
                                                
                                                
                                                $
                                                15,871United
      States
                                                
                                                
                                                82,347
                                                
                                                
                                                
                                                49,267Total
      Assets
                                                
                                                $
                                                86,706
                                                
                                                
                                                $
                                                65,138
 F-8
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)




NOTE
      3
            RELATED
      PARTY TRANSACTIONS





Manufacturer/Licensor





Our
licensor, CRI, is the present manufacturer of all the products we are licensed
to sell or use. CRI licenses its manufacturing process and products from
Radatech. The majority of CRI common stock is owned by Praba (51%) and HJS
(49%). Praba is a member of our Board of Directors, who owns
7,607,500 shares of our outstanding common stock aside from his wife’s
corporation which owns 1 million shares of common stock. HJS, our Chief
Executive Officer/ President (CEO) and Board Chairman, owns 6 million
shares of our preferred stock which may be converted into common stock at any
time on a basis of four common shares for each share of preferred stock
owned.  HJS, along with either of our other two officers, has the
majority voting control of our Company as of October 31, 2008.





Legal
Services





Corporate
and SEC legal services for the Company are being provided by The O’Neal Law
Firm, P.C. whose sole owner is a shareholder of both CCI and CCII. As of October
31, 2007, this firm was paid a total of $5,900 for our organizational costs, of
which $5,000 was paid in cash and the balance paid with 2 million restricted
shares of $.0001 par value common stock included in the spin off. During the
fiscal year ended October 31, 2008, it was paid $15,000 for business structuring
and preparation of minutes and various corporate agreements, and $25,000 for the
preparation of our registration statement on Form S-1.





CRI





We
advanced CRI, $10,000 on March 14, 2008, which was repaid in full on June 18,
2008, prior to the filing of our registration statement.





Accounts
Payable-Related Parties





Technical
Support services for the Company were provided by Braverman International, P.C.
whose sole owner is a shareholder and CFO of CCII.  As of October 31,
2008, $3,510 was due to Braverman International, P.C. for services rendered
during the fiscal year then ended.





Shareholder
Advances





On
October 17, 2007, HJS advanced us, free of interest or collateral, the sum of
$28,960, against which $25,000 was repaid leaving $3,960 owing to him as on
October 31, 2007.





During
2008, HJS advanced us $30,678 on the same basis as the above advances of which
$4,735 represented his direct payment for our stock transfer fees. In addition,
HJS also incurred $34,052 on behalf of the Company, which is included in
shareholder advances as of October 31, 2008, in connection with principally
travel, website costs and a computer. The total of all advances from him were
offset by a personal payment we made on his behalf of $867, leaving a balance
outstanding at October 31, 2008 of $67,823. We subsequently repaid $38,000 of
this liability in December 2008.





Other
shareholder advances during the current year totaled $4,373, representing
principally web based programs supporting the services required of our CFO as of
October 31, 2008 of which $1,000 was repaid in December 2008.








F-9
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)
  NOTE
      3
              RELATED PARTY
      TRANSACTIONS -
      continued


Prepaid
Expenses





Prepaid
expenses consisted of (1) prepaid travel of $15,870 as of October 31, 2007, for
the airfare and hotel accommodations of our Arizona based legal counsel and our
Chief Financial Officer (CFO) for their initial trip to Kuala Lumpur, Malaysia
during November 2007, and (2) $5,333 in prepaid management consulting. We
initially advanced $10,000 as management consulting fees to our CFO, but offset
that with the amount earned by him of $4,667 as of October 31, 2007, as further
discussed in Note 4. During the current year (1) was expensed to travel and (2)
was applied against accrued compensation.





NOTE
      4
            MANAGEMENT
      CONSULTING SERVICES





On the
spin off date, ourPresident/CEO and Chief
Technical Officer (CTO)/Secretary, agreed to provide their services over a three
year period for annual compensation each of $90,000, $150,000 and $210,000,
respectively, and an option to renew After inception of CRI in November 2007,
these officers agreed to continue providing such services under a formal
consulting agreement with CRI.  Our CTO/Secretary resigned from office
on December 11, 2008. (See Note 9 Subsequent Events for additional
information.)





The
Company also entered into a consulting agreement with Braverman International
P.C. to provide the services of Ivan Braverman, CPA in the capacity of CFO at
the date of spin off for a period of three years with annual compensation of
$120,000, $180,000 and $240,000, respectively, and an option to renew at the end
of the term.  All executives shall also participate in the incentive
plan payable in cash and Company stock or options upon achievement of reasonable
performance goals and stock option plan, when implemented. As per the
agreements, and when cash flow is available, the executives are also entitled to
group term life insurance with coverage of at least $500,000, all premiums being
paid by the Company. The Company shall also provide long term disability
insurance with compensation annually equal to at least $90,000 for our CEO and
CTO and $120,000 for our CFO. The executives are also entitled to no less than
39 days of paid time off each year which shall be accrued according to the
Company policies and practices from time to time. Management consulting services
totaling $12,934 was accrued (of which $8,267 remains accrued as of
October 31, 2007) and expensed for the last two weeks of October 2007,
consisting of $11,667 was for compensation, and $1,267 was for accrued absences.
An additional $800 was expensed for the value of stock compensation provided by
our CEO and CFO for the 8 million preferred shares they received on October 31,
2007.





On
October 31, 2008, all three officers contributed their accrued compensation and
benefits totaling $313,443 to paid in capital as of that date, since there were
no significant revenues earned by us, our private placement funds were not
adequate to support paying anything but essential day to day expenses, and there
was little prospect of sufficient cash flows to pay their accrued compensation
and benefits for the near term.





NOTE
      5
            INCOME
      TAXES





At
October 31, 2008 and 2007, the Company had a net federal operating loss carry
forward of $141,440 and $8,909, respectively which begin to expire in 2027 and
$132,531 in 2028.  Components of net deferred tax assets, including a
valuation allowance, are as follows:




2008
                            
                            
                            2007Net
      operating loss carry-forward
                            
                            $
                            46,386
                            
                            
                            $
                            3,118Unpaid
      accrued expenses
                            
                            
                            
                            
                            
                            
                            2,893Valuation
      allowance
                            
                            
                            (46,386
                            )
                            
                            
                            (6,011
                            )Net
      deferred tax assets
                            
                            
                            -0-
                            
                            
                            
                            -0-


Cumulative  deferred
tax assets as of October 31, 2008 were $49,504 as the unpaid accrued amount from
2007 was paid in the current year.





In
assessing the recovery of the deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized.  The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income in the periods
in which those temporary differences become deductible.  Management
considers the scheduled reversals of future deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment.  As a result, management determined it was more likely
than not the deferred tax assets would not be realized as of October 31, 2007
and 2008, and recorded a full valuation allowance at those dates.








F-10
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)
 
 NOTE
      5
                INCOME TAXES-
      continued
 Reconciliation
between the Federal statutory rate and the effective tax rate for the years
ended October 31, 2007 and 2008 is as follows:
  2008
                              
                              
                              2007Federal
      statutory rate
                              
                              
                              (35
                              )%
                              
                              
                              (35
                              )%Permanent
      differences
                              
                              
                              25
                              
                              
                              
                              6Valuation
      allowance
                              
                              
                              10
                              
                              
                              
                              29Effective
      tax rate
                              
                              
                              0
                              %
                              
                              
                              0
                              %


NOTE
      6
            RECENTLY
      ISSUED ACCOUNTING STANDARDS





Recently Adopted Accounting
Standards





In June
2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” which
clarifies  the  accounting  for  uncertainty  in  income  taxes
recognized in an enterprise's financial statements in accordance with
FASB No. 109, "Accounting for Income Taxes." This Interpretation 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. This Interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.  This Interpretation is effective for
fiscal years beginning after December 15, 2006. We have determined that the
adoption of FIN 48 did not have a material impact on our results of operations
or financial position.





New Accounting Standards Not
Yet Adopted





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosure about fair
value measurements. The statement does not require any new fair value
measurements, but for some entities, the application of the statement will
change current practice. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years.  We do not expect the adoption of SFAS 157
will have a material impact on our financial statements.





In
February 2007, the FASB issued SFAS No. 159, the “Fair Value Option for
Financial Assets and Financial Liabilities”. SFAS 159 provides entities with an
option to report selected financial assets and liabilities at fair value and
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that select different measurement attributes. SFAS
159 is effective for fiscal years beginning after November 15,
2007.  We do not expect the adoption of SFAS 159 will have a material
impact on our financial statements.





In June
2007, the Emerging Issues Task Force (“EITF”) issued Issue No. 07-3, “Accounting
for Nonrefundable Advance Payments for Goods or Services To Be Used in Future
Research and Development Activities” (“EITF 07-3”) which concluded that
nonrefundable advance payments for goods or services to be received in the
future for use in research and development activities should be deferred and
capitalized. The capitalized amounts should be expensed as the related goods are
delivered or services are performed. Such capitalized amounts should be charged
to expense if expectations change such that the goods will not be delivered or
services will not be performed. The provisions of EITF 07-3 are effective for
new contracts entered into during fiscal years beginning after December 15,
2007. The consensus on EITF 07-3 may not be applied to earlier periods and early
adoption is not permitted.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations - Revised 2007”. SFAS 141(R) provides guidance on improving the
relevance, representational faithfulness, and comparability of information that
a reporting entity provides in its financial reports about a business
combination and its effects. SFAS 141(R) applies to business combinations where
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. We do not expect the adoption of
SFAS No. 141(R) to have a material impact on our financial
statements.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - an Amendment of Accounting Research Bulletin
No. 51” (“SFAS No. 160”), which establishes accounting and reporting standards
for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated.








F-11
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)
  NOTE
      6
                RECENTLY ISSUED
      ACCOUNTING STANDARDS-
      continued
 New
Accounting Standards Not Yet Adopted -
continued
 SFAS No.
160 also establishes reporting requirements that provide sufficient disclosures
that clearly identify and distinguish between the interests of the parent and
the interests of the non-controlling owners. SFAS No. 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.





In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities", an amendment of SFAS No. 133. SFAS 161 applies to all
derivative instruments and non-derivative instruments that are designated and
qualify as hedging instruments pursuant to paragraphs 37 and 42 of SFAS 133 and
related hedged items accounted for under SFAS 133. SFAS 161 requires entities to
provide greater transparency through additional disclosures about how and why an
entity uses derivative instruments, how derivative instruments and related
hedged items are accounted  for under SFAS 133 and its related
interpretations, and how derivative instruments and related hedged items affect
an entity's financial position, results of operations, and cash flows. SFAS 161
is effective as of the beginning of an entity's first fiscal year that begins
after November 15, 2008. The Company does not expect the adoption of SFAS 161
will have a material impact on its financial condition or results of
operation.




In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of FASB Statement No. 60.”  SFAS
163 requires that an insurance enterprise recognize a claim liability prior to
an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation.  This
Statement also clarifies how Statement 60 applies to financial guarantee
insurance contracts, including the recognition and measurement to be used to
account for premium revenue and claim liabilities. Those clarifications will
increase comparability in financial reporting of financial guarantee insurance
contracts by insurance enterprises. This Statement requires expanded disclosures
about financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements.  SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008.  The
Company does not expect the adoption of SFAS 163 will have a material impact on
its financial condition or results of operation.





NOTE
      7
            STOCKHOLDERS’
      EQUITY





Common
Shares Issued





Common
Stock: The authorized common stock is 100,000,000 shares at $0.0001 par
value.





On
October 17, 2007, the total number of common shares issued to the shareholders
of CCI, our former parent, resulting from the spin off totaled 24,196,000. On
October 24, 2007, $70,000 funds were received for a private placement of 250,000
common shares sold to a foreign national as approved by the Board of Directors
for $0.28 per share.





On
November 1, 2007, our Board of Directors approved the sale of, 175,000 shares of
our restricted common stock to unaffiliated non resident aliens for $0.29 per
share, for a total of $50,685.





Subsequent
to November 2007, the Company erroneously issued 14,187,500 shares to certain
shareholders including those of Carbon Credit Industries (“CCI”). Of this total,
10,795,000 shares are in the process of being cancelled and consist of 6,700,000
shares issued to the CEO of the Company, 4,000,000 shares to his wife, and
95,000 shares to the shareholders in Environmental Alternatives, Inc. We
anticipated that the recovery of the balance of the 3,392,500 shares issued to
other shareholders would further delay the process of filing the registration
statement on Form S-1 which became effective on September 18, 2008, therefore,
we decided to adjust them against the issued and outstanding shares owned by our
CTO to effect a private transaction.





On
October 15, 2008, our Board of Directors approved a private placement of our
common stock for 4,500,000 shares at $.33 per share under Regulation
S.  As of October 31, 2008, we received $48,861 and approved for
issuance, 160,000 common shares.





Class
A Convertible Preferred Shares Issued





Preferred
Stock:  The authorized Series A preferred stock is 10,000,000 shares
with $0.0001 par value.





On
October 17, 2007, 8 million preferred shares were issued at the fair market
value of services for


$800
rendered in connection with the formation and organization of the
corporation.  Of the 8 million shares, 6 million are owned by HJS and
2 million are owned by our CFO.





Preferred
shares are convertible at any time into common shares at the rate of 4 common
shares for each preferred share owned totaling 32,000,000 shares of common stock
after full conversion. No dividends are payable unless declared by the Board of
Directors. Each preferred share is entitled to 4 votes and ranks senior to all
other classes of stock in liquidation in the amount of $1 per
share.





F-12
 
 CARBON
CREDITS INTERNATIONAL, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO FINANCIAL STATEMENTS
 October
31, 2008 and 2007
 (AUDITED)




NOTE
      8
            COMMITMENTS
      AND CONTINGENCIES





Exclusive
Worldwide Distribution Agreement





On July
25, 2008, we entered into an exclusive worldwide distribution agreement with
CRI to distribute CRI products upon a mutually acceptable pricing schedule
for. The agreement shall continue in perpetuity. Therefore, from July 25,
2008 forward, all sales agents/distributorships already established by CRI are
supposed to become our sales agents/distributors. We are in the process of
implementing this changeover.





The
original exclusive worldwide distribution agreement was amended to include a
commission on all sales reported to us by CRI through its sales
agents/distributors established as of July 25, 2008. The commission structure
provides for a 5% commission on demonstrator sales, and 10% for all other sales
based upon the actual selling prices involved.  We recorded commission
income of $767 for demonstrator sales reported to us by CRI through October 31,
2008.





Kuala
Lumpur Office





From
inception we rented, on a month to month basis, a shared executive suite in
Kuala Lumpur, Malaysia, where we obtain all of our overseas secretarial,
copying, computer and other required administrative services. Rent expense,
incurred on a month to month basis and dependent on services rendered and space
occupied, was $87 for the last two weeks of October 2007. During 2008, $1,625
was expensed, an average of $135 per month.





Las
Vegas Office





Starting
in January 2008, we rented for a minimum of $294 per month, on a month to month
basis, a shared executive suite in Las Vegas, Nevada to use as our United States
contact address, and to accommodate meetings when they occur in the United
States. We incurred and paid a total of $2,950 for the current fiscal year. The
lessor of the property allows us to use any of the other approximate 600 offices
in the United States for the same minimum monthly rental should our meetings
require a different location.





NOTE
      9
            SUBSEQUENT
      EVENTS





Common
Stock





Common
stock issued subsequent to year end through January 2, 2009,  as a
result of the continuing private placement of such shares as further described
in Note 7 above, totaled 130,000 shares resulting in net proceeds of
$41,162.





Sales
Agent Agreement





On
December 11, 2008, our president/CEO incorporated Carbon Reducer Industries Ltd
(CRIL),  a company of which he and his wife own 49%, and is located in
Bangkok Thailand. The Company was required to be formed under Thailand law
to enable us to sell our products in that country.  In accordance with
the Commisions Sales agreement, we will pay a 10% commission for all sales
provided by CRIL and incur no costs, unless we choose to do so. We will
designate the selling prices of all of our products to be sold. Minimum units
required to be sold will be 25 the first year, increasing by 25 per year over
the following 3 years, and then 100 per year for each year in perpetuity. If the
minimum sales are not achieved, the parties will renegotiate the
agreement.





Office
Rentals





Commencing
December 1, 2008, the Board of Directors approved paying $1,500 per month, on a
month to month basis, for home office space, utilities, supplies and
communications to each officer (CEO and CFO).





Compensation





Effective
December 15, 2008, the Board of Directors approved consulting compensation for
our CEO and CFO of $210,000 each, plus benefits identical to those in Note 4
above, for the 12 months following December 15, 2008, increasing $60,000 per
year over the following two year life of the related consulting agreements. The
services of our CEO, formerly provided through CRI, will be provided by
CRIL.





Market
Maker





In
January 2009, we were in the process of obtaining approval through FINRA to have
our stock listed on the OTCBB.





Contract
Violations





Although
we have the exclusive worldwide license to market and sell all products produced
by CRI as of July 25, 2008, we determined in December 2008, we had a contract
interference which potentially limited our ability to implement it
successfully.  Accordingly, the parties who were involved in this
limitation were put on notice of our exclusive license and to date we believe
that our actions have resulted in our being in control of the issues, although
we cannot rule out litigation should we determine that it is necessary to
protect our interests.





Dr.
Praba’s resignation from CCII as Chief Technical Officer and Director was
tendered by him and accepted by us on December 11, 2008, as a result of certain
misrepresentations.  All of his accrued compensation and benefits from
October 31, 2008, to December 11, 2008 totaling $18,770, was contributed to paid
in capital in the first quarter of the fiscal year ending October 31,
2009.




F-13




Item 9.
            Changes
      in and Disagreements with Accountants on Accounting
      Disclosures





None






Item 9A.
            Controls
      and Procedures





Evaluation
of Disclosure Controls and Procedures




We
maintain a system of disclosure controls and procedures, as defined in Exchange
Act Rule 13a-15(e), which is designed to provide reasonable assurance that
information, which is required to be disclosed in our reports filed pursuant to
the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), is
accumulated and communicated to management in a timely manner. At the end of the
period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the date of
such evaluation, our disclosure controls and procedures were effective in timely
alerting them to information relating to us that is required to be included in
our reports filed under the Exchange Act.




Changes
in Internal Control over Financial Reporting




There
were no significant changes in our internal control over financial reporting or
in other factors that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.




Management's
Report on Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting, as
defined in Exchange Act Rule 13a-15(f), is a process designed by, or under
the supervision of our principal executive and principal financial officer and
effected by our Board of Directors, management and other personnel, 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 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 our
      assets;




•
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and
      directors; and




•
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our 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. 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. All 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. The scope of management's
assessment of the effectiveness of internal control over financial reporting
includes all of our Company's consolidated subsidiaries.





Our
management assessed the effectiveness of our internal control over financial
reporting as of October 31, 2008. In making this assessment, our management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in "Internal Control-Integrated Framework." Based on
this assessment, management believes that, as of October 31, 2008, our internal
control over financial reporting was effective based on those
criteria.






Item 9B.
            Other
      Information





None





14




PART III





Item 10.
            Directors,
      Executive Officers and Corporate
Governance





Our
executive officers, significant employees and directors, and their ages and
positions, are as follows:





All
directors of our company hold office until the next annual meeting of the
stockholders or until their successors have been elected and qualified. The
officers of our company are appointed by our board of directors and hold office
until their death, resignation or removal from office. Our directors and
executive officers, their ages, positions held, and duration as such, are as
follows:





Name
                      Position
      Held with the Company
                      Age
                      Date
      First Elected or AppointedHans
      J. Schulte
                      CEO/President/Director
                      47
                      October
      15, 2007Dr.
      Prabaharan Subramaniam
                      CTO/
      Director
                        (resigned
      on December 11, 2008)
                      47
                      November
      19, 2007Ivan
      Braverman
                      Secretary/Treasurer/CFO/
      Director
                      73
                      November
      19,
2007





Business
Experience





The
following is a brief account of the education and business experience of each
director and executive officer during at least the past five years, indicating
each person's business experience, principal occupation during the period, and
the name and principal business of the organization by which he was
employed.





Mr.
Hans J. Schulte, Chief Executive Officer, President and Member of the Board of
Directors





Mr.
Schulte has been serving as CCII’s Chief Executive Officer and a member of our
Board of Directors since October 15, 2007.  The term of his office is
for one year and is renewable on an annual basis.





From 1984
until 1992, Mr. Schulte worked at Landmark Chemicals in Antwerp trading in
Africa plastic raw materials like HDPE, LLDPE, LDPE, PP, and PVC. Mr. Schulte
was responsible for new market development, establishing links between
OEM/chemical manufactures and end-user market, integration of marketing
positions across business lines, strategic alliances, acquisitions, technology
licensing, long range planning, and new product platform development. From 1992
until 2005, Mr. Schulte traded industrial chemicals such as titanium dioxides,
which he exported to or from the Far East and South America. Mr. Schulte
participated in a joint venture operation with Thai DNT Paint MFG Co., Ltd who
manufactured paint for Mitsubishi Corp. Japan.





He also
worked in Cherkassy, Ukraine with AURORA Cherkassy Varnish and Paint Plant for
whom he operated as purchase manager in Titanium dioxide and was an agent for
SCM chemicals UK, now millennium chemicals, for the Tiona products and sold it
mainly to Surinam, Egypt and the Middle East. Mr. Schulte has extensive
experience as a private investor and served as a director and CEO for Xraymedia,
Inc. in Vancouver, B.C., and thereafter in Plano, Texas.





Mr.
Schulte is currently devoting approximately 40 hours a week of his time to CCII,
and is planning to continue to do so during the next 12 months of
operation.





Mr.
Schulte is not an officer or director of any reporting company that files
annual, quarterly, or periodic reports with the United States Securities and
Exchange Commission.





Dr.
Prabaharan Subramaniam, Secretary, Chief Technology Officer and Member of the
Board of Directors (Resigned December 11, 2008)





Dr.
Subramaniam has been serving as CCII’s CTO since October 17, 2007, and a member
of the Board of Directors since November 19, 2007. The term of his office is for
three years and is renewable thereafter on an annual basis. He resigned as an
officer and director on December 11, 2008.











15




Item 10.
              Directors, Executive
      Officers and Corporate Governance-
      continued





Dr.
Subramanian has over 25 years of experience in the field of Engineering
Technology. Since 2001, Dr. Subramanian has served as Chief Technology Officer
and Director of 3T Holdings PTE LTD located in Singapore. This company was
originally responsible for the research & development of our many versions/
types of energy saving devices.





Dr.
Subramanian holds a B.S. Degree in Engineering Technology, an MBA in Business
Administration, and a DBA in Business Administration.





Dr.
Subramaniam is currently devoting none of his time to CCII.





Dr.
Subramanian is not an officer or director of any reporting company that files
annual, quarterly, or periodic reports with the United States Securities and
Exchange Commission.





Ivan
Braverman, Secretary/Treasurer, Chief Financial Officer and Member of the Board
of Directors





Mr.
Braverman has been serving as CCII’s Secretary/Treasurer and CFO since October
17, 2007, and a member of the Board of Directors since November 19, 2007. The
term of his office is for three years and is renewable thereafter on an annual
basis.





Mr.
Braverman is an Arizona Certified Public Accountant, and the owner of Braverman
International, P.C., an Arizona licensed certified public accounting firm
located in Prescott, Arizona. Prior to the formation of his firm in October 1980
in Denver, Colorado, he was an SEC audit partner in an International CPA firm,
an audit manager for an International CPA firm, and an audit/tax partner in
smaller CPA firms. Mr. Braverman has performed countless audits for both private
and public companies, prepared income tax returns of all types of entities,
appeared as an expert witness for plaintiffs’ in several lawsuits including lost
profits and income taxation, and provided other professional services including
activity based costing. The majority of his clientele were smaller publicly held
companies in the development stage, and he presently assists taxpayers in
reentering the tax system and represents them in office audits, appeals
proceedings, collections and assists them in the preparation of tax court
matters. Mr. Braverman is also a CFFA, Certified Forensic Financial
Analyst.





Mr.
Braverman has a Masters Degree in Taxation from the University of Denver where
he also obtained his undergraduate business degree.  He
is  also a member of the CENTER FOR PUBLIC COMPANY AUDIT FIRMS of the
AICPA, and his firm is registered with the PCAOB enabling Mr. Braverman to file
audited and reviewed financial statements in registration statements and
periodic financial reports with the SEC as mandated by the Sarbanes-Oxley
Act of 2002.





Mr.
Braverman is currently devoting the majority of his time to CCII, and is
planning to continue to do so throughout the term of his
employment.





Mr.
Braverman is not an officer or director of any reporting company that files
annual, quarterly, or periodic reports with the United States Securities and
Exchange Commission.






Item 11.
            Executive
      Compensation





The
following summary compensation table sets forth information concerning
compensation earned during the year ended October 31, 2008 and the period from
inception (October 15, 2007) to October 31, 2007  by our Chief
Executive Officer and our other most highly compensated executive officers. We
refer to these executives collectively as our named executive
officers.  Our named executive officers were not paid compensation in
excess of $100,000 during the fiscal year ended October 31, 2008.  All
compensation from inception (October 15, 2007 ) to October 31, 2008 was
contributed to capital by the officers.
































16


Item 11.
              Executive
      Compensation-
      continued
  Summary
Compensation Table





Name
      and Principal Position
                              Year
                              
                              Salary
      ($)
                              
                              
                              Bonus
      ($)
                              
                              
                              Stock
      Awards ($)
                              
                              
                              Option
      Awards ($) (1)
                              
                              
                              Non-Equity
      Incentive Plan Compensation ($4)
                              
                              
                              Nonqualified
      Deferred Compensation Earnings ($)
                              
                              
                              All
      Other Compensation ($)
                              
                              
                              TotalHans
      J. Schulte
                              2008
                              
                              $
                              102,253
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              102,253CEO
                              2007
                              
                              $
                              3,500
                              
                              
                              $
                              0
                              
                              
                              $
                              600
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              4,100Ivan
      Braverman
                              2008
                              
                              $
                              135,503
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              135,503CFO
                              2007
                              
                              $
                              4,667
                              
                              
                              $
                              0
                              
                              
                              $
                              200
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              4,867Dr.
      Prabaharan Subramaniam
                              2008
                              
                              $
                              102,253
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              102,253CTO
      (Resigned 12/11/08)
                              2007
                              
                              $
                              3,500
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              3,500





Consulting
Agreements with Executive Officers





Our
executive officers, have received compensation pursuant to consulting
agreements.  These agreements expire on October 16,
2010.




On the
spin off date, our President/CEO and Chief Technical Officer (CTO)/ Secretary,
verbally agreed to provide their services over a three year period, for annual
compensation of $90,000, $150,000 and $210,000, respectively, with an option to
renew. On November 29, 2007, their verbal agreement to continue providing such
services was incorporated under a formal consulting agreement with CRI, signed
on August 13, 2008, which agreement provided for their services and
pre-incorporation, effective October 17, 2007.





We also
entered into a consulting agreement with Braverman International P.C., effective
October 17, 2007, to utilize the services of its principal, Ivan Braverman, in
the capacity of CFO for a period of three years with annual compensation of
$120,000, $180,000 and $240,000, respectively, with an option to renew at the
end of the term.





The
executives shall also participate in the incentive plan payable in cash and
Company stock or options upon achievement of reasonable performance goals and
stock option plan, when implemented. As per the agreements, and when cash flow
is available, the executives are also entitled to group term life insurance with
coverage of at least $500,000, all premiums being paid by the Company. We shall
also provide long term disability insurance with compensation annually equal to
at least $90,000 each to our CEO and CTO, and $120,000 to our CFO. The
executives are also entitled to no less than 39 days of paid time off each year
which shall be accrued according to the Company policies and practices from time
to time. Management consulting services totaling $12,934 was accrued and
expensed for the last two weeks of October 2007, of which $11,667 was for
compensation, and $1,267 was for accrued absences. An additional $800 was
expensed for the value of stock compensation provided by our CEO and CFO for the
8 million preferred shares they received on October 31, 2007.





Effective
December 15, 2008, the Board of Directors approved consulting compensation for
our CEO and CFO of $210,000 each, plus benefits identical to those above, for
the 12 months following December 15, 2008, increasing $60,000 per year over the
following two year life of the related consulting agreements.





The
services of our CEO, formerly provided through CRI, will be provided by Carbon
Reducer Industries Ltd, a company of which our president/CEO and his wife own
49%, which is located in Bangkok Thailand, and was required to be formed under
Thailand law to enable us to sell our products in that country..





Dr.
Praba’s resignation from CCII as Chief Technical Officer and Director was
tendered by him and accepted by us on December 11, 2008, and his consulting
agreement was cancelled on that date.














17
 Item 11.
              Executive
      Compensation-
      continued
  Option/SAR
Grants





Currently,
we have no stock option, retirement, pension, or profit sharing plans for the
benefit of our officers and directors.




Long-Term
Incentive Plan Awards





Currently,
we do not have any long-term incentive plans.





Directors
Compensation




We have
no formal plan for compensating our directors for their services in their
capacity as directors. Directors are entitled to reimbursement for reasonable
travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our board of directors. The board of directors may award special
remuneration to any director undertaking any special services on behalf of CCII
other than services ordinarily required of a director. Since inception to the
date hereof, no director received and/or accrued any compensation for his or her
services as a director, including committee participation and/or special
assignments.






Item 12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters





The
following table sets forth certain information with respect to the beneficial
ownership of our Common Stock, at October 31, 2008 for: (i) each person who we
know beneficially owns more than 5% of our Common Stock; (ii) each of our
directors; (iii) each of our named executive officers; and (iv) all of our
directors and executive officers as a group.  The table includes all
shares currently issued, as well as all shares that may be received within 60
days.




Unless
otherwise noted below, the address of each beneficial owner listed in the table
is c/o Carbon Credits International, Inc.,2300 E. Sahara Avenue, Suite
800,Las Vegas,NevadaUSA89102 .





We have
determined beneficial ownership in accordance with the rules of the SEC. Except
as indicated by the footnotes below, we believe, based on the information
furnished to us, that the persons and entities named in the table below have
sole voting and investment power with respect to all shares of common stock that
they beneficially own, subject to applicable community property laws. 
Beneficial ownership representing less than 1% is denoted with an
*.





The
following is a table detailing the current shareholders of CCII owning 5% or
more of the common stock and shares owned by CCII’s directors and officers as of
October 31, 2008:





COMMON
STOCK





Title
      of
                        Class
                      Name
      and Address of Beneficial Owner
                      Amount
      and Nature of Beneficial Ownership
                      Percent
      of Class(2)Common
                      Hans
      J. Schulte
                        President,CEO,
      Director
                        2300
      E. Sahara Avenue, Suite 800
                        Las
      Vegas, NV 89102
                      -0-
                      0%Common
                      Dr.
      Prabaharan Subramaniam(3)
                        CTO,
      Director
                        2300
      E. Sahara Avenue, Suite 800
                        Las
      Vegas, NV 89102
                      Direct
                        7,607,500
                      30.69%Common
                      Ivan
      Braverman
                        Treasurer,
      CFO, Director
                        2300
      E. Sahara Avenue, Suite 800
                        Las
      Vegas, NV 89102
                      Direct
                        2,000,000
                      8.07%Common
                      William
      D. O’Neal, Esq.
                        14835
      E. Shea Boulevard, Suite 103,
                        PMB
      494
                        Fountain
      Hills, AZ 85268
                      Direct
                        2,000,000
                      8.07%Common
                      Directors
      and officers and 5% Shareholders as a group(1)
                      11,607,500
                      46.84%





1.
                Represents
      beneficial ownership2.
                Based
      on the total of 24,781,000 outstanding common shares as of the date
      hereof3.
                Dr.
      Prabaharan Subramaniam’s wife owns separately a company which owns 1
      million commons shares  not included in this total number of
      shares above








18
  Item 12.
              Security Ownership
      of Certain Beneficial Owners and Management and Related Shareholder
      Matters-
      continued
  PREFERRED
STOCK





Title
      of
                      Class
                    Name
      and Address of Beneficial Owner
                    Amount
      and
                      Nature
      of
                      Beneficial
                      Ownership
                    Percent
      of Class(2)Preferred
                    Hans
      J. Schulte
                      President,
      CEO, Director
                      2300
      E. Sahara Avenue
                      Suite
      800
                      Las
      Vegas, NV 89102
                    Direct
                      6,000,000
                      (3)
                    75%Preferred
                    Ivan
      Braverman
                      Treasurer,
      CFO, Director
                      2300
      E. Sahara Avenue
                      Suite
      800
                      Las
      Vegas, NV 89102
                    Direct
                      2,000,000
                      (4)
                    25%Preferred
                    Directors
      and officers and 5% Shareholders as a group(1)
                    8,000,000
                    100%





1.
              Represents
      beneficial ownership2.
              Based
      on the total of 8,000,000 outstanding preferred shares as of the date
      hereof3.
              Convertible
      into 24,000,000 shares of common stock of the Company4.
              Convertible
      into 8,000,000 shares of the common stock of the
  Company





DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITY LIABILITIES





The
Nevada General Corporation Law requires CCII to indemnify officers and directors
for any expenses incurred by any officer or director in connection with any
actions or proceedings, whether civil, criminal, administrative, or
investigative, brought against such officer or director because of his or her
status as an officer or director, to the extent that the director or officer has
been successful on the merits or otherwise in defense of the action or
proceeding. The Nevada General Corporation Law permits a corporation to
indemnify an officer or director, even in the absence of an agreement to do so,
for expenses incurred in connection with any action or proceeding if such
officer or director acted in good faith and in a manner in which he or she
reasonably believed to be in or not opposed to the best interests of the Company
and such indemnification is authorized by the stockholders, by a quorum of
disinterested directors, by independent legal counsel in a written opinion
authorized by a majority vote of a quorum of directors consisting of
disinterested directors, or by independent legal counsel in a written opinion if
a quorum of disinterested directors cannot be obtained.




The
Nevada General Corporation Law prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Nevada General Corporation Law may permit an
officer or director to apply to the court for approval of indemnification even
if the officer or director is adjudged to have committed intentional misconduct,
fraud, or a knowing violation of the law.




The
Nevada General Corporation Law also provides that indemnification of directors
is not permitted for the unlawful payment of distributions, except for those
directors registering their dissent to the payment of the
distribution.





According
to Article IX of CCII’s bylaws, CCII is authorized to indemnify its directors to
the fullest extent authorized under Nevada Law subject to certain specified
limitations.





Insofar
as indemnification for liabilities arising under the Securities Act may be
provided to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, CCII has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable.






Item 13.
            Certain
      Relationships and Related Transactions, and Director
      Independence




Transactions
with Management and Stockholders Holding More Than 5% of Our Outstanding Common
Stock





Other
than the transactions discussed below, CCII has not entered into any transaction
nor are there any proposed transactions in which any director, executive
officer, shareholder of CCII or any member of the immediate family of any of the
foregoing had or is to have a direct or indirect material interest.






19


Item 13.
              Certain
      Relationships and Related Transactions, and Director Independence -
      continued
  Manufacturer/Licensor





Our
licensor, CRI, is the manufacturer of all of the products we are licensed to
sell or use. CRI licenses its manufacturing process and products from Radatech,
all of whose common stock is owned by Hans J. Schulte and Dr. Prabaharan
Subramaniam. Dr. Prabaharan Subramaniam is our CTO, and a member of our Board of
Directors, (resigned on December 11, 2008) who owns 7,607,500 shares of our
outstanding common stock and whose wife through a company she owns, owns 1
million common shares. Hans J. Schulte, our Chief Executive Officer/ President
(CEO) and Board Chairman, owns   6 million shares of our preferred
stock which may be converted into common stock at any time on a basis of four
common shares for each share of preferred stock owned. Together, these two
related parties control our Company and CRI.






Item 14.
            Principal
      Accountant Fees and Services




Audit
fees were $11,500 for the fiscal year ended October 31, 2008.







PART IV





Item 15.
            Exhibits
      and Financial Statement Schedules





The
following documents are filed as part of this Report:





2.
              Exhibits. The
      Exhibits on the accompanying Index to Exhibits are filed as part of, or
      incorporated by reference into, this Annual Report on
      Form 10-K.














20


SIGNATURES





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





CARBON
CREDITS INTERNATIONAL, INC.




/s/  
      Hans
      J. Schulte
              
              
              January
      29, 2009Hans
      J. SchultePresident,
      Principal Executive Officer




/s/  
      Ivan
      Braverman
              
              
              January
      29, 2009Ivan
      BravermanTreasurer,
      Principal Financial Officer and Principal
                Accounting
      Officer





In
accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.




/s/  
      Hans
      J. Schulte
              
              
              January
      29, 2009Hans
      J. SchultePresident, Principal
      Executive Officer and Director




/s/  
      Ivan
      Braverman
              
              
              January
      29, 2009Ivan
      BravermanSecretary/Treasurer, Principal
      Financial Officer,
                Principal
      Accounting Officer and Director






EXHIBIT INDEX





ExhibitNumber31.1
            Certification of Chief Executive Officer pursuant
      to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            Certification of Chief Financial Officer pursuant
      to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            Certification of Chief Executive Officer and Chief
      Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of
  2002.







21