UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
20-F





[  ]
            REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
      OF 1934OR[ X
      ]
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For
      the fiscal year ended December 31, 2008OR[  ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              For
      the transition period
      from              toOR[  ]
            SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
              Date
      of event requiring this shell company report:For
      the transition period from _____________________ to
      ______________________





Commission
file number 000-50339





CAPITAL RESERVE CANADA
LIMITED


(Exact
name of Registrant as specified in its charter)


N/A


(Translation
of Registrant's name into English)




Alberta,
Canada


(Jurisdiction
of incorporation or organization)





18104 –
102 Avenue


Edmonton,
      Alberta T5S-1S7


(Address
of principal executive offices)





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





Title
      of each class
              
              Class
      A Common Stock
            
            Name
      of each exchange on which registered





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


None


(Title
      of Class)





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


None


(Title
      of Class)




















Indicate
the number of outstanding shares of each of the issuer's capital or common stock
as of the close of the period covered by the annual report:





118,621,359 Class
A common shares as at December 31, 2008.





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


Act.                                [  ]
Yes [X] No





If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.


[  ]
Yes [X] No





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





[X]Yes
[  ] No





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





Large
      accelerated
    filer     [  ]
            Accelerated
      filer     [  ]
            Non-accelerated
      filer    [ X ]





Indicate
by check mark which financial statement item the registrant has elected to
follow.


[  ]
Item 17 [X] Item 18





If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange
Act).                                                                                                                          [  ]
Yes [X] No





________________________________





(APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
YEARS)





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


[  ]
Yes [  ] No
















TABLE
OF CONTENTS





PART
I               ............................................................................................................2





Item
1.                 Identity
of Directors, Senior Management and Advisors.....................................2





Item
2.                 Offer
Statistics and Expected Timetable.........................................................2





Item
3.                 Key
Information .....................................................................................2





Item
4.                 Information
on the Company.....................................................................8





Item
5.                 Operating
and Financial Review and Prospects.............................................16





Item
6.                 Directors,
Senior Management and Employees..............................................19





Item
7.                 Major
Shareholders and Related Party Transaction.......................................22





Item
8.                 Financial
Information.............................................................................24





Item
9.                 The
Offering and Listing..................................................................25





Item
10.               Additional
Information.....................................................................25





Item
11.               Quantitative
and Qualitative Disclosures about Market Risk.....................29





Item
12.               Description
of Securities Other than Equity Securities..............................29





PART
II                      .............................................................................................................29





Item
13.               Defaults,
Dividends Arrearages and Delinquencies...................................29





Item
14.                                 Material
Modifications to the Rights of Security Holders


and
use of proceeds.........................................................................29





Item
15.               Controls
and Procedures..................................................................29





Item
16A.                        Audit
Committee financial Expert...................................................30





Item
16B.                        Code
of Ethics............................................................................30





Item
16C.                        Principal
Accountant Fees and Services............................................30





Item
16D.                        Exemptions
from the Listing Standards for Audit Committees...............30





PART
III...........................................................................................................31





Item
17.               Financial
Statements.......................................................................31





Item
18.               Financial
Statements......................................................................31





Item
19.                        Exhibits.....................................................................................31



























PART
I








ITEM  1.
            IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS





Not
Applicable





ITEM
2.                                OFFER
STATISTICS AND EXPECTED TIMETABLE





Not
Applicable





ITEM
3.                                KEY
INFORMATION








SELECTED
FINANCIAL DATA





Exchange
Rates





Financial
statements are presented in Canadian dollars and all dollar amounts in this
document are in Canadian Dollars unless otherwise indicated.





The host
country is the United States of America and therefore the Company provides
disclosure of the exchange rate between its financial reporting currency which
is in Canadian dollars and United States dollars (“US$”) of the host country
based upon the exchange rate in effect at the end of the month or of the
calendar year to which the amount relates, or the exchange rate on the date
specified.  For such purposes, the exchange rate means the noon buying
rate for United States dollars from the bank of Canada (the “Noon Buying Rate”).
These translations should not be construed as representations that the Canadian
dollar amounts actually represent such U.S. dollar amounts or that Canadian
dollars could be converted into U.S. dollars at the rate indicated or at any
other rate. The Noon Buying Rate at the end of each of the five years ended
December 31, the average of the Noon Buying Rates on the last day of each month
during each of such fiscal years and the high and low Noon Buying Rate for each
of such fiscal years were as follows:





2004
              2005
              2006
              2007
              2008At
      the end of period
              0.83
              0.858
              0.862
              1.020
              0.817Average
      for period
              0.77
              0.825
              0.882
              0.930
              0.938High
      for period
              0.85
              0.869
              0.909
              1.0905
              1.029Low
      for period
              0.72
              0.787
              0.853
              0.844
              0.771





Following
is a table of the Noon Buying Rates on the last day of each month for the last
four months ended April 30, 2009:





January
              February
              March
              AprilAt
      the end of period
              0.996
              1.016
              0.974
              0.993Average
      for period
              0.989
              1.001
              0.999
              0.986High
      for period
              1.010
              1.029
              1.021
              0.998Low
      for period
              0.969
              0.981
              0.973
              0.974


The Noon
Buying Rate as at June 30, 2009 was 0.8602







Change
of Control





On August
8th,
2005, the Company acquired 78.2% of KCP Innovative Services Inc. for the
issuance of 17,335,814 Class A common shares for the Company bringing the total
number of Class A shares issued and outstanding at that time to
19,335,814.  This effected a change in control of the
Company.  Based on the acquisition of the controlling interest in KCP
Innovative Services Inc. as of August 8th, 2005,
and reverse merger accounting applied to the transaction, the following
financial information reflects the financial information of KCP Innovative
Services Inc. for the fiscal years ended August 31, 2002 to December 31,
2005.  KCP Innovative Services there after changed its fiscal year end
to the fiscal year end of the Company which is December 31.












This date
of writing this report is June 30, 2009.





Year
      End
              Aug
      31
              Aug
      31
              Dec
      31
              Dec
      31
              Dec
      31
              Dec
      312004
              2005
              2005
      (4 mos)
              2006
              2007
              2008CAD
              CAD
              CAD
              CAD
              CAD
              CADOperating
      Revenues
              380,606
              933,441
              355,017
              1,714,925
              1,021,818
              24,000Income
      (loss) from Operations
              (197,917)
              (862,266)
              (399,830)
              (188,745)
              (854,288)
              (7,004,583)Net
      Income (loss)
              (178,084)
              (643,469)
              (258,114)
              (188,745)
              (854,288)
              (6,912,734)Net
      Income (loss) from Operations Per Share
              (.008)
              (.037)
              (.015)
              (.0004)
              (0.01)
              (0.07)Total
      Assets
              2,848,614
              2,003,032
              1,698,171
              7,128,648
              6,460,892
              993,536Net
      Assets
              2,048,488
              291,726
              883,308
              5,818,271
              5,912,304
              689,758Capital
      Stock
              2,320,783
              2,320,783
              3,242,434
              8,381,142
              9,314,463
              11,004,651Number
      of Shares
              17,335,814
              19,335,814
              34,810,814
              58,396,421
              65,566,421
              118,621,359





CAPITALIZATION
AND INDEBTEDNESS





Not
Applicable





REASONS
FOR THE OFFER AND USE OF PROCEEDS





Not
Applicable





RISK
FACTORS





Our
business will be subject to numerous risk factors, as more particularly
described below.





Our
business operations are speculative.  The failure of our plans could
ultimately force us to reduce or suspend operations and even liquidate our
assets and wind-up and dissolve our company.





Our
shares should be considered highly speculative due to the proposed nature of our
business and the current stage of our development.  Certain
information set out in this annual report includes or is based upon
expectations, estimates, projections or other “forward looking information”.
Such forward looking information includes projections or estimates made by us
and our management as to our future business operations.  While
statements concerning forward looking information, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost certainly
vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested herein.  See “cautionary statement concerning
forward – looking information”in ITEM 12.





A
significant or prolonged decrease in oil and natural gas prices will seriously
and negatively impact our business plans and operations.





Our
revenues are dependent on the expenditures of oil and gas companies. The demand
for our tools and services are primarily influenced by current and anticipated
commodity prices, particularly oil and natural gas prices. Weakness in commodity
prices may cause our customers to reduce their capital and operating
expenditures as weaker commodity prices result in fewer wells being drilled.
Other factors that may affect demand for our tools and services
include:





·
            The
      level of development, exploration and production activity of, and
      corresponding spending by, energy and resource companies, which in turn is
      affected by conditions such as weather conditions, and seasonality,
      government regulation of energy and resource companies,
  and·
            Conditions
      in the worldwide energy and resources
industry.
















Periods
of diminished or weakened demand for our tools and services may occur in the
future. In light of these factors, historical operating results may not be
indicative of our future performance. In addition, reductions in commodity
prices can result in a reduction in the trading prices and value of our
securities, even if the reduction in commodity prices does not affect our
business generally.





Seasonality
may affect our performance.





In
general, the level of activity in the oilfield service industry is influenced by
seasonal weather patterns.  Wet weather and the spring thaw may make
the ground unstable.  Consequently, municipalities and provincial
transportation departments enforce road bans that restrict the movement of rigs
and other heavy equipment, thereby reducing activity
levels.  Additionally, certain oil and gas producing areas are located
in areas that are inaccessible other than during the winter months because the
ground surrounding the drilling sites in these areas consists of swampy
terrain.  Seasonal factors and unexpected weather patterns may lead to
declines in the activity levels of exploration and production companies and
corresponding declines in the demand for our tools and services.





We
may be unable to continue as a going concern if we are unable to raise
additional capital.





The cost
associated with further development of our business and our ability to generate
revenue will depend on a variety of factors, including our ability to meet out
development schedule and customer needs, changes in technology, and the
availability of additional funds that may be required to advance and expand our
business. Additional funds, whether through additional equity financing, debt
financing or other sources, may not be available on terms acceptable to us or at
all, or mayresult
in significant dilution to our shareholders and/or a change of control of the
Company. The inability to obtain additional funds may have a material adverse
affect on our business, results of operations, and financial
condition.





There
is no guarantee that we will generate profit.  We have incurred losses
and anticipate losses will continue.  This could have an impact on
stockholders’ investments in our common stock.





Our
business is capital intensive and we have no history of
profit.  Accordingly, there can be no assurance that our future
business activities will be profitable. We have incurred costs to develop and
enhance our tools and services, to establish strategic relationships and to
build an administrative organization. Our ability to operate profitably and
generate positive cash flow in the future will be affected by a variety of
factors, including our ability to further develop and test our technology on
schedule and on budget, the pace of our entry into our target markets, consumer
acceptance of our products, the intensity of the competition experienced by us,
the availability of additional capital to pursue our business plans, including
development of new products.  An inability to generate sufficient
funds from operations will have a materially adverse affect on our business,
results of operations and financial condition.





Our
ability to grow our business and meet our commitments to our customers is
dependent upon the availability of suppliers upon which we rely.





We will
have to rely on suppliers for additional gauges, trucks and equipment in order
to expand, or to replace existing equipment. The availability of suppliers could
affect our ability to expand or to meet our commitment to existing
customers.





We
are in an early stage of development and there are no guarantees that we will be
able to achieve our business objectives. This may have a material adverse impact
on our business and ability to continue as a going concern.





Our
business prospects are subject to all of the risks inherent to a new
business.  There can be no assurance that we will obtain market
acceptance as contemplated in our business objectives and any failure to sell
our products or services may have a material adverse effect on our business,
results of operations, and financial condition.





The
industry in which we operate is marked by rapid technological change. Our
inability to adapt to such change(s) may have a material adverse impact on our
business and ability to continue as a going concern.





Our
Industry is subject to rapid change, and any inability on our part to adapt to
such change may have an adverse affect on our business, results of operations
and financial condition.  The effect of new developments and
technological changes on the business sector in which we will compete cannot be
predicted. Our failure to adapt to any of the above could have a material
adverse effect on our business, results of operations, and financial
condition.












We
compete directly with independent, technology-driven services companies. Our
inability to effectively compete with these companies could have a material
adverse impact on our business.





We expect
to face significant competition from other organizations and there can be no
assurance that we will be able to compete effectively in our target
markets.  In addition, new technologies may emerge that are
competitive with our tools and services. Advances in measurement tools as well
as changes in the market place and the regulatory and legislative environment
are constantly occurring and any such change could have a material adverse
impact on us. We expect that competition will intensify in the future, as our
tools and services, and the opportunities presented thereby, become better
known.





There
is continual need for innovative solutions. Our ability to develop new solutions
or refine our existing solutions could have a material adverse impact on our
business.





To
achieve our business objectives and obtain market share and profitability, we
will need to continually research, develop and refine our tools and
services.  Many factors may limit our ability to develop and refine
existing tools and services. We may also be exposed to marketplace resistance to
new tools and services. Any failure to develop or refine our existing tools and
services, or create new tools or offer new services could have a material
adverse effect on our business, results of operations, and financial
condition.





Our
failure to protect our intellectual property could have a material adverse
impact on our business.





Our
success will be largely dependent upon our ability to protect our proprietary
technology.  We rely upon copyright law and trade secrets to protect
our intellectual property. We have not, to date, applied for or obtained any
patents or trademarks to protect our intellectual property in
KCP.  Where appropriate, we also enter into non –disclosure agreements
with persons to whom we reveal proprietary information. Any failure to protect
our intellectual property could have a material adverse effect on our business,
results of operations, and financial condition.





We may
have to engage in litigation in the future to enforce or protect our
intellectual property rights or to defend against claims of invalidity and we
may incur substantial costs as a result. Any claims or litigation initiated by
us to protect our proprietary technology could result in significant expense to
us and diversion of the efforts of our technical and management resources,
whether or not the claims or litigation are determined in favor of
us.





A
small number of stockholders own a significant number of our shares which could
make it difficult for other investors to make changes in our operations or
management, and therefore, shareholders would be subject to decisions made by
management and the majority stockholders.





A
significant number of our outstanding shares are owned by one (1) stockholder,
Steven Claussen .  In total, this stockholder owns 42,833,495shares
of the total amount of 146,260,969 shares outstanding, which is approximately
29.3%.  This stockholder has the power to significantly influence our
affairs and may be able to influence the outcome of matters required to be
submitted to stockholders for approval, including the election of directors and
the amendment of our articles of incorporation and bylaws. Conversely, it may be
difficult for the remaining stockholders to influence the outcome of such
matters.





Our
business may attract uninsured liabilities which may have an adverse impact on
us.





Our
products are used in processes of production of oil and gas. Though it is
unlikely that the products could cause damage, we may be subject to liability
for property damage, personal injury or other hazards.  We are insured
in accordance with industry standards to address certain of these risks;
however, such insurance has limitations on liability that may not be sufficient
to cover the full extent of such liabilities.  In addition, such risks
may not in all circumstances be insurable. The payment of such uninsured
liabilities would have an adverse effect on our business, results of operations
and financial condition.





There may
be environmental liability from our services.  In the event that
losses or damages result from the operation of the assets that are not covered
by the operator’s insurance, these losses or damages would become a liability
for us. It is possible that uncovered losses and damages could be insured which
could cause us to have to file for bankruptcy protection from the
courts.













Our
inability to effectively manage our planned growth could have a material adverse
impact on our business.





Responding
to consumer demands, expanding into other geographical markets and targeting
growth in our business is likely to place significant strains on our
administrative and operational resources and increased demands on our internal
systems, procedures and controls. If we experience rapid acceptance of our
technology, the need to manage such growth will add to the demands on our
management, resource, systems, procedures and controls. There is no operations
since the sale of KCP’s assets. There can be no assurance that our
administrative infrastructure, systems, procedures and control will be adequate
to support our operations or that our officers and personnel will be able to
manage any significant expansion of operations. If we are unable to manage
growth effectively, our business, operating results, and financial condition
will be materially adversely affected.





We are currently
understaffed in our management. If our current essential officers leave prior to
securing their replacements, we will be left without adequate management and our
business operations would cease.





We will
be reliant upon company management personnel to anticipate and address consumer
demands and hire technical employees and contractors to provide our
service.  There can be no assurance that qualified management or
technical personnel will be available to us in the future.  The
success of our operations and activities will depend to a significant extent on
the efforts and abilities of our management and technical
personnel.  The loss of services of any of our management or technical
personnel could have a material adverse effect on our business, results of
operations, and financial condition.





Our
day–to-day management and operations are dependent on the expertise of Steve
Claussen, our President. If he was no longer able to provide services, our
operations could be threatened.





Currently,
we are dependent on the expertise of Steve Claussen, who has an in-depth
knowledge of our technology and operations. He is also responsible for the
day-to-day management of our wholly-owned subsidiaries. Our ability to operate
would be severely curtailed if he were to be unavailable.





Unpredictable
events could cause fluctuations in our operating results, which could cause
unanticipated losses and adversely impact our business.





We expect
to be exposed to significant fluctuations in operating results caused by many
factors, including changes in the demand for our technology, the introduction of
competing technologies, market acceptance of such enhancements or products,
delays in the introduction of such enhancements or products, changes in our
pricing policies or those of our competitors, the mix of services sold, foreign
currency exchange rates and general economic conditions.





Our
future operating results may fluctuate significantly depending upon a number of
factors, including industry conditions, prices of oil and natural gas, rate of
drilling success, rates of production from completed wells and the timing of
capital expenditures. This variability makes it very difficult to predict when
we might reach profitability and hence would have a serious impact on the value
of an investor’s investment in our company. In addition, any failure or delay in
the realization of expected cash flows from initial operating activities could
limit our future ability to continue exploration and to participate in an
economically attractive project.





The price
of oil and natural gas is determined based on world demand and supply. It is
impossible to predict future oil and natural gas price movements with any
certainty, as they have historically been subject to wide fluctuations in
response to a variety of market conditions, including relatively minor changes
in the supply and demand for oil and natural gas, economic, political and
regulatory developments, and competition from other sources of
energy.





Any
extended or substantial decline in oil and natural gas prices would have a
material adverse effect on our ability to negotiate favorable joint ventures
with viable industry participants, our cash flow and our access to capital.Our business may be
adversely impacted by the Kyoto Protocol and/or unforeseen changing government
regulations.





Canada is
a signatory to the United Nations Framework Convention on Climate Change and has
ratified the Kyoto Protocol established hereunder.  Canada, as an
Annex B party  to the Kyoto Protocol, is required to set legally
binding targets to reduce nation-wide emissions of carbon dioxide, methane,
nitrous oxide and other so-called “greenhouse gases”.





The
direct or indirect costs of complying with emissions regulations may adversely
affect the oil and gas business in Canada, which in turn may adversely affect
the oil and gas services industry in which we will participate.





Other
government regulations are subject to change at any time and are beyond our
control.












US
investors face the risk that their investment may be subject to special US
federal income tax rules.





For any
of our taxable years, if at least seventy-five percent (75%) of our gross income
is “Passive income” (as defined in the Internal Revenue Code of 1986, as amended
(the “Code”)), or if at least fifty percent (50%) of our assets, by average fair
market value, are assets that produce or are held for the production of passive
income, we will be a Passive Foreign Investment Corporation
(“PFIC”).





If we are
a PFIC for any taxable year during which an individual who is a citizen or
resident of the United States or a domestic corporation (a “US Taxpayer”) owns
any common stock, the US Taxpayer will be subject to US federal income tax
rules, set forth in Sections 1291 to 1297 of the Code, with respect to all of
such US Taxpayers’ common stock. For example, gifts and exchanges pursuant to
corporate reorganizations and use of the common stock as security for a loan may
be treated as a taxable disposition, and a stepped-up basis upon the death of
such US Taxpayer may be not available. Furthermore, in the absence of an
election by such US Taxpayer  to treat us as a “qualified electing
fund” (the “QEF election”), as discussed below, the US Taxpayer would be
required to (i) report any gain on disposition of any common stock as ordinary
income rather than capital gain, (ii) to compute the tax liability on such gain
and on certain distributions as if the share had been earned pro rata over the
US Taxpayer’s holding period (or a certain portion thereof) for the common
stock, and (iii) would be subject to the highest ordinary income tax rate for
each taxable year of the US Taxpayer in which the shares were treated as having
been earned.  Such US Taxpayer would also be liable for interest
(which may be non-deductible by certain US Taxpayers) on the foregoing tax
liability as if such liability had been due with respect to each prior
year.





US
Taxpayers are strongly urged to consult his or her own tax advisor in this
regard.





The
foregoing discussion of United States taxation is of a general and summary
nature only and is not intended to be, nor should it be considered to be, legal
or tax consequences of receiving dividends from us or disposing of their common
stock, and thus, any investment in our common stock could be illiquid for an
indefinite period of time.





You
should not expect to receive dividends on your investment.





We have
never paid any cash dividends on shares of our capital stock, and we do not
anticipate that we will pay any dividends in the foreseeable future. Our current
business plan is to retain any future earnings to finance the expansion of our
business. Any further determination to pay cash dividends will be at the
discretion of our board of directors, and will be dependent upon our financial
condition, results of operations, capital requirements and other factors as our
board of directors may deem relevant at that time.





Our
business may be adversely impacted by unforeseen changes in environmental and
safety requirements.





Environmental
and safety regulations are extensive in the industry and subject to change at
any time.  This may affect the development of our business.
Environmental and Safety matters are more completely described in Item 4 of this
document.





ITEM
4.                      INFORMATION
ON THE COMPANY





HISTORY
AND DEVELOPMENT OF THE COMPANY





Capital
Reserve Canada Limited (“Capital Canada,” the “Company”, “we”, “us” or “our”)
was incorporated on December 8th, 1999
as a private corporation under the Business Corporations Act (Alberta, Canada).
On January 15, 2003, we amended our articles of incorporation to enable us to be
a public company under the laws of the Province of Alberta. On May 28, 2003, we
amended our Articles of Incorporation to forward split issued and outstanding
shares of class A common stock on the basis of 2,000 shares for every one (1)
share held.  From the date of incorporation to November 1, 2004, we
were a wholly-owned subsidiary of FACT Corporation. On November 1, 2004, FACT
Corporation distributed our shares to FACT Corporation’s shareholders and to a
creditor and we ceased to be a subsidiary of FACT Corporation.




Our
principal place of business is located at 18104-102 Ave., Edmonton, Alberta, T5S
1S7. Our telephone number is 780-701-4447.





On July
1, 2005, we entered in two (2) convertible loan agreements with FACT Corporation
in the principal amount of $533,527 USD and $152,997 CDN (approx $126,222 USD).
The loan agreements were to mature on June 30, 2007 and interest calculated at
US prime plus one percent (1%).  The loans were converted into our
Class A common shares at $0.05 USD per share. On November 22, 2005, FACT
Corporation advised us that it had assigned all of its rights and interest in
the convertible loan agreements.  On November 23, 2005, we received
notice of election to convert a total of $772,550 USD owing for interest and
principal and issued a total of 15,451,000 Class A common shares pursuant to the
conversion.  Also, on November 23, 2005, 24,000 Class A common shares
were issued when options were exercised.  On February 15, 2006, we
received notification of the conversion of the remaining balance of the
convertible loans in the amount of $226,065 USD and issued a total of 4,521,307
Class A common shares. This constituted full and final settlement of all
outstanding debt under the convertible notes.












On August
2, 2005, we incorporated a wholly-owned subsidiary, Capital Reserve Canada
Projects Ltd., to effect the acquisition of an operating business in the oil and
gas services industry.  On August 8, 2005, we issued a total of
17,335,814 of our Class A common shares and Capital Reserve Canada Projects Ltd.
acquired a 78.2% interest in KCP Innovative Services Inc. (“KCP”). After this
issuance, we had a total of 19,335,814 Class A common shares outstanding which
resulted in a change in control of the Company.





On
February 3, 2006, we issued an additional 4,834,300 shares of Class A common
stock for the remaining 21.8% of the shares of KCP and Capital Reserve Canada
Projects Ltd. This effected an amalgamation with KCP, with KCP being the
surviving entity. KCP is now a wholly-owned subsidiary of us. All of our
operations are currently carried on by KCP. As all of our operations are
undertaken by KCP, management has applied reverse merger accounting for the
reporting of financial information. Unless otherwise stated, all of the
financial information included in this annual report is the financial
information of KCP, our wholly-owned subsidiary, except for the shareholders’
equity which includes information for both us and KCP.





On June
13, 2006, we incorporated Two Hills Environmental Inc. in the Province of
Alberta, Canada as a wholly-owned subsidiary to acquire the assets of Southbend
Power Ltd. (“Southbend”).  On June 16, 2006, as amended July 5, 2006,
Two Hills Environmental Inc. and Southbend entered into an asset purchase
agreement for the purpose of acquiring a water diversion permit, 147 acres of
surface rights with water pumping station, and certain mineral rights from
Southbend, in exchange for 13,200,000 of our Class A common restricted
shares.





On August
11, 2006, we, through a newly formed subsidiary, Suncone Technologies Ltd
(“SUN”), entered into an agreement with Southbend whereby Southbend agreed to
sell to SUN an Infratronic Soil Sterilization Unit for $50,000 on the condition
that the unit passed a start-up and operational test to the sole satisfaction of
SUN no later than September 30, 2006.  This was later extended to
November 30, 2006 after which the contract was cancelled by SUN. Southbend was
given until March 31, 2007 to repay the $50,000.  On December 11,
2006, both parties agreed to apply the $50,000 against work done by Southbend on
the Two Hills site. This work consisted of cleaning debris from the Two Hills
site. SUN was subsequently dissolved on Dec 18, 2006.  The $50,000 was
offset by work done by Southbend on the site during the 2007 fiscal
year.





On
October 20, 2006, we purchased salt rights to about four (4) sections of
adjacent land from Rich Resources Investment Ltd. in exchange for 1,000,000 of
our Class A common restricted shares.




On
February 4, 2008 we issued 23,500,000 shares to purchase the shares of Behral
Canada Ltd. Behral owns the patents to a blowout preventer valve, stack control
system and portable blowout controller. Behral also owns a floating offshore
drilling vessel, a blow out preventer stack control system as well as a subsea
blowout stack control system. Pursuant to the agreement, the CEO of Behral
became our CEO.





On
February 8, 2008, KCP Innovative Services Ltd. sold one of the slickline trucks
for $300,000. The proceeds were used to retire the equipment loan with Canadian
Western Bank of about $236,000 and the remainder was used for working
capital.





In June
2008, the remaining slickline truck in KCP and tools were transferred to CRC and
subsequently, the truck was sold for $290,000 and the tools for
$100,000.  With the assets being sold, KCP has become an inactive
company.





Principal
Capital Expenditures and Divestitures





The
financial statements presented in this annual report relate to our consolidated
operations of our wholly-owned subsidiaries, KCP, Two Hills Environmental Inc.
and Behral Canada Ltd. We have included the information as to capital
expenditures and divestitures in this section.












We were
previously in the oil and gas industry by way of the ownership of certain
producing and non-producing oil and gas properties. On May 15, 2003, we sold
certain oil and gas producing properties to Hornet Energy Ltd. for $150,000 CDN
or approximately $113,920 USD.  The funds received paid off certain
loans with Alberta Treasury Branches in full, funded the drilling of an
exploration well in Montana and paid down a total of $57,526 USD of debt with
FACT Corporation.





On June
10, 2003, we executed an agreement with FACT Corporation and Terra Nostra
Technology Ltd. whereby we acquired an interest in certain oil and gas leases
held in Rosebud and Garfield Counties, Montana for $10, 000 USD.  As
part of such agreement, we also took ownership of small producing oil and gas
wells in Colorado, known as the Kejr leases. We expended a total of $6,181 for
the drilling of an exploration well on the Montana leases during July, 2003. The
well was a dry hole.  Our management determined to divest itself of
the Kejr leases and the Montana leases. On December 23, 2004 we entered into an
agreement with Stone Canyon Resources Inc.  (“Stone Canyon”) whereby
we transferred to Stone Canyon all rights and interest in and to the Kejr and
Montana leases in exchange for Stone Canyon assuming all current liabilities and
any future liabilities for the Kejr and Montana leases.





Effective
January 1, 2004, KCP acquired from a group of individuals a computer modeling
system to analyze the underground formations that contain natural gas and oil by
way of the issuance of a total of 14,966,270 common shares of KCP.





On June
11, 2004, KCP acquired 100% of the issued and outstanding shares of Zone
Technologies Ltd. (“Zone”) from an existing shareholder and an unrelated party.
Consideration for the acquisition was $782,500 which was paid by the way of
1,294,444 shares of KCP and $200,000 cash.





Vendor
              Percent
      Ownership
              Cash
      Consideration
              Share
      ConsiderationDarren
      Klassen
              50%
              $200,000
              425,000
      KCP SharesKen
      Pearson
              50%
              -
              869,444
      KCP SharesTotal
              100%
              $200,000
              1,294,444
      KCP Shares





On
September 26, 2005, Zone Technologies Ltd. was dissolved and the assets were
transferred directly to KCP.





During
February and March 2005, KCP purchased two Slick Line Units at a cost of
approximately $650,000 for use in field operations.





On June
13, 2006, we incorporated Two Hills Environmental Inc. in the Province of
Alberta, Canada as a wholly-owned subsidiary to acquire the assets of Southbend
Powers Ltd.  On June 16, 2006, Two Hills Environmental Inc. and
Southbend entered into an asset purchase agreement for the purchase of acquiring
certain surface and mineral rights from Southbend in exchange for 13,200,000 of
our Class A common restricted shares.





On
October 20, 2006, we purchased salt rights from Rich Resources Investments Ltd.
for 1,000,000 of our Class A common restricted shares.





On August
19, 2007 we issued 4,500,000 shares for the retirement of a $800,000 lien on the
Two Hills property. The shares were issued to Southbend Powers Ltd.





On
February 4, 2008 we issued 23,500,000 shares to purchase the shares of Behral
Canada Ltd. Behral owns the patents to a blowout preventer valve, stack control
system and portable blowout controller. Behral also owns a floating offshore
drilling vessel, a blow out preventer stack control system as well as a subsea
blowout stack control system. Pursuant to the agreement, the CEO of Behral
became our CEO.





On
February 8, 2008, KCP Innovative Services Ltd. sold one of the slickline trucks
for $300,000. The proceeds were used to retire the equipment loan with Canadian
Western Bank of about $236,000 and the remainder was used for working
capital.





In June
2008, the remaining slickline truck in KCP and tools were transferred to CRC and
subsequently, the truck was sold for $290,000 and the tools for
$100,000.  With the assets being sold, KCP has become an inactive
company.












Principal
Capital Expenditures and Divestitures in Progress





We are in
the process of obtaining loans, or convertible debentures, either by mortgage or
by Joint Venture to help with the development of the Two Hills site.
Negotiations are underway to secure $10 million for this purpose. Nothing has
been finalized at the date of writing this report.





On
February 8, 2008, KCP Innovative Services Ltd. sold one of the slickline trucks
for $300,000. The proceeds were used to retire the equipment loan with Canadian
Western Bank of about $236,000 and the remainder was used for working
capital.





In early
May 2008, the Board of Directors asked our CEO, Steve Claussen, to provide a
plan for the development of the Two Hills site. The Board believes that
unlocking its value will provide the most opportunity for increasing shareholder
value. As part of the study, our CEO is also to provide analysis of how KCP
Innovative Services Inc. could be developed as a part of the overall plan, or,
in turn, provide a plan for its divestiture either by sale to Ken Pearson, or to
an outside party, or by dissolution of KCP. There is no update on progress as of
the date of writing this report.





In June
2008, the major assets of KCP were sold to a Calgary company and the proceeds
were used for working capital.





BUSINESS
OVERVIEW





We are an
Alberta, Canada Corporation formed in December 1999 to locate and acquire
producing oil and gas assets in Canada. We disposed of our Canadian oil and gas
production on May 15, 2003, which consisted of a five percent (5%) interest in
an Alberta field. We divested of our interests in oil and gas exploration and
development leases in Montana and a producing oil and gas property located in
Colorado effective as of December 1, 2004. On August 12, 2005, we acquired a
controlling interest in KCP, an oil and gas services company, and we acquired a
further interest in KCP on February3, 2006, making KCP our
wholly-owned subsidiary.





On June
13, 2006, we acquired the assets of Southbend to assist the oil and gas industry
with problem waste and to provide underground storage. These assets include the
property and water diversion permit at the Two Hills site in
Alberta.





On
February 4, 2008 we purchased the shares of Behral Canada Ltd.  Behral
owns the patents to a blowout preventer valve, stack control system and portable
blowout controller. Behral also owns a floating offshore drilling vessel, a blow
out preventer stack control system as well as a subsea blowout stack control
system. Pursuant to the agreement, the CEO of Behral became our CEO. Until the
purchase of Behral, all of our operations were undertaken by KCP.





Operations
and Principal Activities





Since
August 2000, we have been operating in the oil and gas services
industry.  All of our present business is conducted in Alberta, Canada
through wholly-owned subsidiaries KCP, Two Hills Environmental Inc. (“Two
Hills”), and Behral Canada Ltd.





Our lead
product is the Split Ball Blowout Preventer (SBOP). The SBOP has been built and
tested to withstand up to 20,000 psi and is the next generation of blowout
preventers for the oil and gas industry. It provides the highest level of safety
when a blowout occurs and may be the only environmentally safe technology
equipment available on the market. The SBOP virtually eliminates all the hazards
associated with the event by using the wells own pressure to assist in the valve
closure. The SBOP’s size and weight is less than half of that of current
industry BOPs.




We are an
Alberta, Canada Corporation formed in December 1999 to locate and acquire
producing oil and gas assets in Canada. We disposed of our Canadian oil and gas
production on May 15, 2003, which consisted of a five percent (5%) interest in
an Alberta field. We divested of our interests in oil and gas exploration and
development leases in Montana and a producing oil and gas property located in
Colorado effective as of December 1, 2004. On August 12, 2005, we acquired a
controlling interest in KCP, an oil and gas services company, and we acquired a
further interest in KCP on February3, 2006, making KCP our
wholly-owned subsidiary.





On June
13, 2006, we acquired the assets of Southbend Power to assist the oil and gas
industry with problem waste and to provide underground storage. These assets
include the property and water diversion permit at the Two Hills site in
Alberta.





On
February 4, 2008 we purchased the shares of Behral Canada Ltd.  Behral
owns the patents to a blowout preventer valve, stack control system and portable
blowout controller. Behral also owns a floating offshore drilling vessel, a blow
out preventer stack control system as well as a subsea blowout stack control
system. Pursuant to the agreement, the CEO of Behral became our CEO. Until the
purchase of Behral, all of our operations were undertaken by KCP.












September
2nd,
2008 CRC submitted to the Government of Alberta at their request an Expression
of Interest (EOI) for the “Carbon Capture and Storage Projects in Alberta”
mandate. A second EOI will be submitted to the Federal Government for the “Clean
Energy Fund” mandate in which the Government plans to support a cleaner and more
sustainable environment and help meet Canada's climate change
objectives.





Two Hills
Environmental a wholly-owned subsidiary of CRC is in the process of developing a
CO2 Cavern Storage Terminal and a CO2 conversion process in the province of
Alberta in order to assist the Government in meeting its stated goals of
reducing CO2 emissions by at least 50Mt by the year 2020. CRC’s core strategy
revolves around the standpoint that CO2 is a valuable feedstock as opposed to a
disposable liability. In accordance with this core consideration, CRC seeks to
develop the most secure, predictable and quantifiable means of CO2 storage in
order to both enhance the safety and security of the provincial CO2
infrastructure and safely consume this CO2 in a proprietary process for
converting CO2 into fuel products. Through this substantial value-add, CRC will
be able to help close the gap on the province’s proposed CCS
targets.





Operations
and Principal Activities





Since
August 2000, we have been operating in the oil and gas services
industry.  All of our present business is conducted in Alberta, Canada
through wholly-owned subsidiaries KCP, Two Hills Environmental Inc. (“Two
Hills”), and Behral Canada Ltd.





Our lead
product is the Split Ball Blowout Preventer (SBOP). The SBOP has been built and
tested to withstand up to 20,000 psi and is the next generation of blowout
preventers for the oil and gas industry. It provides the highest level of safety
when a blowout occurs and may be the only environmentally safe technology
equipment available on the market. The SBOP virtually eliminates all the hazards
associated with the event by using the wells own pressure to assist in the valve
closure. The SBOP’s size and weight is less than half of that of current
industry BOPs.




KCP Innovative Services Inc.
(KCP)




KCP was a
corporation that developed tools for and provided services using such tools to
businesses engaged in the exploration for energy. Specifically, KCP’s tools were
used for measuring the flow and quantity of production of oil and gas wells.
KCP’s measurement tools were used by oil and gas companies to measure pressure
and temperature of a well, which enables improved production information on
development life to assist the Alberta Energy and Utilities Board to determine
royalty payments and gas reserves.  During 2008, the tools and
equipment were sold and KCP has become inactive.








TWO
HILLS ENVIRONMENTAL INC, (THI) Cavern Storage Terminal and Processing
Facility





Problem
Waste and Underground Storage




Our
subsidiary, Two Hills Environmental Inc, (THI), owns approximately 147 acres of
industrial land, 2500 acres of salt rights, and a water diversion permit on the
North Saskatchewan River, near Two Hills, Alberta, Canada. THI seeks to function
as a CO2, Natural Gas and Waste Management Storage Facility, serving the Fort
McMurray, Cold Lake and Riley, AB regions. This will be accomplished through the
solution-mining of caverns into the Lotsberg Salt formation on its property and
the development of the required surface infrastructure capacities (transport,
compression, purification, etc.). The 1,200 meters of rock and overburden lying
over the Lotsberg contains 3 other salt-based, impenetrable layers as well as
several laterally-spanning, porous formations (adding several levels of safety
in the unlikely event of a fissure). Formal scientific studies of the Lotsberg
have concluded that salt caverns created in the Lotsberg present the safest
means for the permanent sequestration of C02 as well as other
materials.








Waste
Disposal:





With our
Phase 1 Engineering complete, THI seeks to break ground in mid-late 2009 on our
Cavern Storage Terminal and Processing Facility.  Cavern waste
disposal is seen as the safest method of hazardous waste disposal due to the
caverns’ ability to seal wastes off from all other formations (including
aquifers) permanently. Cavern disposal also presents the unique opportunity to
recycle and reclaim waste streams such as hydrocarbons and other chemical
solutions;












With the
strategic location of the Two Hills site above the Nisku Fault, THI plans to
start Phase 1 of the deepwell disposal business to get to revenue within the
next 6 - 12 months, pending permit and funding approval. The Nisku Fault is the
most commonly used formation for deep-well disposal of industrial wastes;
several such wells have been successfully drilled, utilized and sealed on the
property in the past, sufficiently demonstrating this capacity.





Natural
Gas Storage and Cycling





The THI
facility would also be able to accommodate Albertan energy industry with natural
gas storage. Salt caverns in North America have been used for decades to
securely store natural gas. The natural gas is stored during the low demand
summer months and stockpiled to accommodate the peak demands during winter
months. When demand is more than what the natural gas system is able to deliver,
the stored natural gas is added to the system to ensure reli­ability for
their customers.





The
storage of natural gas in caverns would also offer industry cost savings. The
caverns would be able to be accessed and refilled three or four times during the
winter months, where as the depleted oil reserve could only be turned over once
during the same time period, leaving the industry to search for other storage
means. THI facilities would provide the Alberta energy industry with a type of
storage that is secure, easily monitored, and would allow for quick withdrawals
during peak demand times.








BEHRAL
Canada











BEHRAL
holds the patents on 3 next generation oilfield products.  The SBOP
has been built and tested to withstand up to 20,000 psi and is the next
generation of Blowout Preventers for the oil and gas industry. It provides the
highest level of safety when a blowout occurs. The SBOP virtually eliminates all
the hazards associated with a Blow-Out by using the well’s own pressure to
assist in the valve closure. With the size and weight less than half of that of
current industry BOPs; the SBOP aims to be the new standard in Blowout
Preventers worldwide.







Products
that BEHRAL seeks to bring to market in the years to come;





1.
            Subsea
      BOP Stack Control System


An
improvement is provided in a system for controlling a subsea blowout preventer
in which blowout preventer functions are operated by a hydraulic control system.
The improvement resides in a control system, which has at least two elements and
at least one back up control system. The control system includes a subsea
pressure compensated reservoir for replenishing the supply of hydraulic fluid,
and an electric motor, supplied with electrical command energy from the surface,
to operate a hydraulic pump which operates in conjunction with the BOP hydraulic
control system. One back up control system is a standby second electric motor,
supplied with electrical command energy from the surface, to operate a hydraulic
pump, which operates in conjunction with the BOP hydraulic control system. A
second back up control system is an acoustical unit including a transducer and a
subsea acoustic receiver to operate the BOP hydraulic control system drawing
hydraulic fluid from the subsea hydraulic accumulators associated with the
hydraulic control system. Having two back up, standby systems, enhances the
reliability of the BOP control. The total hydraulic control system is housed in
a pressure compensated reservoir located at the usual pod locations. Two pods
are used for additional redundancy.





2.
            Portable
      Blow Out Controller


A blowout
controller is provided which is functional to effect stoppage of the
high-pressure gases and/or fluids flowing from a wild well. The controller
includes a mechanism for simultaneously sealing and gripping the outside wall of
the well pipe.





3.
            Blowout
      Preventer Valve and BOP Stack


A novel
blowout preventer valve is provided herein for connection between a riser
connector and a wellhead connector of a sub-sea well. The valve includes a
generally cylindrical body connectable in a riser string as a replacement for a
riser, the generally cylindrical body being provided with an access opening
through the wall thereof, the access opening being closed by cover plate. Two
segments of a hollow sphere are rotationally mounted within the generally
cylindrical body, each such segment having a driven shaft projecting outwardly
from the generally cylindrical body. Positively actuatable means, e.g. a rotary
hydraulic actuator, is provided for rotating the segments towards and away from
one another between an open position, where there is free access to the borehole
of the well, and a closed position, where a sealed closure is provided on the
drill pipe. The valve so provided is smaller in size and lighter in weight than
conventional BOP valves, and has less assemblage components.







REGULATORY
MATTERS AFFECTING OUR BUSINESS





Environment
and Safety





Our
operations will be subject to numerous federal, provincial and local laws and
regulations relating to environmental protection. These laws and regulations
govern, among other things, the amounts and types of substances and materials
that may be released into the environment, the issuance of permits in connection
with exploration, drilling and production activities, the release of emissions
into the atmosphere, the discharge and disposition of generated waste materials,
offshore oil and gas operations, the reclamation and abandonment of wells and
facility sites and the remediation of contaminated sites. In addition, these
laws and regulations may impose substantial liabilities for the failure to
comply with them or for any contamination resulting from the operations
associated with our assets.  Laws and regulations protecting the
environment have become more stringent in recent years, and may in certain
circumstances impose "strict liability," rendering a person liable for
environmental damage without regard to negligence or fault on the part of such
person. Such laws and regulations may expose us to liability for the conduct of
or conditions caused by others, or for our acts which were in compliance with
all applicable laws at the time such acts were performed. The application of
these requirements or the adoption of new requirements could have a material
adverse effect on our financial position and results of operations.





The Oil
Pollution Act of 1990 ("OPA") and regulations promulgated pursuant thereto
impose a variety of requirements on "responsible parties" related to the
prevention of oil spills and liability for damages resulting from such spills.
Few defenses exist to the liability imposed by the OPA, and such liability could
be substantial. A failure to comply with ongoing requirements or inadequate
cooperation in a spill event could subject a responsible party to civil or
criminal enforcement action.





We take
the issue of environmental stewardship very seriously and work diligently with
our operators to ensure that compliance with applicable environmental and safety
rules and regulations. Compliance with such laws and regulations has not had a
material effect on our operations or financial condition in the past. However,
because environmental laws and regulations are becoming increasingly more
stringent, there can be no assurances that such laws and regulations or any
environmental law or regulation enacted in the future will not have a material
effect on our operations or financial condition.





ORGANIZATIONAL
STRUCTURE




Our
subsidiaries, as of the year ended December 31, 2008, were KCP, Two Hills and
Behral.  All three of these companies are incorporated pursuant to the
laws of the Province of Alberta, Canada.




PROPERTY,
PLANT AND EQUIPMENT





Our
principal corporate and administrative offices are located at 18102-102 Ave.,
Edmonton, Alberta, Canada.  KCP’s office is located at 4403-68 Ave. in
Edmonton.





Until
June 1, 2006, administrative space was provided free of charge by LFC
Corporation (“LFC”), one of our shareholders.  On June 1, 2006, we
agreed to pay LFC Corporation rent of $2,000 per month which includes telephone,
computers, photocopier, fax and reception.  There was no formal rental
agreement and the rental was a verbal agreement on a month-to-month basis and is
cancelable at any time.  We concluded our lease with LFC on December
31, 2006.





KCP
leased 6,500 square feet of office space in Edmonton, Alberta, Canada at 4304-74
Ave, Edmonton, Alberta.  The lease was a three (3) year term
commencing on October 15, 2004, and expired on October 14, 2007.  The
base rent was $3,500 per month net of taxes.  Under the lease
agreement, KCP was responsible for the costs of all utilities, property taxes
and business taxes.  On November 1, 2007, KCP leased new space at
4403-68 Ave for a five (5) year term which expires on October 31, 2012, at a
cost of $11,845 per month.





KCP had a
financing agreement with Canadian Western Bank for $423,500 dated March 22, 2005
for the financing of two (2) PID trucks.  The loan was a sixty (60)
month term bearing interest at 6.375% per annum.  The monthly payment
was $8,313.29.  The balance of the loan on was paid in full February
8, 2008.







ITEM
4A.                      UNRESOLVED
STAFF COMMENTS




Not
Applicable




ITEM
5.                      OPERATING
AND FINANCIAL REVIEW AND PROSPECTS







OPERATING
RESULTS





The
financial information as presented herein relates to our consolidated financial
statements.





Pursuant
to a share exchange agreement dated August 12, 2005, we indirectly, through our
wholly-owned subsidiary, Capital Reserve Projects Ltd., acquired a 78.2%
interest in KCP.  Because the shareholders of KCP became our
controlling shareholders, this transaction was accounted for as a reverse merger
whereby KCP is deemed to be the parent company and Capital Reserve Projects Ltd.
is deemed to be the subsidiary company for accounting purposes.  The
financial statements of the combined entity are issued under our name, but are
considered a continuation of the financial statements of KCP.





We have
provided financial information for the fiscal years ended December 31, 2006,
2007 and 2008.





Comparison
of 2008, 2007 and 2006





Revenues
for the fiscal year ended December 31, 2008 were $24,000 and showed an increase
over revenues from the previous fiscal years ended December 31, 2007 of $18,000
and an increase over December 31, 2006 of $8,825. The increase in revenue in
2008 can be attributed to the lease pertaining for the full year. The increase
in revenues for 2007 can be predominantly attributed to more months of a lease
than 2006.




For the
year ended December 31, 2008, we incurred operating losses of $7,004,583 as
compared to operating losses of $197,461 for the fiscal year ended December 31,
2007 and operating losses of $176,776 for the fiscal year ended December
31, 2006.  Expenses for the year ended December 31, 2008 increased to
$5,759,690 as compared to expenses of $215,461 for the year ended December 31,
2007 and $185,601 in the fiscal year ended in December 31,
2006  mainly due to the recording of impairment charges of
$5,759,690.  Consulting, salaries and benefits increased to
$986,332 in 2008 from $nil and $nil in 2007 and 2006 respectively due
to the hiring of consultants in Capital Reserve. General and administrative
expenses decreased to $139,536 in 2008 from $213,414 in 2007 and increased from
$168,886 in 2006.  This is due to higher administrative costs and a
need to retain management and consulting services to maintain the public
listing.  Amortization increased to $3,445 in 2008 from $nil in 2007
and $nil 2006 due to Capital Reserve and Behral acquisitions of
assets. 1





During
fiscal year ended December 31, 2006, we issued 13,200,000 common shares in
exchange for the assets of Southbend. This transaction was valued at $4,777,279.
Also 1,000,000 of our common shares were issued to Rich Resource Investments.
This transaction was valued at $134,400.





On August
19, 2007 the $800,000 lien on the Two Hills property and a BDC loan for
approximately $39,000 was paid with 5,000,000 of shares of common stock. The
lien on the Two Hills property has subsequently been discharged.





During
the fiscal year ended December 31, 2008, we issued 23,500,000 common shares in
exchange for the shares in Behral Canada . This transaction was valued at
$940,000.





LIQUIDITY
AND CAPITAL RESOURCES





Summary
of Working Capital and Stockholders’ Equity





Using
current assets minus current liabilities, as of December 31, 2008, we had
negative working capital of $(243,147) compared to negative working capital of
$(101,601) on December 31, 2007, and compared with positive working capital of
$314,184 on December 31, 2006.





As of
December 31, 2008, stockholders' equity was $689,758 compared to $5,912,304 at
December 31, 2007 and $5,818,271 at December 31, 2006. The decrease is largely
due to the recording of the impairment in the water permits and salt leases and
the mineral rights, as well as the patent acquired in
Behral.  Stockholders’ equity and KCP’s working capital increased in
2006 mainly because of the acquisition of Southbend assets.  It had
decreased during 2005 due to the acquisition of additional equipment and
increased expenses as KCP increased operations and undertook to become a public
company.





Liquidity





We expect
that we can meet our monthly overhead requirements from our current cash and
cash equivalents for the next twelve months.  We expect to be able to
generate sufficient amounts of cash and cash equivalents, both in the short and
long term, to maintain our capacity, meet our planned growth and development
activities.  Cash and cash equivalents are expected to come from
offerings of the Company’s securities to the public and joint
ventures.




Sources
of Working Capital





During
2006 and 2007, our primary sources of working capital have come from revenues
generated from our operations in KCP.  During 2008, our primary
sources of working capital came from the sale of assets.  As at
December 31, 2008, we had cash equivalents of $5,385 and accounts receivable of
$12,386.  To develop the Two Hills site, the company will be looking
for capital from either a mortgage or a joint venture arrangement or
both.




Borrowings




KCP has
an operating line of credit in the maximum amount of
$95,000.  Interest is charged monthly on the outstanding balance at
the rate of Bank of Canada prime plus one percent (1%).  As at
December 31, 2008, the amount outstanding was $15,000.




KCP
had a demand bank loan repayable over sixty (60) months maturing February
2010.  The loan had monthly blended payments of principal and
interest of $8,313.  The interest rate on the loan was
6.375%.  The loan was secured by two Sterling Slick Line
units.  On February 8, 2008 the loan was paid in full.




Two Hills
assumed a $50,000 (maximum) loan, and a lien of $800,000 from
Southbend.  The loan had monthly payments of interest and an
interest rate of two percent (2%) per month and was due March 5, 2011. The
balance of the loan on December 31, 2007 was $0.  The lien and
the loan were settled with 5,000,000 shares on August 19,
2007.




Neither
we nor our subsidiaries are in arrears on the payment of interest or principal
payments on borrowing.  We are not, nor have we been during the fiscal
year ended 2008, in default on any debt covenants.





Material
Capital Commitments





KCP
had taken delivery of the two (2) PID trucks.  One was delivered
on February 18, 2005 and the other was delivered on March 29, 2005.




KCP has
arranged capital lease financing for the trucks totaling $494,614 including
interest.  The balance of the loan was paid off on February 8, 2008
leaving a loan balance of zero.




KCP
leases space in Edmonton at 4403-68 Ave.  The lease is for a period of
five (5) years commencing on November 1, 2007 at $11,845 per month.





RESEARCH
AND DEVELOPMENT, PATENTS AND LICENSES, ETC.





KCP no
longer invests in research and development, in previous years, they had invested
in research and development, not only to refine its existing products but to
develop new products.




Two Hills
has not conducted research and development in 2008 or 2007.




The
Company has no licenses but has the following patents held in Behral Canada
Ltd:





Serial #
472,497, filed Jan. 21, 1985 - Floating Offshore Drilling Vessel


Serial #
472,498, filed Jan. 21, 1985 - Riser Handling & B.O.P. Stack Handling
System


Serial #
472,499, filed Jan. 21, 1985 - Sub-Sea B.O.P. Stack Control System


Serial #
472,500, filed Jan. 21, 1985 - Blow-Out Preventer





Canadian
patent, number 1239091 -Blowout preventer valve and BOP stack


Canadian
patent number 1239090 - Subsea BOP stack control system


Patent
application no. 2088794 -portable blowout contrail




TREND
INFORMATION





We are
not aware as of the filing of this annual report of any known trends,
uncertainties, demands, commitments or events that are reasonably likely to have
a material effect on our financial condition.





OFF-BALANCE
SHEET ARRANGEMENTS





We have
no off-balance sheet arrangements.





DISCLOSURE
OF CONTRACTUAL OBLIGATIONS





CAPITAL
      RESERVE CANADA
                AS
      AT DECEMBER 31, 2008DISCLOSURE
      OF CONTRACTUAL OBLIGATIONSPayments
      due by periodCONTRACTUAL
      OBLIGATIONS
              Total
              Less
      than
                one
      year
              1-2
      years
              3-5
      years
              More
      than
                5
      yearsKCP
      Lease Obligations (Office Space)(1)
              544,870
              142,140
              284,280
              118,450
              0Long
      Term Debt(2)
              6,137
              6,137
              0
              0
              0Total
              551,007
              148,277
              284,280
              118,450
              0


(1)  Based
on rent of $11,845 per month net of any taxes or operating costs.


(2)  Vehicle
loan with blended payments of $1,027.




ITEM
6.                      DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES







DIRECTORS
AND SENIOR MANAGEMENT





The
following table sets forth at the date of writing this report the names and ages
of our current directors and executive officers, the principal offices and
positions held by each person and the date such person became a director or
executive officer. Our executive officers are elected annually by our Board of
Directors. The directors serve one-year terms until their successors are
elected. The executive officers serve terms of one (1) year or until their
death, resignation or removal by the Board of Directors. Unless described below,
there are no family relationships among any of the directors and officers, and
no persons have been elected as a director or officer at the request of any
shareholders, customers, suppliers or others.





Name
              Age
              TitleDonald
      Getty
              75
              Chairman
      of the Board and DirectorSteve
      Claussen
              37
              Director,
      President and CEOMichael
      Dolinski
              61
              Director





Donald
Getty - Chairman of the Board, Director of Capital Reserve Canada Ltd. and
Director of KCP Innovative Services Inc.




Mr. Getty
earned his Business Administration degree from the University of Western Ontario
with honours in 1954. His position with the Alberta Governement included two
terms as Premier of Alberta, position of Energy Minister and the position of
Minister of Federal and Intergovernmental Affairs. In his business career, Mr.
Getty has served on the Boards of distinguished companies such as Royal Bank of
Canada, Nova Company, Genstar Company and Interprovincial Pipe and Steel
Corp.




Steve
Claussen - Director, President and CEO of Capital Reserve Canada
Ltd.





Mr.
Claussen joined CRC as President and CEO in 2007 through CRC’s acquisition of
Behral Canada Inc. a company founded by Mr. Claussen. Mr. Claussen brings 13
years of executive and entrepreneurial experience in building successful
companies in many sectors including retail, publishing and Oil and Gas to CRC.
Mr. Claussen is also the company’s largest shareholder.





Michael
G. Dolinski M.Sc., M.P.M. - Director





Mr.
Dolinski was trained as an entomologist and held the position of Provincial
Entomologist during most of his 32-year career with Alberta Agriculture, Food,
and Rural Development. He has chaired many Provincial and National Committees
during his career, and the first World Organic Conference in London U.K. in
2000. Mr. Dolinski has provided consulting and training services in pest
management and organic agriculture production across Canada and the Northern US
through Agri-Trend Agrology, the largest agricultural consulting company in
North America, which has also developed a system to measure carbon sequestration
and market carbon credits to large carbon dioxide emitters.





COMPENSATION





The
following table sets forth the compensation paid to our directors and members of
our management group for the last fiscal year.





Annual
      Compensation
              Long
      Term CompensationName
      and Principal Position
              Year
              Salary
                (CDN$)
              Bonus
                (CDN$)
              Securities
      Under Options to be Granted
                (#)
              Long
      Term Incentive Plan Payouts (CDN$)
              All
      other Compensation
                (CDN$)Donald
      Getty
                Chairman
      of the Board and Director
              2008
                2007
                2006
              0
                0
                0
              -
              -
              -
              -Steve
      Claussen
                Director
      and
                CEO
      of  CRC and KCP
              2008
                2007
                2006
              360,000
                0
                0
              -
              -
              -
              -Michael
      Dolinski
                Director
              2008
                2007
                2006
              0
                0
                0
              -
              -
              -
              -Nicole
      Wood
                Chief
      Financial Officer
              2008
                2007
                2007
              21,000
                0
                0
              -
              -
              -
              -


A balance
of $12,930 is owed to the CEO and $16,000 is owed to the CFO as at December 31,
2008





MANAGEMENT
CONTRACTS





KCP had a
management contract with Projex Corporation Ltd., a company of which James Baker
is the sole officer and director, for the provision of Mr. Baker’s services as
CEO for $5,000 per month on a part-time basis, commencing Feb 1,
2005.  Mr. Baker devoted approximately fifty percent (50%) of his time
to us and KCP.  The other fifty percent (50%) of his time was devoted
to his consulting business.  The contract concluded on December 31,
2006.





KCP had
an employment agreement with Ken Pearson, as President of KCP, for $14,166 per
month. The agreement commenced on February 1, 2005.  The contract has
no specific term of employment and no specific termination
clause.  Any termination would be subject to the employment laws of
the Province of Alberta, Canada.  Employment includes a company health
plan covering healthcare supplemental coverage, dental care, vision care, life
insurance and disability.  The cost of the plan for Ken Pearson is
$98.20 per month.  This contract was terminated in June
2008.





KCP had
an employment agreement with Faye Pearson for Office Management Services for
$5,833 per month.  The contract has no specific term of employment and
no specific termination clause.  Any termination would be subject to
the employment laws of the Province of Alberta, Canada.  Employment
includes a company health plan covering healthcare supplemental coverage dental
care, vision care, life insurance and disability.  The cost of the
plan for Faye Pearson is $168.40 per month.  This contract was
terminated in June 2008.





Capital
Reserve has a management contract with 1406172 Alberta Inc, a company of which
Steve Claussen is the sole officer and director, for the provision of Mr.
Claussen’s services as CEO for $30,000 per month, commencing in December
2007.  The term of the contract is two years.





Capital
Reserve has a consulting contract with 544686 BC Ltd., a company of which Nicole
Wood is the sole officer and director, for the provision of Mrs. Wood’s services
as CFO for $4,000 per month, commencing in August 2008.





Compensation
of Directors





No
directors received any form of compensation in their capacity as our directors
to December 31, 2008. However, on March 13, 2008, our CEO approved the issuance
of 1,000,000 shares each to the three existing directors as compensation for
being on the Board. This issuance is subject to stockholders’ approval at the
next Annual General Meeting.





BOARD
PRACTICES





Members
of our Board of Directors are elected annually at the Annual Shareholders’
Meeting and hold their positions until the next Annual Shareholders’
Meeting.  We have not entered into any formal service contracts with
any of our directors for their service as directors.





We do not
have any standing audit, nominating or compensation committees of the Board of
Directors.  Our Board of Directors undertakes the role of audit and
compensation committees at this time.  Our executive officers are
elected annually by our Board of Directors and hold such positions until the
following year or until his her successor is duly elected by our Board of
Directors.





EMPLOYEES





As at
December 31, 2008, CRC had no employees, but did have three (3)
consultants.





Presently
we have a total of one (1) employee.





SHARE
OWNERSHIP





The
following table sets forth information, as of July 08, 2009, with respect to the
beneficial ownership of Capital Reserve Canada Limited's Class A common stock by
each of our officers and directors, and by our officers and directors as a
group.  Information is also provided regarding beneficial ownership of
Class A common stock if all outstanding options, warrants, rights and conversion
privileges are exercised, and additional shares of our Class A common stock are
issued.








TITLE
      OFCLASS
              BENEFICIAL
      OWNER
              AMOUNT
      AND NATURE OF BENEFICIAL OWNER
              PERCENT
      OF
                CLASS(1)Class
      A Common
              Steve
      Claussen, CEO, Director and President of Capital Reserve Canada; St.
      Albert, Alberta T8N 5M1
              42,833,495
      common shares held directly and indirectly.(3)
              29.3%Class
      A Common
              Donald
      Getty, Director and Chairman of the Board of Capital Reserve Canada
      Limited
                c/o
      1273 Potter Greens Dr
                Edmonton,
      Alberta T5T 5Y8
              6,234,429
      common shares held indirectly.(2)
              4.3%Class
      A Common
              Trisha
      Claussen, Comptroller
                St.
      Albert, Alberta T8N 5M1
              2,642,857
      common shares held directly
              1.8%Class
      A Common
              Jeff
      Leslie, Director of Behral Canada
                9521
      180A Street
                Edmonton
      Alberta T5T2Z4
              4,486,334
      common shares held directly
              3.1%Class
      A Common
              Nicole
      Wood, C.F.O.
                1014
      Dory Street
                Coquitlam,
      BC V3C 4L2
              500,000
      common shares held indirectly
              0.3%Class
      A Common
              Michael
      Dolinski, Director
                4416
      – 29 Street
                Edmonton
      Alberta
              0
      common shares held directly
              0.0%56,697,115
      common shares
              38.8%





(1)
            Based
      on 146,260,969 shares of Class A Common Stock. As of July 8,
      2009(2)
            Held
      in Sunnybank Investments Ltd., a company of which Mr. Getty is the sole
      shareholder.(3)
            Held
      in 1406172 Alberta Ltd (Steve Claussen)(4)
            544686
      BC Ltd. (Nicole Wood)





ITEM
7.                      MAJOR
STOCKHOLDERS AND RELATED PARTY TRANSACTIONS






MAJOR
STOCKHOLDERS






The
following table sets forth information, as of July 08, 2009, with respect to the
beneficial ownership of Capital Reserve Canada Limited's Class A common stock by
each person known to be the beneficial owner of more than five percent (5%) of
the outstanding Class A common stock.  As at July 08, 2009 there were a
total of 856 stockholders holding 146,260,969of
our Class A common shares.






Information
is provided regarding beneficial ownership of Class A common stock if all
outstanding options, warrants, rights and conversion privileges are exercised
and additional shares of Class A common stock are issued.




TITLE
      OF CLASS
            BENFICIAL
      OWNER
            AMOUNT
      AND NATURE OF BENEFICIAL OWNER
            PERCENT
      OF CLASS(1)Class
      A Common
            Steve
      Claussen, CEO,  Director and President of Capital Reserve
      Canada, St. Albert, Alberta T8N 5M1
            42,833,495
      common shares held directly and indirectly.(2)
            29.3%





(1)  Based
on 146,260,969 shares of Class A common stock.


(2)Held in 1406172 Alberta Ltd (Steve
Claussen)





RELATED
PARTY TRANSACTIONS







On August
8, 2005, we issued a total of 7,585,814 Class A common shares to Ken Pearson, a
member of the Company’s and KCP’s Boards of Directors, and 4,000,000 Class A
common shares to Projex Corporation Ltd., a company controlled by James Baker,
at that time, an officer and a member of the Company’s and KCP’s Boards of
Directors. The shares were issued as part of the acquisition transaction of
KCP.




On
November 24, 2005, we issued a total of 1,000,000 Class A common shares to Ken
Pearson in settlement of $50,000 USD debt owed by the Company and a total of
500,000 Class A common shares to Sunnybank Investments Ltd., a company
controlled by Don Getty, a director of us and KCP, for settlement of $25,000 USD
debt.




KCP
borrows funds from its stockholders, directors and employees from time to time
in order to meet working capital requirements and to ensure payment of
liabilities as they come due. As at December 31, 2007, the amount outstanding
under these loans was nil.




On
January 28, 2004, KCP appointed an employee of one of KCP’s customers as a
director, Mr. Robert Hawkes, who is an employee of BJ Services Company Ltd.
During the fiscal year ended December 31, 2007, KCP earned $184,046 of revenues
from this customer in the normal course of operations.




On
February 1, 2005, KCP entered into a consulting management contract with Projex
Corporation Ltd., a company controlled by a stockholder, and at the time, an
officer and director of KCP. During the twelve (12) month period ended December
31, 2006, we paid $60,000 (for the fiscal year ended August 31, 2005 - $63,880),
in consulting fees pursuant to this contract. Pursuant to the terms of the
contract, Projex Corporation Ltd. receives $5,000 per month and has been paid up
to date to December 31, 2006 at which time the contract was
concluded.





On
February 1, 2005, KCP entered into an employment agreement with Ken Pearson.
During the twelve (12) month period ended December 31, 2007 we paid Mr. Pearson
$170,000. During the twelve (12) month period ended December 31, 2006, we paid
Mr. Pearson $120,000 (for the fiscal year ended August 31, 2005 - $ 108,000) for
services rendered under this employment agreement.  Pursuant to the
terms of this agreement, Mr. Pearson receives $14,166 per month and has been
paid up to date as of the date of writing of this report.





On
February 1, 2005, KCP entered into an employment agreement with the wife of Mr.
Pearson. During the twelve (12) month period ended December 31, 2007 we paid
Mrs. Pearson $70,000. During the twelve (12) month period ended December 31,
2006, we paid Mrs. Pearson $48,000 (for the fiscal year ended August 31, 2005 -
$ 44,000) for office management services.  Pursuant to the terms of
this agreement, Mrs. Pearson receives $5,833 per month and has been paid up to
date as of the date of writing of this report.





During
the fiscal year 2006, KCP obtained key man insurance on Mr. Pearson in the
amount of $2,000,000 payable to KCP.  The cost of this insurance is
$477.90/month and is paid for by KCP.





On
December 1, 2006, we entered into an agreement with Southbend, a company owned
by two (2) of our stockholders, Fergus Ismond and Steven Hoof, for the provision
of services at the Two Hills site. The contract was for $150,000 and is subject
to financing. To date, $60,500 has been paid and payments are up to date as of
the date of writing of this report.





On August
11, 2006, we entered into an agreement with Southbend for the sale of an
infrared sterilization unit for $50,000 subject to the sole satisfaction of the
Company.  We cancelled the contract on November 30,
2006.  Southbend was given until March 31, 2007 to refund the $50,000
payment. Both parties agreed later to apply the $50,000 purchase price to work
performed on the Two Hills’ site by Southbend.





On July
19, 2007 we issued 700,000 shares for consulting services with two
stockholders.





On August
19, 2007 we issued 5,000,000 shares for the retirement of an $800,000 lien held
by Southbend Powers Ltd. on the Two Hills property and the assumption of
approximately a $39,000 loan, and 1,500,000 shares for $49,634 in accumulated
debt held by a stockholder.





On
February 4, 2008 we issued 3,500,000 shares in lieu of payment for work done on
the site at the Two Hills site by a stockholder.





On
February 4, 2008 we issued 23,500,000 shares to purchase the shares of Behral
Canada Ltd. Behral owns the patents to a blowout preventer valve, stack control
system and portable blowout controller. Behral also owns a floating offshore
drilling vessel, a blow out preventer stack control system as well as a subsea
blowout stack control system. Pursuant to the agreement, the CEO of Behral
became our CEO.





On March
12, 2008 we issued 1,000,000 shares for consulting services with two
stockholders.





On March
12, 2008, our CEO approved the issuance of 3,000,000 shares, 1,000,000 each to
the three existing directors as compensation for being on the Board. This
issuance is subject to stockholders’ approval at the next Annual General
Meeting.





On May 7,
2008 we issued 6,749,933 shares for consulting services with two
stockholders.





On July
7, 2008 we issued 3,660,643 shares for consulting services with two
stockholders.





On July
31, 2008 we issued 1,020,833 shares for consulting services.





On August
13, 2008 we issued 2,300,000 shares for consulting services to three
consultants.





On
November 3, 2008 we issued 3,323,529 shares for consulting
services.





On
December 16, 2008 we issued 4,500,000 shares for consulting services to three
stockholders.





INTERESTS
OF EXPERTS AND COUNSEL





Not
applicable





ITEM
8.                      FINANCIAL
INFORMATION





CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION





The
required financial statements are provided at the end of this Annual Report
starting on Page F-1.





SIGNIFICANT
CHANGES





On
February 4, 2008 we issued 23,500,000 shares to purchase the shares of Behral
Canada Ltd. Behral owns the patents to a blowout preventer valve, stack control
system and portable blowout controller. Behral also owns a floating offshore
drilling vessel, a blow out preventer stack control system as well as a subsea
blowout stack control system. Pursuant to the agreement, the CEO of Behral
became our CEO.





On
February 8, 2008, KCP Innovative Services Ltd. sold one of the slickline trucks
for $300,000. The proceeds were used to retire the equipment loan with Canadian
Western Bank of about $236,000 and the remainder was used for working
capital.





In June
2008, the remaining slickline truck in KCP and tools were transferred to CRC and
subsequently, the truck was sold for $290,000 and the tools for
$100,000.  With the assets being sold, KCP has become an inactive
company.








ITEM
9.                      THE
OFFER AND LISTING





OFFER
AND LISTING DETAILS





Not
Applicable





PLAN
OF DISTRIBUTION





Not
Applicable





MARKETS





Our Class
A common shares trade on the NASDAQ Over-the-Counter Bulletin Board Market under
the symbol “CRSVF”.





SELLING
SHAREHOLDERS





Not
Applicable





DILUTION





Not
Applicable





EXPENSES
OF THE ISSUE





Not
Applicable





ITEM
10.                      ADDITIONAL
INFORMATION





SHARE
CAPITAL





Not
Applicable








MEMORANDUM
AND ARTICLES OF ASSOCIATION





We
incorporate by reference herein the information set forth under the heading
“MEMORANDUM AND ARTICLES OF
ASSOCIATION”located in our Amendment No. 4 to Form 20F/A filed with the
Securities and Exchange Commission on March 16, 2004.





MATERIAL
CONTRACTS





For the
last two fiscal
years, we have not entered into any contracts material to investors in
the normal course of business other than the following:





1.
            KCP’s
      Office Leases





KCP’s
principal corporate and administrative offices are located at 4403-68 Avenue,
Edmonton, Alberta, Canada.  Up to June 1, 2006, this space was
provided free of charge by LFC. On June 1, 2006, we agreed to pay LFC a monthly
rent fee of $2,000 which includes telephone, computers, photocopier, fax and
reception.  Rental was on a month-to-month basis and the lease with
LFC concluded on December 31, 2006.





KCP
leased space in Edmonton at 4304-74 Ave. The lease payment is $3,500 per month
and provides KCP with sufficient space to carry out its operations for the
foreseeable future.  The lease commenced on October 15, 2004 provides
for a three (3) year term expiring on October 15, 2007.  On November
1, 2007 KCP moved its operations to 4403-68 Ave. The lease payment is $11,845
per month and provides for a five year term ending October 31,
2012.





2.
            Management
      and Employment Agreements with Steve Claussen, and Nicole
    Wood





CRC has a
management agreement with 1406172 Alberta Inc on behalf of Steve Claussen, as
CEO and President of CRC, for $30,000 per month.




CRC has a
consulting agreement with 544686 BC Ltd. on behalf of Nicole Wood as CFO
services for $4,000 per month.




*
      3.
            The
      Purchase of KCP





On August
2, 2005, we incorporated a wholly-owned subsidiary, Capital Reserve Canada
Projects Ltd., to effect the acquisition of KCP.  On August 8, 2005,
we issued a total of 17,335,814 of our Class A common shares and Capital Reserve
Canada Projects Ltd. acquired a 78.2% interest in KCP.  This effected
a change in our control.





On
February 3, 2006, we issued a further 4,834,300 shares of our Class A common
stock for the remaining 21.8% of KCP and Capital Reserve Canada Projects Ltd.
which effected an amalgamation with KCP with KCP being the surviving entity. KCP
is now one of our wholly-owned subsidiaries which are responsible for carrying
on all of our operations.





*
      4.
            The
      Agreement with Southbend Power Ltd. to Acquire All of Its Major
      Assets





On June
16, 2006 and as amended on July 5, 2006, we entered into an agreement to acquire
the predominant assets of Southbend, which included a water diversion permit,
147 acres of surface rights with a water pumping station, and certain mineral
rights, in exchange for 13,200,000 of our Class A common shares. Share
certificates have been issued for these shares. We established Two Hills to
acquire these assets.










**
5.           The Purchase
of Salt Rights from Rich Resources Investments





On
September 28, 2006, we entered into an agreement with Rich Resource Investments
Ltd., a company formed pursuant to the laws of Alberta, Canada, whereby we
acquired the mineral rights to approximately four sections of land adjacent to
the Two Hills site in exchange for 1,000,000 of our common shares.





6.
            The
      Exchange of 6,000,000 shares for
debt.





On August
19, 2007 we issued 6,000,000 shares for the retirement of a lien of $800,000 on
the Two Hills property, and for $49,634 in accumulated debt.





7.            The
Purchase of the shares of Behral Canada Ltd.





On
February 4, 2008 we issued 23,500,000 shares to purchase all the shares of
Behral Canada Ltd. Behral owns the patents to a blowout preventer valve, stack
control system and portable blowout controller. Behral also owns a floating
offshore drilling vessel, a blow out preventer stack control system as well as a
subsea blowout stack control system. Pursuant to the agreement, the CEO of
Behral became our CEO.





EXCHANGE
CONTROLS





There are
no governmental laws, decrees, regulations or other legislation of Canada that
may affect the import or export of capital for our use.





Other
than the withholding of any taxes due under the terms of specific treaties
between countries on dividends paid to our stockholders, there are no
restrictions on the remittance of dividends, interest or other
payments.





TAXATION





The
discussions below summarize the material tax considerations relevant to an
investment in common shares by individuals and corporations who, for income tax
purposes, are residents in the U.S. for purposes of the Convention (as
hereinafter defined) and are not residents of Canada, who hold common shares as
a capital asset, and who do not hold the common shares in carrying on a business
through a permanent establishment in Canada or in connection with a fixed base
in Canada (collectively, "Unconnected U.S. Shareholders," "Holder" or
"Holders"). The tax consequences of an investment in common shares by investors
who are not Unconnected U.S. Shareholders may differ substantially from the tax
consequences discussed herein. The discussion of U.S. tax considerations is
addressed only to Unconnected U.S. Shareholders whose "functional currency"
within the meaning of Section 985 of the Internal Revenue Code of 1986, as
amended (the "Code"), is the U.S. dollar, and to U.S. citizens who are not
residents in the U.S. for purposes of the Convention, but who otherwise meet the
definition of Unconnected U.S. Shareholders.  Furthermore, the
discussion of U.S. tax considerations does not address the tax treatment of
Unconnected U.S. Shareholders that own, or are deemed for U.S. federal income
tax purposes to own, 10% or more of the total combined voting power of all
classes of voting stock of Capital Reserve Canada Limited.  The
discussion of Canadian tax considerations does not address the tax treatment of
a trust, company, organization or other arrangement that is a resident of the
U.S. and that is generally exempt from U.S. tax.





This
discussion does not address all of the income tax consequences that may be
applicable to any Holder subject to special treatment under the U.S. federal
income tax law or to any particular Holder in light of such Holder's particular
facts and circumstances. Some Holders, including tax exempt entities, banks,
insurance companies and persons who hold common shares as part of a hedging
transaction may be subject to special or different rules not discussed below.
The discussion of U.S. tax considerations is based on the provisions of the
Code.





The
discussion of Canadian tax consideration is based upon the provisions of the
Income Tax Act (Canada), as amended from time to time (the "Tax Act"), the
Convention between Canada and the U.S. with Respect to Taxes on Income and
Capital, as amended from time to time (the "Convention"), and our understanding
of published administrative practices of Canada Customs and the Revenue Agency
and judicial decision, all of which are subject to change. The discussion does
not take into account the tax laws of the various provinces or territories of
Canada or the tax laws of the various state and local jurisdictions in the
U.S.







U.S.
Federal Income Tax Considerations





Unconnected
U.S. Shareholders generally will treat the gross amount of the distributions
paid by us, including the amount of any Canadian tax withheld, as foreign source
dividend income for U.S. federal income tax purposes to the extent of our
current or accumulated earnings and profits, as computed for U.S. federal income
tax purposes. Distribution in excess of that amount will reduce an Unconnected
U.S. Shareholder's tax basis in the common shares, but not below zero, and the
remainder, if any, will be treated as taxable capital gains. In general, in
computing its U.S. federal income tax liability, an Unconnected U.S. Shareholder
may elect for each taxable year whether to claim a deduction or, subject to the
limitations described below, a credit for Canadian taxes withheld from dividends
paid on its common shares. If the Unconnected U.S. Shareholder elects to claim a
credit for such Canadian taxes, the election will be binding for all foreign
taxes paid or accrued by the Shareholder for such taxable year. The Code applies
various limitations on the amount of foreign tax credit that may be available to
a U.S. taxpayer based upon the segregation of foreign source income into
separate categories of income. The amount of credit which may be claimed with
respect to the category of income to which the dividend is allocated, and to
which the foreign taxes are attributable generally may not exceed the same
portion of the U.S. tax on worldwide taxable income, before applying the foreign
tax credit as the U.S. holder's foreign source taxable income allocation to such
category bears to such U.S. holder's entire taxable income. The foreign tax
credit is disallowed for dividends on stock unless a minimum holding period is
satisfied and additional limitations may restrict the ability of some
individuals to claim the foreign tax credit. Accordingly, we urge investors to
consult their own tax advisors with respect to the potential consequences to
them of the foreign tax credit limitations.





For U.S.
federal income tax purposes, the amount of any distributions made on a common
share to an Unconnected U.S. Shareholder in Canadian dollars will equal the U.S.
dollar value of the Canadian dollars calculated by reference to the appropriate
exchange rate in effect on the date of receipt of the distribution, regardless
of whether the Canadian dollars are actually converted into U.S. dollars upon
receipt.  Unconnected U.S. Shareholders are urged to consult their own
tax advisors regarding the treatment of foreign currency gain or loss, if any,
on any Canadian dollars which are converted into U.S. dollars subsequent to
receipt by the shareholder.





The sale
of common shares generally will result in a gain or loss to the Holder in an
amount equal to the difference between the amount realized and the Holder's
adjusted cost basis in the shares. Provided that the Holder is not considered a
"dealer" in the shares sold, gain or loss on the sale of the common shares will
generally be capital gain or loss.





Capital
losses are used to offset capital gains.  Individual taxpayers may
deduct the excess of capital losses over capital gains of up to $3,000 USD a
year, $1,500 USD in the case of a married individual filing separately, from
ordinary income.  Non-corporate taxpayers may carry forward unused
capital losses indefinitely.  Unused capital losses of a corporation
may be carried back three (3) years and carried forward five (5)
years.





Canadian
Tax Considerations





Dividends
received or deemed to be received, on the common shares by Unconnected U.S.
Shareholders will be subject to Canadian withholding tax at the rate of
twenty-five percent (25%), subject to reduction under the
Convention.  Under the Convention, the maximum rate of withholding tax
on such dividends is reduced to fifteen percent (15%) if the beneficial owner of
such dividends is an Unconnected U.S. Shareholder.  However, that rate
is reduced to five percent (5%) under the Convention if the beneficial owner of
such dividends is an Unconnected U.S. Shareholder that is a corporation that
owns at least ten percent (10%) of the voting stock of the company.





An Unconnected U.S.
Shareholder will not be subject to tax in Canada on any capital gain realized
upon the disposition or deemed disposition of the common shares, provided that
the common shares do not constitute "taxable Canadian property" of the
shareholder within the meaning of the Tax Act.





Canada
does not currently impose any estate taxes or succession duties.





DIVIDENDS
AND PAYING AGENTS





Not
applicable





STATEMENTS
BY EXPERTS





Not
Applicable





DOCUMENTS
ON DISPLAY





All
documents filed in connection with this registration statement have been filed
with the Securities and Exchange Commission using the EDGAR (Electronic Data
Gathering, Analysis and Retrieval) system.  The Securities and
Exchange Commission maintains a web site on the Internet at the address
http://www.sec.gov that contains reports, proxy information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission.





SUBSIDIARY
INFORMATION





At
December 31, 2008, we had three (3) subsidiaries, KCP and Two Hills, which was
formed on June 16, 2006, to receive the assets from Southbend and Behral, which
was acquired on February 4, 2008.





ITEM
      11.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
Applicable





ITEM
12.                      DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES





Not
applicable





This
annual report contains forward looking statements as that term is defined in
Section 27A of the United States Securities Act of 1933 and Section 21E of the
United States Securities Exchange Act of 1934.  These statements relate to
future events or our future financial performance.  In some cases, you can
identify forward looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology.  These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors” that may cause our or our industry's activity,
performance or achievements expressed or implied by these forward looking
statements.  Although we believe that the expectations reflected in
the forward looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements.  Except as
required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward looking statements to conform
these statements to actual results.





PART
II





ITEM
13.                      DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES





None





ITEM
      14.
            MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS.





None





ITEM
15.                      CONTROLS
AND PROCEDURES





i.
            Disclosure
      Controls and Procedures





As of
December 31, 2008, the Company’s chief executive officer, Steve Claussen, has
evaluated and reviewed our disclosure controls and procedures as of the end of
the period covered by this Annual Report. Based upon this evaluation and review,
the officer has concluded that the Company’s disclosure controls and procedures
are effective and sufficient to comply with Rules 13a-15(c) and 15d-15(c) of the
Securities Exchange Act of 1934.








Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis.  Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.





ii.
            Management’s
      Annual Report on Internal Control Over Financial
  Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting. All internal control systems, no matter how well designed,
have inherent limitations and may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.





Management’s
framework for evaluating the effectiveness of its internal controls is based
upon the criteria established in Internal Control— Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).




As at
December 31, 2008, management assessed the effectiveness of our internal control
over financial reporting and concluded that such internal control over financial
reporting are effective and that there were no material weaknesses in our
internal control over financial reporting.




iii
            Attestation
      Report of Independent Registered Public Accounting
  Firm





This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to the temporary rules of
the Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.





iv.
      Changes in Internal Control Over Financial
  Reporting





There
have been no changes in our internal control over financial reporting during the
year ended December 31, 2008, that have materially affected, or are reasonably
likely to affect our internal control over financial reporting.





During
Fiscal 2008, the Company appointed a new Chief Financial Officer and also used
the assistance of one external Chartered Accountant firm in various aspects of
its internal controls.





ITEM
16A.                      AUDIT
COMMITTEE FINANCIAL EXPERT





We do not
presently have an audit committee.





ITEM
16B.                      CODE
OF ETHICS





As of the
date of this report, we have not adopted a code of ethics that applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.  As we
have gone through a recent change of control, we did not finalize our adoption
of the Code of Ethics.  Our present Board of Directors is presently
preparing a Code of Ethics for review and adoption.   Upon
adoption, we will file a copy of our Code of Ethics with the Securities and
Exchange Commission as an exhibit to our annual report for the year ending
December 31, 2009 and post it on our website.





ITEM
16C.                      PRINCIPAL
ACCOUNTANT FEES AND SERVICES





The
following table sets forth the approximate fees billed to us and our subsidiary
KCP for professional services rendered by our principal accountant:





Services
              2008
              2007Audit
      Fees
              $20,000
              $20,000Audit
      related Fees
              0
              0Tax
      Fees
              0
              0Total
      Fees
              $20,000
              $20,000








Audit fees consist of fees
for the audit of our annual financial statements or the financial statements of
our subsidiaries or services that are normally provided in connection with the
statutory and regulatory filings of the annual financial
statements.


Audit-related
services include the review of our financial statements and quarterly reports
that are not reported as Audit fees.


Tax fees
included tax planning and various taxation matters.





ITEM
16D.                      EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES





Not
applicable





ITEM
16E.                      PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS





Not
applicable




PART
III






ITEM
17.                      FINANCIAL
STATEMENTS







See Item
18 below.




ITEM
18.                      FINANCIAL
STATEMENTS







The
required financial statements are provided herein starting on page
F-1.




ITEM
19.                      EXHIBITS







Exhibit
      No.
              Exhibit1.1
              Certificate
      of Incorporation of the company consisting of the Articles of
      Incorporation filed with the Alberta Registries on December 8, 1999, filed
      with the Registrant’s Form 20-F filed on July 11, 2003 (file #
      000-50339)1.2
              Amendment
      to Articles of Incorporation of the company filed with Alberta Registries
      on January 15, 2003, incorporated by reference to the Exhibits filed with
      the Registrant's Form 20-F filed on July 11, 2003 (file #
      000-50339)1.3
              By-Laws
      of the company, dated December 8, 1999, incorporated by reference to the
      Registrant's Form 20-F filed on July 11, 2003 (file #
      000-50339)4.1
              Petroleum,
      Natural Gas, and General Rights Conveyance between Capital Reserve Canada
      Limited and Stone Canyon Resources Ltd. dated December 23, 2004,
      incorporated by reference to the Exhibits filed with the Company’s 20-F
      filed Annual Return for the year ended December 31, 2004 (file #
      000-50339)4.2
              Share
      Exchange Agreement between Capital Reserve Canada Ltd., Capital Reserve
      Canada Projects Ltd., KCP Innovative Services In., and Ken Pearson, 966358
      Alberta Ltd., 989320 Alberta Ltd., 332601 Alberta Ltd. and Ben Marshall
      dated August 8, 2005, incorporated by reference to the Exhibit filed with
      the Company’s 8K filed on August 12, 2005 (file #
    000-50339)4.3
              Proxy
      and Information Circular of KCP Innovative Services Inc. with respect to
      the Amalgamation with Capital Reserve Canada Projects Ltd. and Capital
      Reserve Canada Ltd. and Notice of Annual and Special Meeting of
      Shareholders of KCP Innovative Services Inc., dated December 22, 2005,
      incorporated by reference to the Exhibit filed with the Company’s 6-K
      filed on February 8, 2006 (file # 000-50339)4.4
              Offer
      to lease office space entered into between Sabo Bros. and KCP Innovative
      Services Inc. dated August 24, 2004 and affected October 15, 2004,
      incorporated by reference to the exhibits filed with the
      Registrant’s
                Form
      20-F filed on July 17, 2006 (file #000-50039).4.5
              Management
      Agreement between KCP Innovative Services Inc. and Projex Corporation
      dated February 1, 2005, incorporated by reference to the exhibits filed
      with the Registrant’s Form 20-F filed on July 17, 2006 (file
      #000-50039).4.6
              Employment
      Agreement between KCP Innovative Services Inc. and Ken Pearson dated
      February 1, 2005, incorporated by reference to the exhibits filed with the
      Registrant’s Form 20-F filed on July 17, 2006 (file
      #000-50039).4.7
              Employment
      Agreement between KCP Innovative Services Inc. and Faye Pearson dated
      February 1, 2005, incorporated by reference to the exhibits filed with the
      Registrant’s Form 20-F filed on July 17, 2006 (file
      #000-50039).4.8
              Loan
      agreement between Canadian Western Bank and KCP Innovative Services Inc.
      dated March 22, 2005, incorporated by reference to the exhibits filed with
      the Registrant’s Form 20-F filed on July 17, 2006 (file
      #000-50039).4.9
              Asset
      Purchase Agreement between Two Hills Environmental Inc. and South Bend
      Powers Ltd. dated June 16, 2006 and amendment dated July 5, 2006,
      incorporated by reference to the exhibits filed with the Registrant’s Form
      20-F filed on July 17, 2006 (file #000-50039).12
              Certifications
      required by Rule 13a-14(a) or Rule 15d-14(a), filed as an exhibit to this
      filing.13
              Certifications
      required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter
      63 of Title 18 of the United States code (18 U.S.C. 1350), filed as an
      exhibit to this filing.4-10
              Share
      Purchase Agreement between Steve Claussen and Barbara Troisin dated
      February 5, 2008, filed as an exhibit to this filing.4-11
              Office
      lease agreement between Sabo Bros. and KCP dated August 9, 2007, filed as
      an exhibit to this filing.








SIGNATURES





The
registrant hereby certifies that it meets all the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.





CAPITAL
RESERVE CANADA LIMITED














/s/ Steven
Claussen


Steven
Claussen


Chief
Executive Officer, principal executive officer











Date:















































1 2008
expences also included $5,699,102 in impairment charges and restoration
costs.
































CAPITAL
RESERVE CANADA LIMITED





CONSOLIDATED
FINANCIAL STATEMENTS





DECEMBER
31, 2008

















































REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board of
Directors


Capital
Reserve Canada Limited


Edmonton,
Alberta, Canada





We have
audited the accompanying consolidated balance sheets of Capital Reserve Canada
Limited as of December 31, 2008, 2007 and 2006, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years ended December 31, 2008, 2007 and 2006.  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 audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audit included consideration of
internal control over financial reporting, as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such
opinion.  An audit 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 audits provide a reasonable basis for our
opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Capital Reserve Canada
Limited as of December 31, 2008, 2007 and 2006 and the results of its
operations, changes in stockholders' equity, and its cash flows for the years
ended December 31, 2008, 2007 and 2006, in conformity with accounting principles
generally accepted in the United States.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note
4 to the consolidated financial statements, the Company currently has cash
flow constraints and an accumulated deficit.  These factors, among others,
raise substantial doubt about the Company’s ability to continue as a going
concern.  Management’s plans in regard to these matters are also described
in Note 4.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





/s/
Child, Van Wagoner & Bradshaw


CERTIFIED
PUBLIC ACCOUNTANTS


Salt Lake
City, Utah


July 15,
2009





















CAPITAL
RESERVE CANADA LIMITED


CONSOLIDATED
BALANCE SHEETS


AS
OF DECEMBER 31, 2008, 2007, and 2006





December
      31,2008
              
              
              2007
              
              
              2006ASSETSCurrent
      assetsCash
      and cash equivalents
              $
              5,385
              
              $
              7,895
              
              $
              391,528Term
      deposits (Note 6)
              
              22,291
              
              
              21,884
              
              
              21,259Accounts
      receivable
              
              12,386
              
              
              250,871
              
              
              269,164Work
      in process
              
              -
              
              
              -
              
              
              40,000Prepaid
      expenses
              
              20,569
              
              
              13,647
              
              
              41,480Total
      current assets
              
              60,631
              
              
              294,297
              
              
              763,431Property,
      plant and equipment (Note 7)
              
              921,059
              
              
              5,977,989
              
              
              6,073,206Intangible
      assets (Note 8)
              
              1
              
              
              51,259
              
              
              166,509Goodwill
              
              -
              
              
              125,502
              
              
              125,502Other
      assets
              
              11,845
              
              
              11,845
              
              
              -Total
      assets
              $
              993,536
              
              $
              6,460,892
              
              $
              7,128,648LIABILITIESCurrent
      liabilitiesBank
      indebtedness
              $
              6,137
              
              $
              16,367
              
              $
              -Accounts
      payable and accrued liabilities
              
              256,834
              
              
              234,244
              
              
              139,204Income
      and commodity taxes payable
              
              19,807
              
              
              517
              
              
              14,760Deferred
      income
              
              6,000
              
              
              30,000
              
              
              -Line
      of credit (Note 9)
              
              15,000
              
              
              14,000
              
              
              285,354Current
      portion of long-term  debt
              
              -
              
              
              100,230
              
              
              9,929Total
      current liabilities
              
              303,778
              
              
              395,358
              
              
              449,247Long-term
      liabilitiesLong-term
      debt (Notes 10 & 11)
              
              -
              
              
              153,230
              
              
              861,130Future
      tax liability (Note 13)
              
              -
              
              
              -
              
              
              -Total
      long-term liabilities
              
              -
              
              
              153,230
              
              
              861,130Total
      liabilities
              
              303,778
              
              
              548,588
              
              
              1,310,377STOCKHOLDERS’
      EQUITYShare
      Capital
              
              11,004,651
              
              
              9,314,463
              
              
              8,381,142Stock
      Subscription receivable
              
              -
              
              
              -
              
              
              (15,000)Retained
      earnings (Deficit)
              
              (10,314,893)
              
              
              (3,402,159)
              
              
              (2,547,871)Total
      stockholders' equity
              
              689,758
              
              
              5,912,304
              
              
              5,818,271Total
      liabilities and stockholders' equity
              $
              993,536
              
              $
              6,460,892
              
              $
              7,128,648





The
accompanying notes are a part of these financial statements.













CAPITAL
RESERVE CANADA LIMITED


CONSOLIDATED
STATEMENTS OF OPERATIONS


YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006





Year
      ended December 31, 2008
            
            
            Year
      ended December 31, 2007
            
            
            Year
      ended December 31, 2006Revenue
            $
            24,000
            
            $
            18,000
            
            $
            8,825Cost
      of sales
            
            -
            
            
            -
            
            
            -Gross
      profit
            
            24,000
            
            
            18,000
            
            
            8,825ExpensesConsulting,
      salaries and benefits
            
            986,332
            
            
            -
            
            
            -General
      and administrative
            
            139,536
            
            
            213,414
            
            
            168,886Impairment
      charges
            
            (5,759,690)
            
            
            -
            
            
            -Restoration
      costs
            
            (139,412)
            
            
            -
            
            
            -Amortization
            
            3,445
            
            
            -
            
            
            10,426Interest
            
            168
            
            
            2,047
            
            
            6,288Total
      expenses
            
            7,028,583
            
            
            215,461
            
            
            185,601Operating
      loss
            
            (7,004,583)
            
            
            (197,461)
            
            
            (176,776)Gain
      on sale of equipment
            
            261,549
            
            
            -
            
            
            -Discontinued
      operations
            
            (169,799)
            
            
            (656,827)
            
            
            (11,969)Net
      loss
            $
            (6,912,734)
            
            $
            (854,288)
            
            $
            (188,745)Basic
      and diluted earnings(loss) per shareOperating
      loss
            $
            (0.07)
            
            $
            (0.00)
            
            $
            (0.00)Discontinued
      operations
            $
            (0.00)
            
            $
            (0.01)
            
            $
            (0.00)Net
      Loss
            $
            (0.07)
            
            $
            (0.01)
            
            $
            (0.00)Weighted
      average number of shares outstanding
            
            101,178,060
            
            
            61,072,284
            
            
            46,603,617




















The
accompanying notes are a part of these financial statements.








F-2




















CAPITAL
RESERVE CANADA LIMITED


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


For
the years ended December 31, 2006, 2007 and 2008





Common
      Stock
            
            Retained
      Deficit
            
            Stock
      Subscription Receivable
            
            Total
      Stockholder’s EquityShares
            
            AmountBalance
      at December 31, 2005
            34,810,814
            
            
            3,242,434
            
            
            (2,359,126)
            
            
            -
            
            
            883,308Shares
      issued to acquire minority 21.8%
            4,834,300
            
            
            -
            
            
            -
            
            
            -
            
            
            -Shares
      issued to acquire assets
            13,200,000
            
            
            4,730,882
            
            
            -
            
            
            -
            
            
            4,730,882Shares
      issued to acquire asset
            1,000,000
            
            
            134,400
            
            
            -
            
            
            -
            
            
            134,400Shares
      issued for debt settlement
            4,521,307
            
            
            258,426
            
            
            -
            
            
            -
            
            
            258,426Shares
      issued for restricted shares
            30,000
            
            
            15,000
            
            
            -
            
            
            (15,000)
            
            
            -Net
      Loss for year 2006
            -
            
            
            -
            
            
            (188,745)
            
            
            -
            
            
            (188,745)Balance
      at December 31, 2006
            58,396,421
            
            
            8,381,142
            
            
            (2,547,871)
            
            
            (15,000)
            
            
            5,818,271Stock
      cancelled per contract
            (30,000)
            
            
            (15,000)
            
            
            -
            
            
            15,000
            
            
            -Shares
      issued for consulting services
            700,000
            
            
            59,500
            
            
            -
            
            
            -
            
            
            59,500Shares
      issued for debt settlement
            5,000,000
            
            
            839,187
            
            
            -
            
            
            -
            
            
            839,187Shares
      issued for debt settlement
            1,500,000
            
            
            49,634
            
            
            -
            
            
            -
            
            
            49,634Net
      Loss for year 2007
            -
            
            
            -
            
            
            (854,288)
            
            
            -
            
            
            (854,288)Balance
      at December 31, 2007
            65,566,421
            
            
            9,314,463
            
            
            (3,402,159)
            
            
            -
            
            
            5,912,304Shares
      issued to acquire subsidiary
            23,500,000
            
            
            940,000
            
            
            
            
            
            
            
            
            940,000Shares
      issued to debt settlement
            3,500,000
            
            
            139,412
            
            
            
            
            
            
            
            
            139,412Shares
      issued for consulting services
            25,554,938
            
            
            601,776
            
            
            
            
            
            
            
            
            601,776Shares
      issued for cash
            500,000
            
            
            9,000
            
            
            
            
            
            
            
            
            9,000Net
      Loss for year 2008
            
            
            
            
            
            
            (6,912,734)
            
            
            
            
            
            (6,912,734)Balance
      at December 31, 2008
            118,621,359
            
            $
            11,004,651
            
            $
            (10,314,893)
            
            $
            -
            
            $
            689,758





The
accompanying notes are a part of these financial statements.





F-3


[Missing Graphic
Reference]











CAPITAL
RESERVE CANADA LIMITED


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2006, 2007 and 2008


Year
      ended December 31, 2008
            
            
            Year
      ended December 31, 2007
            
            
            Year
      ended December 31, 2006Operating
      ActivitiesNet
      Loss
            $
            (6,912,734)
            
            $
            (854,288)
            
            $
            (188,745)Adjustments
      to reconcile net income (loss) to net cash provided (used) by operating
      activities:Amortization
            
            3,445
            
            
            -
            
            
            -Impairment
      charges
            
            5,759,690
            
            
            -
            
            
            -Gain
      on sale of equipment
            
            (261,549)
            
            
            -
            
            
            -Stock
      issued for services
            
            741,188
            
            
            109,134
            
            
            -Accounts
      receivable
            
            1,195
            
            
            50,000
            
            
            (21,560)Corporation
      income taxes
            
            -
            
            
            -
            
            
            9,263Work
      in process
            
            -
            
            
            -
            
            
            (40,000)Prepaid
      expenses and deposits
            
            (16,669)
            
            
            3,910
            
            
            (31,937)Accounts
      payable and accrued liabilities
            
            155,257
            
            
            196,436
            
            
            36,435Deferred
      revenue
            
            (24,000)
            
            
            30,000
            
            
            -Income
      and commodity taxes payable
            
            -
            
            
            -
            
            
            12,144Cash
      provided (used) by operating activities – continuing
      operations
            
            (564,929)
            
            
            (464,808)
            
            
            36,642Cash
      provided (used) by discontinued operations
            
            150,995
            
            
            118,429Cash
      provided (used) by operating activities
            
            (413,934)
            
            
            (346,379)
            
            
            36,642Investing
      ActivitiesDecrease
      in restricted cash
            
            -
            
            
            -Purchase
      of property, plant and equipment
            (7,401)
            
            
            (1,623)
            
            
            -Proceeds
      from sale of fixed assets
            
            390,000
            
            
            -
            
            
            -Proceeds
      from purchase of subsidiary
            
            2,057
            
            
            -
            
            
            -Cash
      provided (used) by investing activities
            
            384,655
            
            
            (1,623)
            
            
            -Cash
      provided (used) in discontinued operations
            
            280,459
            
            
            (2,233)
            
            
            424,757Cash
      provided (used) by investing  activities
            
            665,114
            
            
            (3,856)
            
            
            424,757Financing
      ActivitiesShares
      issuances
            
            9,000
            
            
            -
            
            
            -Cash
      provided by financing activities – continuing operations
            
            9,000
            
            
            -
            
            
            -Cash
      used in discontinued operations
            
            (262,690)
            
            
            (33,398)
            
            
            (94,639)Cash
      used by financing activities
            
            (253,690)
            
            
            (33,398)
            
            
            (94,639)Increase
      (decrease) in cash during the year
            
            (2,510)
            
            
            (383,633)
            
            
            366,760Cash
      and cash equivalents, beginning of year
            7,895
            
            
            391,528
            
            
            24,768Cash
      and cash equivalents, end of year
            $
            5,385
            
            $
            7,895
            
            $
            391,528Supplemental
      InformationCash
      paid for interest
            $
            9,642
            
            $
            20,600
            
            $
            29,486Shares
      issued for assets
            $
            -
            
            $
            -
            
            $
            4,865,280Shares
      issued for subsidiary
            $
            940,000
            
            $
            -
            
            $
            676,802Shares
      issued for debt settlement and expenses
            $
            741,188
            
            $
            888,821
            
            $
            258,426





The
accompanying notes are a part of these financial statements.


F-4


[Missing
Graphic Reference]









1.      Description
of the Company





KCP
Innovative Services Inc. was incorporated as a private corporation named K C
Pearson Consulting Inc. in the Province of Alberta on February 20,
1996.  The name was changed to KCP Innovative Services Inc. on May 22,
2003. KCP has developed a series of devices that are used to diagnose the pay
zone in oil or gas wells.  The diagnostic information collected from
these devices is used by production engineers to complete the well at the most
efficient level.  KCP's customers are oil and gas
companies.





Capital
Reserve Canada Ltd. (“CRC") was incorporated as a private corporation in the
Province of Alberta on December 8, 1999, and is a reporting company registered
with the U.S. Securities and Exchange Commission.  CRC provides
minimal equipment and related rental services. Pursuant to the share exchange
agreement dated August 12, 2005, the Company effected a share exchange
indirectly with the shareholders of KCP Innovative Services Ltd. ("KCP"),
resulting in the Company acquiring 78.2% of the outstanding shares of KCP
through exchanging shares with the Company's wholly owned subsidiary, Capital
Reserve Canada Projects Ltd ("Project"). Subsequent to the Annual General
Meeting of the company on January 12, 2006, the minority interest shareholders
signed off and all minority interest shares were exchanged for CRC shares.
Because the shareholders of KCP became the controlling shareholders of the
Company, this transaction was accounted for as a reverse takeover whereby KCP
was deemed to be the acquirer as described more fully in Note 2.





Capital
Reserve Canada Projects Ltd. was incorporated as a private corporation in the
Province of Alberta on August 2, 2005, and it has been inactive since inception
except for the share exchange as described. Effectively on February 3, 2006
Capital Reserve Canada Projects Ltd. amalgamated with KCP Innovative Services
Inc.





Effective
January 22, 2006, KCP Innovative Services Inc. became directly a wholly-owned
subsidiary of Capital Reserve Canada Ltd.





On
February 4, 2008 we issued 23,500,000 shares to purchase the shares of Behral
Canada Ltd. Behral owns the patents to a blowout preventer valve, stack control
system and portable blowout controller. Behral also owns a floating offshore
drilling vessel, a blow out preventer stack control system as well as a subsea
blowout stack control system.





2.      Share
exchange





On August
12, 2005, Project issued 17,335,814 common shares to exchange for 17,335,814
common shares (78.2%) from the shareholders of KCP Innovative Services. CRC then
issued 17,335,814 common shares in exchange for 17,335,814 common shares from
Projects.





Subsequent
to January 12, 2006, minority interest shareholders of KCP signed off to
exchange for shares in CRC. Minority interest of 21.8% (4,833,085 shares) was
exchanged for CRC shares. CRCP and KCP were amalgamated on February 3, 2006.
Following the transactions, CRC directly owns 100% of KCP.





During
2006, CRC issued 896,264 common shares to FACT Corp. in exchange for the debt of
$258,426.





These
share exchange transactions between CRC (legal parent) and KCP (legal
subsidiary) were accounted for as a reverse takeover as a capital transaction in
accordance with accounting principles generally accepted in the United States of
America. As a result, no goodwill is accounted for in this
transaction.





The
reverse takeover accounting reports result in the following:





(a)           KCP
is deemed to be the parent company and CRC is deemed to be the subsidiary
company for accounting purposes;





F-5















2.      Share
exchange (contiued)





(b)           The
financial statements of the combined entity are issued under the name of the
legal parent, CRC, but are considered a continuation of the financial statements
of the legal subsidiary, KCP; and





(c)           Since
KCP is deemed to be the acquirer for accounting purposes, its assets and
liabilities are included in its consolidated balance sheet at their historical
carrying values.





3.      Summary
of significant accounting policies





These
consolidated financial statements include the accounts of the company and its
legal subsidiary, KCP Innovative Services Inc., its wholly-owned subsidiary, Two
Hills Environmental Inc and Behral Canada Ltd. and have been prepared in
accordance with accounting principles generally accepted in United States of
America. All significant inter-company transactions and balances are eliminated
in the preparation of these consolidated financial statements.





(a)           Cash
and cash equivalents





Cash and
cash equivalents consist of cash on deposit and short-term investments with
original maturities of 90 days or less and are recorded at the lower of cost or
market value.





(b)           Leases





Leases
are classified as either capital or operating.  Leases which transfer
substantially all of the benefits and risks of ownership of property to the
Company are accounted for as capital leases. The capitalized lease obligation
reflects the present value of future rental payments, discounted at the
appropriate interest rates.  The amount capitalized as the cost of the
asset is amortized as set out below under property, plant and equipment. Rental
payments under operating leases are expenses as incurred.





(c)           Property,
plant and equipment





Property,
plant and equipment are recorded at cost and are being amortized using the
following method at the rates set out below which are estimated to be sufficient
to amortize the cost of the assets to residual value by the expiration of their
useful lives:





Building
              
              4%
      diminishing balanceEquipment
              
              20%
      diminishing balanceFurniture
      and Fixtures
              
              20%
      diminishing balanceVehicles
              
              30%
      diminishing balanceComputer
      and Software
              
              30%
      diminishing balanceMineral
      Rights
              
              0%
      diminishing balanceWater
      Permit
              
              0%
      diminishing balance





(d)           Goodwill
and intangible assets





The cost
of intangible assets is amortized over the period in which the benefits of such
assets are expected to be realized, principally on a straight-line
basis.  The Company's policy is to amortize client relationships with
determinable lives over four years.  Contract backlog is amortized
over the estimated period of completion, generally less than one
year.  Technology is being amortized over an estimated life of four
years.  Goodwill is not amortized but is evaluated annually for
impairment by comparing the fair value of the reporting unit, determined on a
discounted after tax cash flow basis, to the carrying value.  An
impairment loss would be recognized if the carrying value of the goodwill
exceeds its fair value.








F-6













3.      Summary
of significant accounting policies (continued)





(e)           Future
income taxes





The
Company uses the liability method of accounting for income
taxes.  Under this method, future income tax assets and liabilities
are determined based on differences between financial reporting and the tax
bases of assets and liabilities and measured using the substantively enacted
rates and laws that will be in effect when these differences are expected to
reverse.





(f)           Revenue
recognition





The
Company's services are generally sold based upon purchase orders or contracts
with customers that include fixed or determinable prices based upon daily,
hourly or job rates. Customer contract terms do not include provisions for
significant past service delivery obligations.  Revenue is recognized
when services and equipment rentals are rendered and only when collectability is
reasonably assured.





(g)           Statement
of cash flows





The
statement of cash flows has been prepared using the indirect
method.





4.      Basis
of presentation and going concern





These
financial statements have been prepared on the basis of accounting principles
applicable to a going concern which assumes the Company will continue in
operation for the foreseeable future and will be able to realize its assets and
discharge its liabilities in the normal course of operations.





Because
of the operating losses of the past two periods, the Company's continuance as a
going concern is dependent upon its ability to obtain adequate financing and to
reach profitable levels of operation.  Management believes actions
planned and presently being taken provides the opportunity for the Company to
continue as a going concern.





5.      Acquisition
of Zone Technologies Ltd.





On June
11, 2004, KCP acquired 100% of the issued and outstanding shares of Zone
Technologies Ltd. ("Zone") from an existing stockholder and an unrelated
party.  The transaction was recorded at the exchange amount, as the
change in ownership interests in Zone was substantive.





Consideration
for the acquisition was $782,500 and it consisted of 1,294,444 common shares of
KCP, at a fair value of $0.45 per share and cash of $200,000.  Zone is
an Alberta based company focused on providing diagnostic and consulting services
to customers exploring for coal based methane gas.  The fair value of
the acquisition was determined through an independent third party appraisal of
Zone as at the date of acquisition.





The
acquisition was accounted for using the purchase method and the results of
operations from June 11, 2004.


























F-7























5.      Acquisition
of Zone Technologies Ltd. (continued)





The fair
value of the net assets acquired is summarized as follows:





Cash
            
            $
            43,954Accounts
      receivable
            
            
            21,414Property,
      plant and equipment
            
            
            48,000Zone
      Technology (Note 8)
            
            
            277,000Backlog
            
            
            196,600Customer
      relationships
            
            
            184,000Goodwill
            
            
            138,155909,123Accounts
      payable and accrued liabilities
            
            
            4,407Income
      and commodity taxes payable
            
            
            36,016Future
      income tax liability
            
            
            86,200126,623Net
      assets acquited
            
            $
            782,500Cash
      consideration
            
            $
            200,000Share
      considedration (Note 12)
            
            
            582,500Purchase
      price
            
            $
            782,500





The
goodwill is non-deductible for income tax purposes.


Subsequent
to September 2005, Zone Technologies Ltd. was dissolved as a corporate
entity.





6.      Term
deposits





The term
deposit of $21,884 matured on March 14, 2008 and bore interest at 2.65% per
annum.





7.      Property,
plant and equipment





Cost
            
            Accumulated
      Amortization
            
            Net
      December 31, 2008Land
            
            $
            900,000
            
            $
            -
            
            $
            900,000Water
      Permit & Salt Lease
            
            
            -
            
            
            -
            
            
            -Furniture
      and fixtures
            
            
            18,239
            
            
            12,376
            
            
            5,863Computer
      and software
            
            
            48,131
            
            
            32,935
            
            
            15,196Mineral
      Rights
            
            
            -
            
            
            -
            
            
            -$
            966,370
            
            $
            45,311
            
            $
            921,059





During
2008, it has been determined that the water permit and salt lease, as well as
the mineral rights should be written off as an impairment charge due to the
uncertainty of future economic value.  The impairment charge amounts
to $4,802,079.











F-8























7.      Property,
plant and equipment (continued)





Southbend
Power Ltd.





On June
16, 2006, Two Hills Environmental Inc., a wholly-owned subsidiary of CRC
purchased 147 acres of land together with certain salt lease and water permit
rights from Southbend Power Ltd. for the consideration of CRC to issue
13,200,000 common shares to Southbend Power Ltd. and the assumption of certain
liabilities. The transaction was completed on July 28, 2006. The company
recorded the value of the purchase based on the market share trading value of
July 28, 2006 at US$ 0.32 per share. The company recorded the land at its fair
market value of $900,000 and the value of the water permits and salt leases to
be $4,677,679, the trading value of the exchanged shares.  These 147
acres sit on the Nisku Fault and the Lotsburg salt formation has 3 large
existing salt caverns.  The Lotsburg salt formation contains salt
deposits that average 122m in thickness and spans a total area of 390,000 sq.
km.  The Nisku Fault resides approximately 1000m underground and
extends downwards and can be used for certain liquid waste
disposal.  Caverns are formed through solution mining, during which
water is pumped into the formation to dissolve large pockets of salt in the
formation.  These caverns are especially important in the oilfield
waste disposal industry, where wastes from oil production are stored in these
caverns.  The 147 acres are strategically located in terms of
proximity to sources of oilfield wastes being generated in the Cold Lake Region.
The companies currently producing oil wastes are discouraged from the duopoly in
the oil waste disposal industry due to prices and lack of customer service.
Currently, 7 million cubic meters of oilfield wastes are being produced
annually. At the going rate of $100/m for disposal of oilfield wastes that
require deep disposal, the revenue potential for disposal of current volumes is
estimated to be $1,900,000 per day. Two Hills estimates in capturing 545 cubic
meters per day which would equate to approximately $55,000 per day in revenues
and annual cash flow exceeding $5,300,000. Due to the projections of these
estimates and the time that it would take Two Hills to have their site ready for
oilfield waste disposal, the Company has decided to take a conservative approach
in valuing these salt caverns and have recorded them at the original cost at
acquisition. The numbers represented in this paragraph concerning the amount of
oilfield waste production and revenue generated per day were received through
two third party consultants.





In
addition to the salt caverns, this site has a water pumping station and water
rights to pump from the North Saskatchewan River running along
it.  Future water rights are not being easily given for the North
Saskatchewan River due to the scarcity of water there. This site is now held at
a premium due to the water pump located there and the rights already
owned.





The
Company has leased a portion of the land to another company for $2,000 per month
for storage of trailers and other equipment.  This lease will expire
on September 1st
2009.





The
Company is currently seeking opportunities to further expand the operations of
this site by either raising money or forming a joint venture to be able to
prepare the site for waste disposal storage and commence operations in this
area.





Rich
Resources Limited





On
October 20, 2006, Two Hills Environmental Inc., wholly-owned subsidiary of CRC
purchased a certain mineral rights from Rich Resources Limited. CRC issued
1,000,000 common shares for the consideration. The company recorded the
transaction at the market trading value of US$0.12 per shares at the exchange
rate of C$1.12 for a total of $134,000.

















F-9

















8.      Intangible
assets





Cost
              
              Accumulated
      Amortization
              
              Net
      December 31, 2008PID
      Technology
              
              $
              1
              
              $
              -
              
              $
              1Zone
      Technology
              
              
              277,000
              
              
              277,000
              
              
              0Backlog
              
              
              196,600
              
              
              196,600
              
              
              0Customer
      relationships
              
              
              184,000
              
              
              184,000
              
              
              0Patents
      in Behral
              
              
              -
              
              
              -$
              657,601
              
              $
              657,600
              
              $
              1





Perforation
Inflow Diagnostics ("PID")





Effective
January 1, 2004, KCP acquired from a group of individuals, one of which was a
stockholder of KCP, a computer modeling system to analyze the underground
formations that contain natural gas and oil.  Consideration consisted
of 14,966,270 common shares of KCP.  As this related party transaction
did not result in a substantive change in the ownership interest of the
technology, the technology has been recorded at the nominal carrying value of
$1.





Zone
Technology





Effective
June 11, 2004, KCP acquired 100% of the outstanding shares of Zone Technologies
Ltd. Zone Technologies Ltd. has developed a computer modeling system to explore
the underground formations that contain coal based methane gas. Zone
Technologies Ltd. was dissolved on September 26, 2005.





Suncone
Technologies Ltd.


The
company was formed to purchase the Infratronic Soil Sterilization Unit in
exchange for CRC shares and cash. $50,000 was paid to Southbend Powers Ltd. for
the unit for testing and evaluation. However, it was determined that the unit
was not consistent with the overall business objectives. Suncone Technologies
Ltd. was dissolved and the funds were returned to CRC through a follow-on
transaction during the 2007 fiscal year.





Patents


Patents
were acquired with the acquisition of Behral.  As none of the patents
are in production, the economic value is uncertain and thus written off to
impairment charges during the year. ($947,611)





9.      Operating
line of credit





The
Company has an operating line of credit to a maximum of
$95,000.  Interest is charged monthly on the outstanding balance at
the rate of prime plus 1%.  It is secured by General Security
Agreement. There was an outstanding amount as of December 31, 2008, of
$15,000.





10.           Demand
bank loan





The bank
loan is repayable over 60 months commencing March 2005 and ending in February
2010.  Monthly blended payments of principal and interest are $8,313
with an interest rate of 6.375%. The first payment was $4,130 and was made on
March 18, 2005.  One half of the loan was drawn on February 18, 2005
upon completion of unit 101.  The balance was drawn on March 31, 2005
upon completion of unit 102. Two Sterline Slick Line units, included in
property, plant and equipment, are pledged as collateral for this
loan.   The Loan was paid in full on February 8, 2008 when one of
the slick line trucks was sold.








F-10













11.           Long-term
debt





2008Vehicle
      loan
              
              $
              6,137Current
      portion
              
              
              6,137$
              0





The
vehicle loan is repayable over 72 months commencing in August 2003 and ending in
July 2009. The blended payments of principal and interest are $1,027 per month
with an interest rate of 7.99% per annum.  A 2003 Dodge truck,
included in property, plant and equipment, is pledged as collateral for this
loan.





Aggregate
principal payments required on the vehicle loan over the next two fiscal years
are as follows:





2009
              
              
              6,137$
              6,137





12.           Share
capital





Authorized


The
authorized share capital of the Company consists of an unlimited number of
common shares without par value: Shares issued are as follows:





Shares
      already issued in CRC as at December 31, 2005
              
              
              34,810,814Issued
      Feb 3, 2006 for the remaining 21.8% of KCP
              
              
              4,834,300Issued
      Feb 16, 2006 as a Debt Settlement
              
              
              4,521,307Issued
      June 15, 2006 Per Southbend Agreement
              
              
              13,200,000Issued
      Aug 6, 2006
              
              
              30,000Issued
      Oct 20, 2006 per Rich Resource Agreement
              
              
              1,000,000Cancelled
      Feb 7, 2007 pursuant to contract
              
              
              -30,000Issued
      July 19, 2007 for consulting services @$.085
              
              
              700,000Issued
      Aug 19, 2007 for $839,187 debt
              
              
              5,000,000Issued
      Aug 19, 2007 for $49,634 debt
              
              
              1,500,000Issued
      Feb 4, 2008 for purchase of Behral Canada
              
              
              23,500,000Issued
      Feb 5, 2008 as a Debt Settlement
              
              
              3,500,000Issued
      Mar 13, 2008 for directors compensation @ $0.04
              
              
              4,000,000Issued
      Aug 19, 2008 for (in lieu of pay and per contract) @ $0.014 to
      $0.053
              
              
              14,231,409Issued
      Dec 1, 2008 for consulting services @ $0.021
              
              
              3,323,529Issued
      Dec 15, 2008 for consulting services @ $0.017
              
              
              4,500,000TOTAL
      on Dec 31, 2008
              
              
              118,621,359





On
February 4, 2008 we issued 23,500,000 shares to purchase the shares of Behral
Canada Ltd. Behral owns the patents to a blowout preventer valve, stack control
system and portable blowout controller. Behral also owns a floating offshore
drilling vessel, a blow out preventer stack control system as well as a subsea
blowout stack control system.











F-12













13.           Income
taxes





The
income tax effect of the significant components of the Company's future tax
assets and liabilities is as follows:





In
assessing the valuation of future tax assets, management considers whether it is
more likely than not that some portion or all of the future tax assets will be
realized.  The ultimate realization of future tax assets is dependent
upon the generation of future taxable income and tax planning
strategies.





Due to
KCP's stage of development and operation, the Company believes there is
significant uncertainty over the amount of and timing when non-capital losses
may be claimed against future taxable income.  Consequently, a
valuation allowance has been provided against the value of the future tax asset.
The valuation allowance is reviewed periodically and when and if the more likely
than not criterion is met for accounting purposes, the valuation allowance will
be adjusted by a credit or charge to earnings in that period.





The
Company has non-capital losses carried forward for income tax purposes in the
amount of approximately $8,588,965 at December 31, 2008 that may be applied
against future taxable income.  Losses expire as follows: ($88,170 on
December 31, 2009), ($380,730 on December 31, 2015), ($195,850 on December 31,
2016), ($850,000 on December 31, 2027) and an estimated ($6,912,700 on December
31, 2028).  The potential benefits relating to these amounts have not
been recognized in the financial statements.





14.           Related
party transactions





The
amounts due to the shareholders are non-interest bearing, unsecured and due on
demand and are nil.





15.           Commitment





The
Company leases shop and office space under operating leases.  The
future office and shop lease payments are as follows:





2009
              
              $
              142,1402010
              
              
              142,1402011
              
              
              142,1402012
              
              
              118,450Total
              
              $
              544,870





16.           Financial
instruments





Credit
risk





Credit
risk is the risk that one party to a financial instrument will fail to fulfill
an obligation and causes the other party to incur a financial loss. The
Company’s credit risk consists primarily of cash and cash equivalents and
short-term investments. The credit risk is minimized by placing cash and cash
equivalents and investing in short-term investments with major Canadian
financial institutions. The Company’s receivables consist of GST due from the
Federal Government of Canada.  Management believes that the credit
risk concentration with respect to amounts receivable is remote.  The
Company does not invest in asset–backed commercial papers.














F-13




















16.           Financial
instruments (continued)





Interest
rate risk





The
Company is exposed to interest rate risk to the extent that it has bank
indebtedness that carries a variable rate of
interest.  Notwithstanding this, unless otherwise indicated, it is
management's opinion that the Company's exposure to interest rate risk arising
from these financial instruments is insignificant.





Fair
value of financial assets and liabilities





The
Company has estimated the fair value of its financial instruments, which include
cash and cash equivalents, cash restricted, term deposit, accounts receivable,
bank indebtedness, accounts payable, accrued liabilities, due to stockholder and
long-term debt. The Company used valuation methodologies and market information
available at December 31, 2008 and has determined that the carrying amounts of
such financial instruments approximate fair value in all cases.





17.           Comparative
figures





Certain
comparative figures have been reclassified to conform to the current year’s
presentation.  Such reclassification is for presentation purposes only
and has no effect on previously reported results.








18.           Segmented
information





The
Company operates in one geographic segment within one industry
segment.  Oilfield services are provided in Canada.





19.           Sale
of KCP Assets





On
February 8, 2008, KCP Innovative Services Ltd. sold one of the slickline trucks
for $300,000. The proceeds were used to retire the equipment loan with Canadian
Western Bank of about $236,000 and the remainder was used for working
capital.





In June
2008, the remaining slickline truck in KCP and tools were transferred to CRC and
subsequently, the truck was sold for $290,000 and the tools for
$100,000.  With the assets being sold, KCP does not have the ablility
to generate revenue and has become an inactive company.





20.           Subsequent
event





On March
3, 2009 we issued 8,571,428 shares for debt settlement to the company
president.





On March
11, 2009 we issued 15,818,182 shares for consulting services to three
stockholders.





On April
28, 2009 we issued 3,250,000 shares for consulting services to one stockholder
and two consultants.








F-14