Creative Vistas Inc - Quarterly Report (10-Q)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURIT IES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2008

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

Commission file number 0-16819

CREATIVE VISTAS, INC.

(Exact name of registrant as specified in its charter)

Arizona

(State or other jurisdiction of

incorporation or organization

6770

(Primary Standard Industrial

Classification Code Number)

86-0464104

(I.R.S. Employer

Identification No.)

2100 Forbes Street

Unit 8-10

Whitby, Ontario, Canada L1N 9T3

(905) 666-8676

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

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

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

Large Accelerated Filer o	Accelerated Filer o

Non-Accelerated Filer o	Smaller Reporting Company x
(Do not check if a smaller reporting company)

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

Yes o No x

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

At May 15, 2008, the number of shares outstanding of the registrant’s common stock, no par value (the only class of voting stock), was 37,214,757.

PART I. Financial Information
Item 1.	Financial Statements	1

Item 2.	Management's Discussion And Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

Item 4.	Controls and Procedures	19

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults upon Senior Securities	20

Item 4.	Submission of Matters to a Vote of Security Holders.	20

Item 5.	Other Information	20

Item 6.	Exhibits and Reports on Form 8-K	20

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Creative Vistas, Inc. Condensed Consolidated Balance Sheets	March 31, 2008			December 31, 2007
	(Unaudited)
Assets
Current Assets
Cash and bank balances	$	1,215,806		$	1,960,340
Accounts receivable, net of allowance for doubtful accounts of $203,742 and $405,432		5,419,744			6,187,551
Income tax recoverable		253,921			448,126
Inventory and supplies		870,124			1,043,815
Prepaid expenses		705,389			270,930
Due from related parties		2,481			2,581
Total current assets		8,467,465			9,913,343
Property plant and equipment, net of depreciation		7,052,809			6,352,014
Deposits		284,000			125,498
Goodwill		3,093,530			3,101,598
Intangible assets		1,500,162			1,717,003
Other investments - available for sale securities		3,588,567			-
Restricted cash		-			53,430
Deferred financing costs, net		488,631			551,747
Deferred income taxes		37,093			37,547
	$	24,512,257		$	21,852,180
Liabilities and Shareholders' (Deficit)
Current Liabilities
Bank Indebtedness	$	1,018,226		$	-
Accounts payable and accrued liabilities		6,326,582			6,074,212
Current portion of obligation under capital leases		1,316,545			1,195,366
Deferred income		124,344			91,900
Deferred income taxes		25,858			25,858
Current portion of term notes		1,995,178			2,240,356
Current portion of other payable		194,175			303,030
Due to related parties		7,453			8,143
Total current liabilities		11,008,361			9,938,865
Term notes		13,540,421			13,565,421
Notes payable to related parties		1,500,000			1,500,000
Obligation under capital lease		3,437,283			3,184,103
Other payables		97,087			303,030
Due to related parties		224,145			233,203
		29,807,297			28,724,622
Shareholders' (deficit)
Share capital
Authorized
50,000,000 no par value preferred shares undesignated, none issued or outstanding
100,000,000 no par value common shares 36,914,757 and 34,494,623 issued and outstanding
Common stock		5,863,020			1,439,307
Deferred compensation		(354,559	)		-
Additional paid-in capital		11,530,572			4,958,871
Accumulated (deficit)		(18,831,310	)		(12,445,468	)
Accumulated other comprehensive losses
Foreign Currency Translation Adjustment		(644,481	)		(825,152	)
Unrealized loss on available for sale securities		(2,858,282	)		-
		(5,295,040	)		(6,872,442	)
	$	24,512,257		$	21,852,180

The accompanying notes are an integral part of these financial statements

Creative Vistas, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

	Three months ended
	March 31,
	2008			2007
Contract and service revenue
Contract	$	1,479,319		$	1,327,247
Service		9,291,977			6,453,929
Others		10,059			12,444
		10,781,355			7,793,620
Cost of sales
Contract		900,707			921,996
Service		7,407,221			4,609,700
		8,307,928			5,531,696
Gross margin		2,473,427			2,261,924
Operating expense
Project		326,055			281,666
Selling		218,597			175,844
General and administrative		3,582,254			1,750,956
		4,126,906			2,208,466
Income (loss) from operations		(1,653,479	)		53,458
Interest and other expenses
Net financing expenses		4,432,917			559,198
Amortization of deferred charges		44,215			45,276
Foreign currency translation gain (loss)		255,234			(18,918	)
		4,732,366			585,556
(Loss) before income taxes		(6,385,845	)		(532,098	)
Income taxes		-			-
Net (loss)		(6,385,845	)		(532,098	)
Other comprehensive income (loss):
Unrealized loss - available for sale securities		(2,858,282	)		-
Foreign currency translation adjustment		180,671			(44,688	)
Comprehensive (loss)	$	(9,063,456	)	$	(576,786	)
Basic weighted-average shares		36,248,724			33,382,608
Diluted weighted-average shares		36,248,724			33,382,608
Basic (loss) per share	$	(0.18	)	$	(0.02	)
Diluted (loss) per share	$	(0.18	)	$	(0.02	)

The accompanying notes are an integral part of these financial statements

Creative Vistas, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	Three months ended March 31,
	2008			2007

Operating activities
Net cash (used in) operating activities	$	(399,791	)	$	( 714,207	)
Investing activities
Payment for acquisition		(300,000	)		-
Proceeds of sales of property and equipment		24,830			105,051
Purchase of property and equipment		(586,028	)		(110,832	)
Net cash (used in) investing activities		(861,198	)		(5,781	)
Financing activities
Proceeds from bank indebtedness		1,043,223			-
Repayment from notes payable		-			(28,564	)
Due to related parties		(385	)		86
Repayment of capital leases		(362,429	)		(266,710	)
Issuance of common shares		1,260			145,924
Restricted cash		52,894			61,620
Repayment of term notes		(270,178	)		(306,686	)
Net cash provided by (used in) financing activities		464,385			(394,330	)
Effect of foreign exchange rate changes in cash		52,070			(28,879	)
Net change in cash and cash equivalents		(744,534	)		(1,143,197	)
Cash and cash equivalents, beginning of period		1,960,340			3,560,181
Cash and cash equivalents, end of period	$	1,215,806		$	2,416,984

The accompanying notes are an integral part of these financial statements

Creative Vistas, Inc.

Notes to Consolidated Condensed Financial Statements

March 31, 2008 (Unaudited)

1. Summary of Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated balance sheet as at March 31, 2008, and the consolidated condensed statements of operations and cash flows for the periods ended March 31, 2007 and 2008, include the accounts of Creative Vistas, Inc. (“CVAS”), Creative Vistas Acquisition Corp. (“AC Acquisition”), AC Technical Systems Ltd. (“AC Technical”), Cancable Holding Corp. (“Cancable Holding”), Cancable Inc., , Cancable XL Inc., XL Digital Services Inc. (“XL Digital”), 2141306 Ontario Inc., Iview Holding Corp. (“Iview Holding”), and Iview Digital Solutions Inc. (“Iview DSI”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, these condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for and as of the periods shown. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for such periods are not necessarily indicative of the results expected for 2008 or for any future period. These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the Securities and Exchange Commission.

Reclassifications

Certain amounts from the March 31, 2007, financial statements have been reclassified to conform to the current year’s presentation.

Liquidity and going concern

Our consolidated condensed financial statements were prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have incurred losses of $6,385,845 for the three months ended March 31, 2008 and have an accumulated deficit of $18,831,310 at March 31, 2008. In addition, we have working capital and stockholder deficits of $2,540,896 and $5,295,040 at March 31, 2008.

We have outstanding term loans aggregating $15,535,599, together with common stock options and warrants, held by Laurus. We do not currently have the ability to repay the notes in the event of a demand by the holder. Furthermore, we granted a security interest to Laurus in substantially all of our assets and, accordingly, in the event of any default under our agreements with Laurus, they could conceivably attempt to foreclose on our assets, which could cause us to terminate our operations. Additionally, there were 49 shares of common stock of Cancable Holding issuable upon the exercise of options and 20 shares of common stock of Iview Holding issuable upon the exercise of options to Laurus.

Over the next twelve months the Company believes that its existing capital will be sufficient to sustain its operations. Management plans to seek additional capital in the future to fund operations, growth and expansion through additional equity, debt financing or credit facilities. The Company has had early stage discussions with investors about potential investment in the Company at a future date. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our shareholders. The Company has introduced cost cutting initiatives within the Administration, Project and Selling departments to improve efficiency within the Company and also improve cash flow. The Company has also increased its rates for service provided by AC Technical by 20 percent to improve gross margins. This is in line with our competitors. The Company also expects to see the benefits of its research and development efforts within the next 12 months as it starts to introduce its own line of customized products to the industry. These products and technologies are expected to improve gross margins. The Company believes that it will be eligible for research and development tax credits at year end for its research and development efforts during the year and these are additional sources of cash flow for the Company. The Company is also negotiating longer credit terms with its suppliers from 45 days to 60 to 75 days. For all the reasons mentioned above, we believe that we have adequate short term borrowing capability and that we will be able to sustain our operations and continue as a going concern for a reasonable period of time although there can be no assurance of this.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Inventory

Inventory consists of materials and supplies and is stated at the lower of cost and market value. Cost is generally determined on the first in, first out basis. The inventory is net of estimated obsolescence, and excess inventory based upon assumptions about future demand and market conditions. Inventory consists principally of parts, materials and supplies

Earnings (loss) per share

The Company applies Statement of Financial Accounting Standards No. 128, Earnings Per Share (FAS 128). Basic loss per share (“LPS”) is computed using the weighted average number of common shares outstanding during the period. Diluted LPS is computed using the weighted average number of common and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of common stock issuable upon exercise of stock options and warrants using the treasury stock method. An adjustment to earnings per share calculation includes reversing the changes in derivative instruments. Dilutive common share equivalents are not considered in periods when their effect is antidilutive.

2. Deferred Financing Costs, Net

Deferred financing costs, net are associated with the Company’s term notes from Laurus Master Fund, Ltd., a Cayman Islands company. For the period ended March 31, 2008, the amortization of deferred financing cost was approximately $44,215 (2007 - $45,276).

Cost	$	920,671
Accumulated amortization		(432,040	)
	$	488,631

The estimated amortization expense for each of the next five fiscal years and thereafter is as follows:

Year	Amount
2008	$	123,574
2009		133,939
2010		127,501
2011		103,617
	$	488,631

3. Other Investments- Available For Sale Securities

On January 22, 2008, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Erato Corporation (“Erato”) pursuant to which the Company purchased and acquired from Erato 2,674,407 shares of common stock, par value $0.0001 per share (the “Shares”), of 180 Connect Inc., a Delaware corporation, for an aggregate purchase price of $5,444,940 paid by the Company by delivery to Erato of (i) 2,195,720 duly and validly issued shares of common stock of the Company and (ii) a common stock purchase warrant, exercisable into up to 812,988 shares of common stock of the Registrant at an exercise price of $0.01 per share.

On January 30, 2008, the Company entered into a Warrant Purchase Agreement with Laurus Master Fund, Ltd., Erato Corporation, Valens U.S. Fund, LLC and Valens Offshore SPV I, Ltd. (collectively, the “Sellers”) pursuant to which the Company purchased and acquired from the Sellers, warrants to purchase 450,000 shares of common stock at an exercise price of $0.01 per share of 180 Connect Inc. The aggregate purchase price paid by the Company in exchange for the 180 Connect Warrants was $1,001,909 paid by the Company by delivery to the Sellers of common stock purchase warrants, exercisable in the aggregate into up to 506,250 shares of common stock of the Company at an exercise price of $0.01 per share.

The above investment was recorded as fair value as at March 31, 2008, of $3,588,567 and had a cost basis of $6,446,849. The unrealized loss of $2,858,282 was recorded as a component of other comprehensive losses.

4. Intangible Assets

		Cost		Accumulated amortization		Net book value
Customer relationships	$	1,650,485	$	515,048	$	1,135,437
Trade name		1,277,670		912,945		364,725
	$	2,928,155	$	1,427,993	$	1,500,162

Amortization expense for the period ended March 31, 2008 amounted to $190,167 (2007-$150,000).

5. Bank Indebtedness

During the period ended March 31, 2008, the Company established credit facilities with a Canadian chartered bank to provide for borrowings by its subsidiaries, AC Technical and Cancable Inc. The credit facility for AC Technical and Cancable was $500,000 and $1,500,000. Revolving credit loans bear interest at the bank’s domestic rate plus 1.5% for Canadian dollar amounts. Interest is payable monthly. The facilities are secured by an assignment of book debts, inventory, certain other assets and life insurance. In April 2008, an amendment was made to the credit agreement to increase the maximum facility of Cancable to $3,500,000.

As at March 31, 2008, the interest rate of the Canadian dollar amount was 6.25%. At March 31, 2008, the borrowings outstanding under this facility were $1,018,226.

6. Term Notes

In January 2006, concurrently with the closing of the acquisition of Cancable Inc., the Company entered into a series of agreements with Laurus whereby Cancable issued to Laurus a secured term note (the “Cancable Note”) in the amount of $6,865,000 and Cancable Holding issued to Laurus a related option to purchase up to 49 shares of common stock of Cancable Holding (up to 49% of the outstanding shares of Cancable Holding) at a price of $0.01 per share (the “Option”). The loan is secured by all of the assets of the Company and its subsidiaries.

The Cancable Note bears interest at the prime rate plus 1.75% with a minimum rate of seven percent. Interest accrued on the term note but was not payable until February 1, 2006. Interest is calculated on the basis of a 360 day year. The minimum monthly payment on the term note is $81,726 commencing from October 1, 2006. The Company is not obligated, except upon an event of default, to pay more than 25% of the Principal Amount prior to December 31, 2011.

In February 2006, the Company and its subsidiaries, Iview Holding and Iview DSI entered into a series of agreements with Laurus pursuant to a refinancing transaction whereby the Company issued to Laurus a secured term note (the “Company Note”) in the amount of $8,250,000, Iview DSI issued to Laurus a secured term note (the “Iview Note”) in the amount of $2,000,000, the Company issued to Laurus a related warrant to purchase up to 2,411,003 shares of common stock of the Company (up to 7.5% of the outstanding shares of the Company) at a price of $0.01 per share (the “Warrant”) and Iview Holding issued to Laurus a related option to purchase up to 20 shares of common stock of Holding (up to 20% of the outstanding shares of Holding) at a price of $0.01 per share (the “Option”). The loans are secured by all of the assets of the Company and its subsidiaries.

The Company Note bears interest at the prime rate plus 2% with a minimum rate of seven percent. Interest accrued on the term note but was not payable until April 1, 2006. Interest is calculated on the basis of a 360 day year. The minimum monthly payment on the term note is $137,500 commencing March 1, 2007 to February 1, 2009. $4,950,000 is payable on the maturity date. The Company has issued warrants to purchase up to 1,404,000 shares of common stock of the Company at a price from $0.90 to $2.73 per share to defer the principal repayment from March 1, 2007 to March 1, 2008.

The Iview Note bears interest at the prime rate plus 2% with a minimum rate of seven percent. Interest accrued on the term note but was not payable until April 1, 2006. Interest is calculated on the basis of a 360 day year. The minimum monthly payment on the term note is $8,333 commencing March 1, 2007 to February 1, 2011. $1,600,000 is payable on the maturity date. The Company is not obligated, except upon an event of default, to pay more than 25% of the Principal Amount prior to December 31, 2011.

Simultaneously with the closing of this refinancing transaction, the Company paid off the entire outstanding principal amount and all obligations due to Laurus under the Secured Convertible Term Note dated September 30, 2004, the Secured Convertible Minimum Borrowing Note dated September 30, 2004 and the Secured Revolving Note dated September 30, 2004 (collectively, the “2004 Notes”) and such 2004 Notes were subsequently cancelled.

Interest on the term note for the period ended March 31, 2008 was $318,968 (2007: $425,186).


	Amount
Cancable term note bears interest at prime plus 1.75% with the minimum interest rate 7% and due on December 31, 2010	$	5,393,932
Company term note bears interest at prime plus 2% with the minimum interest rate 7% and due on December 31, 2009		8,250,000
Iview term note bears interest at prime plus 2% with the minimum interest rate 7% and due on December 31, 2011		1,891,667
		15,535,599
Less: current portion		1,995,178
	$	13,540,421

The principal payments for the next five fiscal years are as follows:

	Amount
2008	$	1,970,178
2009		6,700,000
2010		100,000
2011		6,765,421
	$	15,535,599

7. Net Financing Expenses

	Three months ended March 31,
	2008		2007
Capital leases	$	103,790	$	80,811
Interest of credit facility		318,968		425,186
Interest on deferred principal repayment of term note - 324,000 warrants		274,196		39,519
Warrants issued for proposed new financing		3,723,565		-
Others		12,398		13,682
	$	4,432,917	$	559,198

Included in net financing expenses are the fair value of $3,723,565 of 2,030,865 warrants to purchase the Company’s common stock issued in conjunction with the investment described in Note 3 for a proposed financing. There can be no assurance that any such financing will be successful.

8. Note Payable to Related Parties

In September 2004, the Company issued two promissory notes with an aggregate principal amount of $3,300,000. On September 30, 2004, the Company repaid an aggregate of $1,800,000 of the principal balance. The outstanding principal bears interest at 3% per annum with no fixed terms of repayment. The notes each with an amount of $750,000 are due to The Burns Trust (the Company’s president is one of the beneficiaries of the trust) and the Navaratnam Trust (the Company’s CEO is one of the beneficiaries of the trust), respectively. During the period ended June 30, 2006, the above two notes payable have been transferred to Malar Trust Inc. (the Company’s CEO is the shareholder of Malar Trust Inc.).

Interest expense recognized for the period was $12,398 (2007 - $13,682).

9. Shareholders’ (Deficit)

The Company has total authorized share capital of 50,000,000 preferred shares, no par value and 100,000,000 common shares, no par value.

During the period ended March 31, 2008, the Company entered into a consulting agreement by issuing 222,414 common shares stock in consideration for investor relations services rendered for 2008 with the fair value of $448,200. The expense in the amount of $93,641 was recorded under general and administrative expenses. The remaining balance was recorded as deferred compensation. Additionally, the Company issued 2,000 common shares to an employee for the exercise of the employee stock options for cash aggregating $1,260.

Options

On June 30, 2006, the Company granted 2,317,000 options to purchase a maximum of 2,317,000 shares of common stock to employees. The options allow the holders to buy the Company’s common stock at a price of $0.63 per share and expire on June 30, 2011. During the year 2007, the Company granted 1,226,000 options to purchase common stock to employees. These options allow the holders to buy the Company’s common stock at a price between $0.90 to $2.59 which will expire in 2012.

The Company’s Stock Option Plan is intended to provide incentives for key employees, directors, consultants and other individuals providing services to the Company by encouraging their ownership of the common stock of the Company and to aid the Company in retaining such key employees, directors, consultants and other individuals upon whose efforts the Company’s success and future growth depends and in attracting other such employees, directors, consultants and individuals.

The Plan is administered by the Board of Directors, or its Compensation Committee. Under the Plan, options on a total of 4,000,000 shares of common stock may be issued. Shares of common stock covered by options which have terminated or expired prior to exercise are available for further options under the Plan. The maximum aggregate number of shares of Stock that may be issued under the Plan as “incentive stock options” is 3,500,000 shares. No options may be granted under the Plan after June 30, 2011; provided, however, that the Board of Directors may at any time prior to that date amends the Plan.

Options under the Plan may be granted to key employees of the Company, including officers or directors of the Company, and to consultants and other individuals providing services to the Company. Options may be granted to eligible individuals whether or not they hold or have held options previously granted under the Plan or otherwise granted or assumed by the Company. In selecting individuals for options, the Committee may take into consideration any factors it may deem relevant, including its estimate of the individual’s present and potential contributions to the success of the Company.

The Committee may, in its discretion, prescribe the terms and conditions of the options to be granted under the Plan, which terms and conditions need not be the same in each case, subject to the following:

a. Option Price. The price at which each share of common stock covered by an option granted under the Plan may be purchased may not be less than the market value per share of the common stock on the date of grant of the option. The date of the grant of an option shall be the date specified by the Committee in its grant of the option, which date will normally be the date the Committee determines to make such grant.

b. Option Period. The period for exercise of an option shall in no event be more than five years from the date of grant. Options may, in the discretion of the Committee, be made exercisable in installments during the option period.

c. Exercise of Options. For the purpose of assisting an Optionee to exercise an option, the Company may make loans to the Optionee or guarantee loans made by third parties to the Optionee, on such terms and conditions as the Board of Directors may authorize. In no event shall any option be exercisable more than five years from the date of grant thereof.

d. Lock-Up Period. Without the consent of the Company, an Optionee may not sell more than fifty percent of the shares issued under the Plan for a period of two years from the date that the Optionee exercises the option. The Committee may impose such other terms and conditions, not inconsistent with the terms of the Plan, on the grant or exercise of options, as it deems advisable.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model, using the assumptions noted in the following table. Expected volatility is based on the historical volatility of the Company’s stock, and other factors. The Company uses historical data to estimate employee termination within the valuation model. Because the Company has not previously granted options to employees, for purposes of the valuation model, the Company has assumed that the life of the options will be equal to one-half of the combined vesting period and contractual life (i.e., that employees will exercise the options at the midpoint between the vesting and expiry date of the options). The risk-free rates used to value the options are based on the U.S. Treasury yield curve in effect at the time of grant.

At March 31, 2008 options to purchase 3,194,000 shares of common stock were outstanding. These options vest ratably in annual installments, over the four year period from the date of grant. As of March 31, 2008, there was $1,249,120 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over the four year vesting period. 496,500 options were vested as of March 31, 2008. The cost recognized for the period end March 31, 2008 was $101,353 (2007:$31,765) which was recorded as general and administrative expenses.

In valuing the options issued, the following assumptions were used;

	2008	2007
Expected volatility	45%	45%
Expected dividends	0%	0%
Expected term (in years)	3.0 - 4.5	3.0 - 4.5
Risk-free rate	4.25% - 5.13%	4.25% - 5.13%

A summary of option activity under the Plan during the period ended March 31, 2008 is presented below:

Options	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Intrinsic Value
Outstanding at December 31, 2007		3,222,000		$	0.63		5.0		-
Granted		64,000		$	2.32
Exercised		(2,000	)	$	0.63
Forfeited or expired		(90,000	)	$	0.63
Outstanding at March 31, 2008		3,194,000		$	1.22		4.0	$	0.67

Exercisable at March 31, 2008		496,500		$	0.63		-		-

Warrants

We use the Black-Scholes option pricing model to value warrants issued to non-employees, based on the market price of our common stock at the time the warrants are issued. All outstanding warrants may be exercised by the holder at any time. During the period ended March 31, 2008, in connection with financing and acquisition arrangements, the Company issued warrants to purchase 3,674,103 shares of common stock. The fair value of the warrants of $6,470,357 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 2.18% to 4.44%, expected dividend yield of 0%, volatility of 45%, share price of $0.01 to $2.84 and expected life of 4 to 50 years.

As of March 31, 2008, we had the following options and warrants outstanding:


Issue Date	Expiry Date		Number of warrants		Exercise Price Per share		Value-issue date		Issued for
01-05-2004		01-05-2009		540,000	$	0.33	$	447,463		Consulting and investment banking fees
09-30-2004		09-30-2009		199,500	$	1.00	$	111,853		Consulting and investment banking fees
09-30-2004		09-30-2011		2,250,000	$	1.15	$	1,370,000		Financing
03-31-2005		03-31-2012		100,000	$	1.20	$	60,291		Financing
04-30-2005		04-30-2012		100,000	$	1.01	$	44,309		Financing
05-31-2005		05-31-2012		100,000	$	1.01	$	56,614		Financing
06-22-2005		06-22-2012		313,000	$	1.00	$	137,703		Financing
06-30-2005		06-30-2012		100,000	$	0.90	$	50,431		Financing
07-31-2005		07-31-2012		100,000	$	1.05	$	56,244		Financing
08-31-2005		08-31-2012		100,000	$	1.05	$	22,979		Financing
09-30-2005		09-30-2012		100,000	$	0.80	$	36,599		Financing
10-31-2005		10-31-2012		100,000	$	0.80	$	27,367		Financing
11-30-2005		11-30-2012		100,000	$	0.80	$	16,392		Financing
12-31-2005		12-31-2012		100,000	$	0.80	$	10,270		Financing
02-13-2006		02-13-2016		1,927,096	$	0.01	$	1,529,502		Financing

03-01-2007	03-01-2011	108,000	$	0.90	$	39,519	Financing
04-01-2007	04-01-2011	108,000	$	1.15	$	50,529	Financing
05-01-2007	05-01-2011	108,000	$	1.25	$	54,941	Financing
06-01-2007	06-01-2011	108,000	$	2.28	$	101,470	Financing
07-01-2007	07-01-2011	108,000	$	2.10	$	93,307	Financing
08-01-2007	08-01-2011	108,000	$	2.55	$	112,117	Financing
09-01-2007	09-01-2011	108,000	$	2.73	$	118,647	Financing
10-01-2007	10-01-2011	108,000	$	2.43	$	105,362	Financing
11-01-2007	11-01-2011	108,000	$	2.60	$	111,868	Financing
12-01-2007	12-01-2011	108,000	$	2.55	$	107,284	Financing
01-01-2008	01-01-2012	108,000	$	2.84	$	108,331	Financing
01-22-2008	01-22-2058	812,988	$	0.01	$	1,470,687	Acquisition
01-22-2008	01-22-2058	1,738,365	$	0.01	$	3,144,685	Financing
01-30-2008	01-30-2058	2,350	$	0.01	$	4,650	Financing
01-30-2008	01-30-2058	582,367	$	0.01	$	1,152,551	Financing
01-30-2008	01-30-2058	214,033	$	0.01	$	423,588	Financing
02-01-2008	02-01-2012	108,000	$	2.09	$	85,612	Financing
03-01-2008	03-01-2012	108,000	$	2.04	$	80,253	Financing
		10,983,699

10. Major Customers

During the three months ended March 31, 2008 the Company derived 60.4% (2007:57.2%) of its revenue from a single customer. The accounts receivable from this customers comprises 40.4% (2007: 39.3%) of the total trade receivable .

11. Segment Information

We determine and disclose our segments in accordance with SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information”, which uses a “management” approach for determining segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the reportable segments. Our management reporting structure provides for the following segments:

Cancable

Cancable Inc. and its wholly owned subsidiary XL Digital Services, Inc. are Canadian based entity. Cancable, Inc. is a US cased entity which is also the wholly owned subsidiary of Cancable Inc. (collectively, the “Cancable”). Cancable is in the business of providing deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable service offering, network deployment, IT integration, and support services, enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. Cancable’s clients rely on Cancable’s knowledge and expertise to rapidly deploy the latest technologies to support advanced cable services, cable broadband Internet access and DSL. Services provisioned include new installations, reconnections, disconnections, service upgrades and downgrades, inbound technical call center sales and trouble resolution for cable Internet subscribers, and network servicing for broadband video, data, and voice services for residential, business, and commercial marketplaces.

AC Technical

A.C. Technical Systems Ltd. (“AC Technical”), a corporation incorporated under the laws of the Province of Ontario, is engaged in the engineering, design, installation, integration and servicing of various types of security systems.

Iview DVSI

Iview Digital Solutions Inc. (“Iview DVSI”), a corporation incorporated under the laws of the Province of Ontario, is a newly formed subsidiary incorporated in late 2005 to focus on providing video surveillance products and technologies to the market.

	March 31, 2008			March 31, 2007
Sales:
Cancable	$	8,871,904		$	6,136,499
AC Technical		1,846,753			1,630,708
Iview		62,698			24,529
Creative Vistas, Inc.		-			1,884
Consolidated Total	$	10,781,355		$	7,793,620
Depreciation and amortization:
Cancable	$	490,533		$	335,556
AC Technical		10,352			9,745
Consolidated Total	$	500,885		$	345,301
INTEREST EXPENSES:
Cancable	$	214,795			244,070
AC Technical		-			1,650
Iview		35,629			50,521
AC Acquisition		12,398			12,032
Creative Vistas, Inc.		4,170,095			250,925
CONSOLIDATED TOTAL	$	4,432,917			559,198
Net (Loss):
Cancable	$	(1,824,129	)	$	183,924
AC Technical		215,362			31,767
Iview		(76,500	)		(54,934	)
AC Acquisition		(12,398	)		(12,032	)
Corporate (1)		(4,688,180	)		(680,823	)
Consolidated Total	$	(6,385,845	)	$	(532,098	)
TOTAL ASSETS
Cancable	$	12,275,543		$	8,459,876
AC Technical		3,623,690			3,784,971
Iview		1,379,437			1,538,235
AC Acquisition		-			-
Creative Vistas, Inc.		7,233,587			4,582,281
Consolidated Total	$	24,512,257		$	18,365,363
CAPITAL ASSETS
Cancable	$	6,237,896		$	3,927,159
AC Technical		814,912			763,103
Consolidated Total	$	7,052,809		$	4,690,262
CAPITAL EXPENDITURES
Cancable	$	1,506,176		$	1,417,354
AC Technical		3,048			-
Iview		-			-
AC Acquisition		-			-
CONSOLIDATED TOTAL	$	1,509,224		$	1,417,354

(1) Corporate expenses primarily include certain stock-based compensation for consulting and advisory services, which we do not internally allocate to our segments because they are related to our common stock and are non-cash in nature.

Revenues by geographic destination and product group were as follows:

	Marc 31, 2008		March 31, 2007
Contract	$	1,479,319	$	1,327,247
Service		9,291,977		6,453,929
Others		10,059		12,444
Total sales to external customers	$	10,781,355	$	7,793,620

Revenue generated by the Company in Canada and United States was $10,501,775 (2007:$7,793,620) and $279,580 (2007: $Nil).

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

(Unaudited)

The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto. The following discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed therein. Factors that could cause or contribute to such differences include, but are not limited to, risks and uncertainties related to the need for additional funds, the rapid growth of the operations and our ability to operate profitably a number of new projects. Except as required by law, we do not intend to publicly release the results of any revisions to those forward-looking statements that may be made to reflect any future events or circumstances.

Results of Operations

Comparison of Three Months Period Ended March 31, 2008

to Period Ended March 31, 2007

For purposes of this “Management’s Discussion and Analysis or Plan of Operation”, we compared the three month period ended March 31, 2008, to the comparable period in 2007.

Sales : Sales for the three month period ended 2008 increased 38% to $10,781,400 from $7,793,600 for the three months period ended 2007. The increase in revenue was mainly due to the increase in service revenue of Cancable Segment to $8,871,900 for the three month period ended 2008 from $6,136,500 for the same period in 2007.

(a) Cancable Segment - This segment includes Cancable Inc., XL Digital and OSS-IM View (collectively, “Cancable Group”). The principal activity is provisioning the deployment and servicing of broadband technologies in both residential and commercial markets. The Cancable Group’s service offering, network deployment, IT integration, and support services, enable the cable television and telecommunications industries to deliver a high quality broadband experience to their customers. In October 2007, we acquired XL Digital which is incorporated under the laws of Ontario and with the same principal business activity of Cancable Inc. XL Digital, with over 70 employees, provides its deployment and provisioning services for Rogers Cable Inc. within two territories where the Company did not have a presence. Total revenue of this segment for the first quarter of fiscal 2008 was $8,871,900 from $6,136,500 for the same period in fiscal 2007. The increase reflects continued growth in revenue, particularly with the business from Rogers Cable Inc. We continued to allocate resources to support the growth of our business. During the first quarter of fiscal 2008, Cancable signed a multi-year contract with one of the largest cable and media companies in the United States. Under the terms of the contract, Cancable will perform installation, customer service and fulfillment for this multi-billion dollar cable and media conglomerate in Charlotte, North Carolina and surrounding communities. Total revenue generated in the United States was $280,000 for the period ended March 31, 2008. Rogers Cable Inc. is Cancable Group’s largest customer and the revenue from this customer for the first quarter of fiscal 2008 was approximately $6,508,100 or 73.4% of its total Cancable revenue compared to $4,457,800 or 72.6% for the three months ended March 31, 2007. (b) AC Technical segment - Total revenue of AC Technical segment was $1,846,800 for the first quarter of fiscal year 2008 compared to $1,630,700 for the first quarter of fiscal year 2007. Contract revenue increased to $1,479,300 for the three months ended March 31, 2008 compared to $1,327,200 for the same period of fiscal 2007. This increase was mainly due to an increase in the number of subcontracts for the provision of services to government and commercial contracts. The service revenue has increased to $420,100 for the three months ended March 31, 2008 from $317,400 for the same period of fiscal 2007. Service revenue primarily represents the cumulative effect of the growth in contracts and number of customers over the past few years. We have experienced a significant increase in the number of inquiries for systems from the government and retail sector. This increased interest in security products and services may result in our achieving increased revenues in future periods if we are successful in attracting new customers or obtaining additional projects from existing customers. There is no assurance that the Company will be able to attract new customers.

Cost of Goods Sold : Cost of goods sold as a percentage of revenue for the three months ended March 31, 2008 was $8,307,900 or 77.1% of revenues compared to $5,531,700 or 71.0% of revenues for the three months period ended March 31, 2007. The increase in cost of sales and a percentage of sales resulted principally from the increase in service revenue from $6,453,900 for the three months period ended March 31, 2007 to $9,291,980 for the three months period ended March 31, 2008. (a) Cancable segment - Cost of sales of this segment was $7,407,200 for the three months ended March 31, 2008, which is comprised principally of labor expenses $5,589,700, vehicle expenses $705,350 and material cost $539,800. The increase in cost of sales is primarily due to the revenue growth discussed above. (b) AC Technical segment - Cost of sales of this segment was $864,900. The material cost was $591,900 or 32.1% of the AC Technical revenue for the three months ended March 31, 2007 compared to $596,700 or 36.6% of revenues in the same period of fiscal 2007. The decrease in percentage of the material cost was mainly due to some contracts having less material needs. On the other hand, the labor and subcontractor cost decreased to $264,100 or 14.3% of AC Technical revenues for the three months ended March 31, 2008 and $296,900 or 18.2% of AC Technical revenues for fiscal 2007. The decrease in labor and subcontractor cost was mainly due to the increase in efficiency.

Project, Selling, General and Administrative Expenses : Project, selling, general and administrative expenses for the three months ended March 31, 2008 was $4,126,900 or 38.3% of revenues for the three months ended 2008 compared to $2,208,500 or 28.3% of revenues for the same period of fiscal 2007. The balance is mainly comprised of the following:

Project cost was $326,100 or 3.0% of revenue for the three months ended March 31, 2008, compared to $281,700 or 3.6% for the same period of fiscal year 2007. Project cost was mainly related to the AC Technical segment. The balance mainly includes the salaries and benefits of indirect staff amounting to $208,700 in the first quarter of fiscal 2008 compared to $157,800 for the same period of fiscal 2007. The increase was mainly due to the increase in headcounts. The automobile and travel expenses were approximately $65,900 for the three months ended March 31, 2008 compared to $64,600 for the same period of fiscal 2007. There was no material fluctuation of percentage in automobile and travel expenses.

Selling expense was $218,600 or 2.0% of revenues for thefirst quarter of 2008 compared to $175,800 or 2.3% of revenues for the first quarter of fiscal 2007. Selling expenses were mainly related to AC Technical segment. As at March 31, 2008, we have 5 salespersons in AC Technical segment, compared to 4 salespersons as at March 31, 2007. The balance for the three months ended March 31, 2007 is mainly comprised of salaries and commission to salespersons of $174,500 compared to $129,600 for the same period of fiscal 2007. The increase was mainly due to the increase in headcounts. The advertising and promotion and trade show expenses were $28,000 in the first quarter of fiscal 2008 compared to $35,300 for the same period of fiscal 2007 with no material fluctuation.

General and administrative expenses were $3,582,300 or 33.2% of revenues for the three month period ended March 31, 2008 compared to $1,750,900 or 22.5% for the same period of fiscal 2007. The balance for the three months ended March 31, 2008 is mainly comprised of $203,300 of professional fees related to fees for the quarterly reports and other corporate matters. In addition, investor relations expenses amounted to $142,500 for the three month period ended March 31, 2008 compared to $57,000 for the same period last year. Total salaries and benefits to administrative staff were $1,086,300 for the first quarter of 2008 compared to $577,000 for the same period last year. Total depreciation of property plant and equipment was $500,900 for the first quarter of fiscal 2008 compared to $345,300 for the same period of last year. The increase in balance was mainly due to the increase in property, plant and equipment.

Interest and other Expenses : Interest and net other expenses for the three months ended March 31, 2008, was $4,732,400 or 44% of revenues compared to net expenses of $585,600 or 7.5% of the revenues for the same period of fiscal 2007. The balance for the current period is primarily comprised of the amortization of deferred charges amounting to $44,200 compared to $45,300 for the same period of fiscal 2007. Additionally, net financing expenses increased to $4,432,900 or 41.1% of revenues compared to $559,200 or 7.2% of revenues for the same period of fiscal 2007. During the three months ended March 31, 2008, the Company entered into two financing arrangements in which the Company has issued 2,030,865 warrants with a value of $3,723,600. The interest due with respect to the Company’s credit facility was $318,900 for the three months ended March 31, 2008 compared to $425,200 in the same period of 2007. The decrease in the balance was due to the decrease in outstanding payables of the term notes from $16,616,300 as at March 31, 2007 to $15,535,600 as at March 31, 2008.

Income taxes : No income tax was paid for the period ended March 31, 2008, which was mainly due to the Company’s losses carried forward to offset all income generated by the Company. All prior taxes have already been accounted for in the income tax recoverable and therefore, there is no additional provision for income taxes recoverable and deferred tax asset.

Net Income/Loss : Net loss for the three months ended March 31, 2008 was $6,385,800 compared to net loss of $532,100 for the three month period ended March 31, 2007. The Company’s operating loss was $1,653,500 for the first quarter of fiscal 2008 compared to operating income of $53,000 for the same period of fiscal 2007. The loss was primarily attributed to the financing transactions in January 2008.

Liquidity and Capital Resources

Since our inception, we have financed our operations through bank debt, loans and equity from our principals, loans from third parties and funds generated by our business. At March 31, 2008, we had $1,215,800 in cash. We believe that cash from operations and our credit facilities with our banks will continue to be adequate to satisfy the ongoing working capital needs of the Company. During fiscal year 2008, our primary objectives in managing liquidity and cash flows will be to ensure financial flexibility to support growth and entry into new markets and improve inventory management and to accelerate the collection of accounts receivable.

Net Cash Used in Operating Activities . Net cash used in operating activities amounted to $399,800 for the three months ended March 31, 2008. The changes in operating assets and liabilities resulted in a use of cash of $1,055,999, which included a $543,400 decrease in accounts receivable, a $187,100 decrease in inventory, a $626,600 increase in prepaid expenses, a $438,700 increase in accounts payable, a $182,100 decrease in income tax recoverable and a $37,100 increase in deferred revenue.

Comparison of the balance sheet as at March 31, 2008 to December 31, 2007

Accounts Receivable

Our accounts receivable decreased by approximately $767,800 compared to the balance as at December 31, 2007. Accounts receivable of Cancable segment were $3,400,800 as at March 31, 2008 compared to $3,989,100 as at December 31, 2007. Accounts receivable of AC Technical segment was $1,908,400 as at March 31, 2008 compared to $2,083,200 as at December 31, 2007. The decrease in balance was mainly due to the timing of payments from our customers.

Inventory

Inventory on hand at March 31, 2008 was $870,100 compared to $1,043,800 as at December 31, 2007. The inventory of the Cancable segment as at March 31, 2008 was $173,700 compared to $363,600 as at December 31, 2007. There was no material fluctuation from the fiscal year ended December 31, 2007. The inventory of AC Technical segment as at March 31, 2008 was $382,700 compared to $638,900 as at December 31, 2007. The level of inventory was higher as we had purchased the inventory as at December 31, 2007 for jobs the Company began to work on during the first quarter of 2008.

Accounts Payable and Accrued Liabilities

Accounts payable increased to approximately $6,326,600 as at March 31, 2008 from $6,074,200 as at December 31, 2007. The increase was mainly due to the timing of payments to our suppliers.

Deferred Revenue

Deferred revenue increased to $124,300 as at March 31, 2008 compared to $91,900 the balance as at December 31, 2007. This increase was mainly due to the timing of payments by our customers. Deferred revenue primarily relates to payments associated with contracts in which revenue is recognized on a percentage of completion basis.

Incomes Taxes Recoverable

The decrease in income taxes recoverable was mainly due to the Company’s receipt of a refund from the Government relating to the losses carried back to prior years and investment tax credits.

Net Cash Used in Investing Activities . Net cash used in investing activities was $861,200 for the three months ended March 31, 2008, compared to $5,781 used for the three months ended March 31, 2007. The balance for both periods was mainly due to the purchase of property and equipment of the Company and offset by the sale proceeds from the sale of property and equipment. For the three month period ended March 31, 2008, the Company has paid $300,000 for the acquisition of XL Digital.

Net Cash Provided From Financing Activities . Net cash provided by financing activities was $464,400 for the three months ended March 31, 2008 compared to net cash used of $394,300 for the three months ended March 31, 2007. Last year’s balance mainly represents the repayment of capital leases and term notes in the amount of $573,400. The current year balance represents net proceeds received from new banking facilities set up with a Canadian financial institution in the amount of $1,043,000. The balance was offset with the repayment of term notes and capital leases in the amount of $632,600.

Our capital requirements have grown since our inception with the growth of our operations and staffing. We expect our capital requirements to continue to increase in the future as we seek to expand our operations. On September 30, 2004, we obtained funding through a series of agreements with Laurus. In 2006, through our wholly owned subsidiary, we acquired all of the issued and outstanding shares of capital stock and any other equity interests of Cancable. Simultaneously, Cancable entered into a series of agreements with Laurus whereby Cancable issued to Laurus a secured term note (the “Cancable Note”) in the amount of $6,865,000. We completed a refinancing transaction with Laurus in February 2006; we issued to Laurus a secured term note (the “Company Note”) in the amount of $8,250,000 and Iview DSI issued to Laurus a secured term note (the “Iview Note”) in the amount of $2,000,000. Simultaneously with the closing of this refinancing transaction, we paid off the entire outstanding principal amount and all obligations due to Laurus under the Secured Convertible Term Note dated September 30, 2004, the Secured Convertible Minimum Borrowing Note dated September 30, 2004 and the Secured Revolving Note dated September 30, 2004 (collectively, the “2004 Notes”) and such 2004 Notes were subsequently cancelled.

Over the next twelve months we believe that our existing capital will be sufficient to sustain our operations. Management plans to seek additional capital in the future to fund operations, growth and expansion through additional equity, debt financing or credit facilities. We have had early stage discussions with investors about potential investment in our firm at a future date. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our shareholders.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This standard establishes a standard definition for fair value, establishes a framework under generally accepted accounting principles for measuring fair value and expands disclosure requirements for fair value measurements. This standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. Adoption of this statement is not expected to have any material effect on our financial position or results of operations .

In September 2006, the FASB issued Financial Accounting Standard No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statement Nos. 87, 88, 106, and 132(R ) ,” or FAS 158. This Statement requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to (a) recognize the funded status of a benefit plan—measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation—in its statement of financial position; (b) recognize, as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to FAS 87, Employers’ Accounting for Pensions , or FAS 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions ; (c) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions); and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. This statement is not expected to have a significant effect on our financial statements.

In February 2007, the FASB issued Financial Accounting Standard No. 159 The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 or FAS 159. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of this Statement apply only to entities that elect the fair value option.

The following are eligible items for the measurement option established by this Statement:

1.	Recognized financial assets and financial liabilities except:

a.	An investment in a subsidiary that the entity is required to consolidate

b.	An interest in a variable interest entity that the entity is required to consolidate

Employers’ and plans’ obligations (or assets representing net overfunded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), post employment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements.

d.	Financial assets and financial liabilities recognized under leases as defined in FASB Statement No. 13, Accounting for Leases.

e.	Deposit liabilities, withdrawable on demand, of banks, savings and loan associations, credit unions, and other similar depository institutions

f.	Financial instruments that are, in whole or in part, classified by the issuer as a component of shareholder’s equity (including “temporary equity”). An example is a convertible debt security with a noncontingent beneficial conversion feature.

2.	Firm commitments that would otherwise not be recognized at inception and that involve only financial instruments

3.	Nonfinancial insurance contracts and warranties that the insurer can settle by paying a third party to provide those goods or services

4.	Host financial instruments resulting from separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument.

The fair value option:

1.	May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method

2.	Is irrevocable (unless a new election date occurs)

3.	Is applied only to entire instruments and not to portions of instruments.

The Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements . We have not yet determined what effect, if any, adoption of this Statement will have on our financial position or results of operations .

FIN 48 - ‘Accounting for Uncertainty in Income Taxes’

In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”, an interpretation of SFAS No. 109. FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present and disclose uncertain tax positions taken or expected to be taken on a tax return. Under FIN 48, we shall initially recognize tax positions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. We shall initially and subsequently measure such tax positions as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. FIN 48 also revises disclosure requirements to include an annual tabular roll-forward of unrecognized tax benefits. We will adopt this interpretation as required in 2007 and will apply its provisions to all tax positions upon initial adoption with any cumulative effect adjustment recognized as an adjustment to retained earnings. Adoption of this statement is not expected to have any material effect on our financial position or results of operations.

EITF 00-19-2, "Accounting for Registration Payment Arrangements".

In December 2006, the FASB issued Staff Position FSP EITF 00-19-2, "Accounting for Registration Payment Arrangements". This statement is effective for existing registration payment arrangements as of January 1, 2007, with earlier application permitted in previously-unissued financial statements. As discussed in Note 8 and as permitted by the FSP, we adopted the provisions of this FSP in our fourth quarter of 2006, resulting in re-classification of certain of our outstanding warrants from derivative instrument liabilities to equity.

In December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of the Company’s fiscal year beginning after December 15, 2008. The Company has not yet determined the impact, if any, of SFAS 160 on its consolidated financial statements.

Off Balance Sheet Arrangements

None

DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective or complex judgments, due to the need to make estimates about the effects of matters that are inherently uncertain. We have identified six critical accounting estimates: accounts receivable allowances, goodwill, revenue, inventory, accounting for income taxes and financial instruments. See our Form 10-K for the year ended December 31, 2007, for a discussion of our critical accounting estimates.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements about our company that are not historical facts but, rather, are statements about future expectations. When used in this document, the words “anticipates,” “believes,” “expects,” “intends,” “should” and similar expressions as they relate to us, or to our management, are intended to identify forward-looking statements. However, forward-looking statements in this document are based on management’s current views and assumptions and may be influenced by factors that could cause actual results, performance or events to be materially different from those projected. These forward-looking statements are subject to numerous risks and uncertainties. Important factors, some of which are beyond our control, could cause actual results, performance or events to differ materially from those in the forward-looking statements. These factors include impact of general economic conditions in North America, changes in laws and regulations, fluctuation in interest rates and access to capital markets.

Our actual results or performance could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, we cannot predict whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on our results of operations and financial condition.

For further information about these and other risks, uncertainties and factors, please review the disclosure included in our December 31, 2007, Annual Report on Form 10-K under the caption “Risk Factors.”

You should not place undue reliance on any forward-looking statements. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other reason after the date of this quarterly report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

This item is not applicable to the Company because we are a smaller reporting company.

Item 4. Controls and Procedures

We maintain a system of disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

We have carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the des ign and operation of our disclosure controls and procedures. Based upon their evaluation and subject to the foregoing , the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the end of the period covered by this report, in all material respects, to ensure that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply their judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

This item is not applicable to the Company because we are a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults upon Senior Securities

Not applicable.

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

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

(a) Exhibits

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CREATIVE VISTAS, INC.

By: /s/ Dominic Burns

Dominic Burns, CEO

Dated: May 15, 2008

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