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 June 30, 2008

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _____ to _____

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 ¨

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 ¨	Accelerated Filer ¨
	Non-Accelerated Filer ¨	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

x No

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

At August 13, 2008, the number of shares outstanding of the registrant’s common stock, no par value (the only class of voting stock), was 37,224,926 .

PART I.
FINANCIAL INFORMATION

Item 1.	Financial Statements	1

Item 2.	Management's Discussion And Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	22

PART II.
OTHER INFORMATION

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3.	Defaults upon Senior Securities	22

Item 4.	Submission of Matters to a Vote of Security Holders	23

Item 5.	Other Information	23

Item 6.	Exhibits and Reports on Form 8-K	23

PART I. Financial Information

Item 1. Financial Statements

Creative Vistas, Inc.

Condensed Consolidated Balance Sheets

	June 30, 2008			December 31, 2007
	(Unaudited)
Assets
Current Assets
Cash and bank balances	$	2,540,203		$	1,960,340
Accounts receivable, net of allowance for doubtful accounts of $469,980 and $405,432		6,266,791			6,187,551
Income tax receivable		293,602			448,126
Inventory and supplies		976,646			1,043,815
Prepaid expenses		622,479			270,930
Due from related parties		2,530			2,581
Total current assets		10,702,251			9,913,343
Property plant and equipment, net of depreciation		8,862,756			6,352,014
Deposits		329,500			125,498
Goodwill		3,097,485			3,101,598
Intangible assets		1,323,267			1,717,003
Other investments – available for sale securities		5,530,200			-
Restricted cash		-			53,430
Deferred financing costs, net		621,423			551,747
Deferred income taxes		37,315			37,547
	$	30,504,197		$	21,852,180
Liabilities and Shareholders' (Deficit)
Current Liabilities
Bank indebtedness	$	2,853,108		$	-
Accounts payable and accrued liabilities		6,428,880			6,074,212
Current portion of obligations under capital leases		1,673,482			1,195,366
Deferred income		181,761			91,900
Deferred income taxes		25,858			25,858
Current portion of term notes		1,750,000			2,240,356
Current portion of other payable		297,030			303,030
Due to related parties		7,601			8,143
Total current liabilities		13,217,720			9,938,865
Term notes		14,811,219			13,565,421
Notes payable to related parties		1,500,000			1,500,000
Obligations under capital lease		4,575,296			3,184,103
Other payables		-			303,030
Due to related parties		228,584			233,203
		34,332,819			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 37,224,926 and 34,494,623 issued and outstanding
Common stock		6,488,137			1,439,307
Deferred compensation		(636,372	)		-
Additional paid-in capital		13,757,869			4,958,871
Accumulated (deficit)		(21,780,236	)		(12,445,468	)
Accumulated other comprehensive (losses)
Foreign currency translation adjustment		(741,371	)		(825,152	)
Unrealized loss on available for sale securities		(916,649	)		-
		(3,828,622	)		(6,872,442	)
	$	30,504,197		$	21,852,180

The accompanying notes are an integral part of these financial statements

Creative Vistas, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Losses

(Unaudited)

Three months ended

Six months ended

June 30

2008

2007

2008

2007

Contract and service revenue

Contract

1,786,195

1,534,017

3,265,514

2,861,264

Service

10,803,125

8,023,515

20,095,102

14,477,444

Other

5,541

19,049

15,600

31,493

12,594,861

9,576,581

23,376,216

17,370,201

Cost of sales

Contract

1,083,059

889,505

1,983,766

1,811,501

Service

8,669,381

5,735,967

16,076,602

10,345,667

9,752,440

6,625,472

18,060,368

12,157,168

2,842,421

2,951,109

5,315,848

5,213,033

Operating expenses

Project

266,018

323,637

592,073

605,303

Selling

261,382

211,726

479,979

387,570

General and administrative

3,954,241

1,996,591

7,536,495

3,747,547

4,481,641

2,531,954

8,608,547

4,740,420

Income (Loss) from operations

(1,639,220

)

419,155

(3,292,699

)

472,613

Interest and other expenses

Net financing expenses

1,383,466

740,091

5,816,383

1,299,289

Amortization of deferred charges

45,700

46,575

89,915

91,851

Foreign currency translation gain (loss)

(119,459

)

(559,237

)

135,775

(578,155

)

1,309,707

227,429

6,042,073

812,985

Income (loss) before income taxes

(2,948,927

)

191,726

(9,334,772

)

(340,372

)

Income taxes

Net income (loss)

(2,948,927

)

191,726

(9,334,772

)

(340,372

)

Other comprehensive income (loss):

Unrealized gain (loss) – available for sale securities

1,941,633

(916,649

)

Foreign currency translation adjustment

(96,891

)

(407,810

)

(452,498

)

(452,498

)

Comprehensive (loss)

(1,104,185

)

(216,084

)

(10,703,919

)

(792,870

)

Basic weighted-average shares

37,147,384

33,576,678

36,667,096

33,475,041

Diluted weighted-average shares

37,147,384

39,132,316

36,667,096

33,475,041

Basic earnings (loss) per share

(0.08

)

0.01

(0.25

)

(0.01

)

Diluted earnings (loss) per share

(0.08

)

0.01

(0.25

)

(0.01

)

The accompanying notes are an integral part of these financial statements

Creative Vistas, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six months ended June 30,
	2008			2007

Operating activities
Net cash provided by (used in) operating activities	$	(1,941,366	)	$	690,980
Investing activities
Payment for acquisition		(300,000	)		-
Proceeds of sales of property and equipment		34,920			115,737
Purchase of property and equipment		(994,708	)		(311,319	)
Net cash (used in) investing activities		(1,259,788	)		(195,582	)
Financing activities
Proceeds from bank indebtedness		2,860,665			-
Proceeds from term note		2,500,000			-
Deferred financing cost		(167,380	)		-
Repayment of notes payable		-			(28,564	)
Due to related parties		(385	)		(913	)
Repayment of capital leases		(843,385	)		(554,724	)
Issuance of common shares		1,260			-
Restricted cash		52,894			160,718
Repayment of term notes		(647,167	)		(583,966	)
Net cash provided by (used in) financing activities		3,756,502			(1,007,949	)
Effect of foreign exchange rate changes on cash		24,315			(78,852	)
Net change in cash and cash equivalents		579,863			(590,093	)
Cash and cash equivalents, beginning of period		1,960,340			3,560,181
Cash and cash equivalents, end of period	$	2,540,203		$	2,969,278

The accompanying notes are an integral part of these financial statements

Creative Vistas, Inc.

Notes to Consolidated Condensed Financial Statements

June 30, 2008 (Unaudited)

1. Summary of Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated balance sheet as at June 30, 2008, and the consolidated condensed statements of operations and cash flows for the periods ended June 30, 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, Inc., Cancable XL Inc., XL Digital Services Inc. (“XL Digital”), 2141306 Ontario Inc., Iview Holding Corp. (“Iview Holding”), and Iview Digital Video 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 June 30, 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 $9,334,772 for the six months ended June 30, 2008 and have an accumulated deficit of $21,780,236 at June 30, 2008. In addition, we have working capital and stockholder deficits of $2,515,469 and $3,828,622, respectively at June 30, 2008.

We have outstanding term loans aggregating $17,763,627, together with common stock options and warrants, held by Laurus Master Fund Ltd, a Cayman Islands company, and/or its affiliates (“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. (see Note 9)

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. 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. For the period ended June 30, 2008, the amortization of deferred financing costs was $89,915 (2007 - $91,851).

Cost	$	1,104,081
Accumulated amortization		(482,658	)
	$	621,423

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

Year		Amount
2008	$	96,638
2009		172,628
2010		163,484
2011		139,179
2012		33,593
2013		15,901
	$	621,423

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 for 812,988 shares of common stock of the Company at an exercise price of $0.01 per share.

On January 30, 2008, the Company entered into a Warrant Purchase Agreement with Laurus, 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 for 506,250 shares of common stock of the Company at an exercise price of $0.01 per share.

The above investment, which is classified as available for sale securities, was recorded as its fair value as at June 30, 2008, of $5,530,200 and had a cost basis of $6,446,849. The unrealized loss of $916,649 was recorded as a component of other comprehensive losses.

4. Intangible Assets

	Cost		Accumulated amortization		Net book value
Customer relationships	$	1,663,366	$	599,505	$	1,063,861
Trade name		1,279,209		1,019,803		259,406
	$	2,942,575	$	1,619,308	$	1,323,267

Amortization expense for the six month period ended June 30, 2008 amounted to $379,936 (2007-$300,000).

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 $3,500,000 respectively. Revolving credit loans bear interest at the bank’s domestic prime 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. As at June 30, 2008, the interest rate of the Canadian dollar amount was 6.25%. At June 30, 2008, the borrowings outstanding under this facility were $2,853,108. T he Company banking facility agreements contain financial covenants pertaining to maintenance of the tangible net worth and debt service coverage ratio. In the event of default, the bank would at its discretion to cancel the facilities and demand immediate repayment of all outstanding amounts.

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”) (see Note 9). 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 7%. 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 original 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. Simultaneously with the closing of this refinancing transaction, the Company paid off the entire outstanding principal amount and all obligations due to Laurus under a Secured Convertible Term Note, a Secured Convertible Minimum Borrowing Note and a Secured Revolving Note, all dated September 30, 2004 (collectively, the “2004 Notes”) and such 2004 Notes were subsequently cancelled.

The options held by Laurus to acquire 49% of Cancable and 20% of Iview Holding are accounted for as minority interests. Because Cancable and Iview Holding have incurred losses, no minority interest has been recognized at June 30, 2008.

The Company Note bears interest at the prime rate plus 2% with a minimum rate of 7%. 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, with a balance of $4,950,000 payable on the maturity date. Through June 30, 2008, the Company has issued warrants to purchase up to 1,728,000 shares of common stock of the Company at prices from $0.90 to $2.84 per share to defer until maturity the principal repayments that were due from March 1, 2007 to June 1, 2008.

The Iview Note bears interest at the prime rate plus 2% with a minimum rate of 7%. 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, with the balance of $1,600,000 payable on the maturity date. The Company is not obligated, except upon an event of default, to pay more than 25% of the original principal amount prior to December 31, 2011.

In June 2008, the Company and its subsidiary, Cancable Inc., entered into a financing transaction whereby the Company issued to Valens Offshore SPV II, Corp. (“Valens Offshore”) and Valens U.S. SPV I, LLC (“Valens U.S.”) secured term notes in the amount of $1,700,000 and $800,000, respectively (collectively, the “Company Second Notes”). The Company also issued to Valens Offshore and Valens U.S. warrants to purchase up to 1,333,333 and 627,451 shares, respectively, of common stock of the Company at a price of $0.01 per share. The loans are secured by all of the assets of the Company and all its subsidiaries.

Interest on the term notes for the six month period ended June 30, 2008 was $631,437 (2007: $846,574).

	Amount
Cancable Note interest at prime plus 1.75% (minimum of 7%), due December 31, 2011	$	5,148,754
Company Note interest at prime plus 2% (minimum of 7%), due February 13, 2010		8,250,000
Iview Note bears interest at prime plus 2% (minimum of 7%), due on February 13, 2011		1,864,873
Company Second Notes interest at 12%, due on June 24, 2013		2,500,000
Less: unamortized discount on Company Second Notes		(1,202,409	)
		16,561,218
Less: current portion		1,750,000
	$	14,811,219

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

	Amount
2008	$	875,000
2009		1,750,000
2010		5,875,000
2011		6,763,627
2013		1,297,591
	$	16,561,218

7. Net Financing Expenses

	Six months ended June 30,
	2008		2007
Capital leases	$	247,550	$	180,624
Interest on terms and credit facility		631,437		846,574
Cost of deferred principal repayment on term notes – 648,000 warrants		628,238		246,459
Warrants issued for proposed new financing		3,723,565		-
Financing cost for the extension for the warrants issued (Note 9)		560,735		-
Others		24,858		25,632
	$	5,816,383	$	1,299,289

Included in net financing expenses is the fair value of $3,723,565 for 2,030,865 warrants to purchase the Company’s common stock issued in January 2008 as follows:

(i) On January 22, 2008 the Company entered into a letter agreement with Erato Corporation for Erato to provide up to $12,000,000 in financing to the Company on such terms and conditions as the Company and Erato shall mutually agree (the “Bridge Financing”). Any proceeds from the Bridge Financing may only be used by the Company for the purpose of financing a third party. The Company does not currently have an agreement to provide financing to any such third party. As consideration for the letter agreement, the Company issued to Erato a warrant to purchase up to 1,738,365 shares of common stock of the Company at an exercise price of $0.01 per share. Because the Company does not currently have any agreement to provide financing to a third party, the financing has not occurred and, as a result, the Company expensed the value of the warrants. The fair value of the warrants of $3,144,685 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 4.23%, expected dividend yield of 0%, volatility of 45%, share price of $1.81 and the expected life of the warrants of 50 years (see Note 9).

(ii) On January 30, 2008, the Company entered into a non-binding letter of intent with Valens U.S. Fund, LLC (the “Letter Agreement”) in which Valens U.S. Fund, LLC confirmed its intention to provide up to $4,000,000 in financing to a subsidiary of the Company. As consideration for the Letter Agreement, the Company issued to Laurus, Erato, Valens U.S. Fund, LLC and Valens Offshore SPV I, Ltd. warrants to purchase 292,500 shares of common stock of the Company at an exercise price of $0.01 per share. The Letter Agreement was only an expression of the present intentions of the parties and no binding legal obligation will exist until the parties sign a definitive agreement. As a result, the Company expensed the value of the warrants. The fair value of the warrants of $578,880 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 4.44%, expected dividend yield of 0%, volatility of 45%, share price of $1.98 and the life of the warrants of 50 years. (see Note 9)

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 of $1,500,000 bears interest at 3% per annum with no fixed terms of repayment. The notes, each with a face 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, both the notes were transferred to Malar Trust Inc. (the Company’s CEO is the shareholder of Malar Trust Inc.).

Interest expense recognized for the six month period end of June 30, 2008 was $24,858 (2007 - $24,155).

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 $211,828 was recorded under general and administrative expenses for the six month period ended June 30, 2008. The remaining balance was recorded as deferred compensation. Additionally, the Company issued 2,000 common shares to an employee for the exercise of an employee stock option for cash aggregating $1,260.

During the period ended June 30, 2008, the Company entered into a consulting agreement by issuing 300,000 common shares stock in consideration for investor relations services rendered for 2008 with the fair value of $600,000. The expense in the amount of $200,000 was recorded under general and administrative expenses. The remaining balance was recorded as deferred compensation. Additionally, the Company issued 10,169 common shares for the payment of outstanding legal fees in the amount of $25,117.

In conjunction with the issuance of the Cancable Note and Iview Note in 2006, the Company has granted Laurus options to purchase up to 49% of Cancable Holding Corp. and 20% of Iview Holding Corp. respectively. The financial statements of Cancable Holding Corp. and Iview Holding Corp. have negative equity on a stand alone basis. At such time as these entities have positive equity, the Company will account for the options as a minority interests.

Options

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:

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.

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.

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.

On June 30, 2006, the Company granted to employees options to purchase 2,317,000 shares of common stock at $0.63 per share; the options expire on June 30, 2011. During 2007, the Company granted to employees options to purchase 1,226,000 shares of common stock, at prices ranging from $0.90 to $2.59 per share; the options expire in 2012.

At June 30, 2008 options to purchase 2,939,000 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 June 30, 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. At June 30, 2008, 786,500 options were vested. The cost recognized for the six month period ended June 30, 2008 was $202,706 (2007:$127,060) 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 June 30, 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		4.75		-
Granted		-			-
Exercised		(2,000	)	$	0.63
Forfeited or expired		(281,000	)	$	0.63
Outstanding at June 30, 2008		2,939,000		$	1.22		3.75	$	0.67

Exercisable at June 30, 2008		786,500		$	0.63		-		-

Warrants

The Company uses 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%, exercise prices of $0.01 to $2.84 and the life of warrants of 4 to 50 years. During the period ended June 30, 2008, in connection with financing arrangements, the Company issued warrants to purchase 2,284,784 shares of common stock. The fair value of the warrants of $2,447,030 was measured using the Black-Scholes option pricing model using the following assumptions: risk free interest rate of 4.19%, expected dividend yield of 0%, volatility of 120% to 125%, exercise prices of $1.07 to $1.90 and the life of the warrants 4 to 10 years.

As of June 30, 2008, we had the following common stocks 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		09-30-2016		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		04-30-2017		100,000	$	1.01	$	44,309	Financing*
05-31-2005		05-31-2012		100,000	$	1.01	$	56,614	Financing
06-22-2005		06-22-2017		313,000	$	1.00	$	137,703	Financing*
06-30-2005		06-30-2017		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		03-01-2016		108,000	$	0.90	$	39,519	Financing*
04-01-2007		04-01-2016		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
04-01-2008		04-01-2012		108,000	$	1.09	$	162,748	Financing
05-01-2008		05-01-2012		108,000	$	1.19	$	103,180	Financing
06-01-2008		06-01-2012		108,000	$	1.02	$	88,114	Financing
06-23-2008		06-23-2018		627,451	$	0.01	$	669,756	Financing
06-23-2008		06-23-2018		1,333,333	$	0.01	$	1,423,232	Financing
				13,268,483

* In May 2008, the Company entered an amendment to extend the expiry date of Stock Purchase Warrants issued to Laurus from the expiry dates from 2011 to 2016 and from 2016 to 2017. The changes in value of warrants in the amount of $560,735 were recorded under net financing costs.

10. Major Customers

During the six months ended June 30, 2008 the Company derived 58.8% (2007:59.4%) of its revenue from a single customer. The accounts receivable from this customers comprises 39.5% (2007: 28.0%) 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 subsidiaries XL Digital Services, Inc. and 2141306 Ontario Inc are Canadian based entities. 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.

	June 30, 2008			June 30, 2007
Sales:
Cancable	$	19,267,812		$	13,816,347
AC Technical		4,004,510			3,492,185
Iview		103,894			59,019
Creative Vistas, Inc.		-			2,650
Consolidated Total	$	23,376,216		$	17,370,201
Depreciation and amortization:
Cancable	$	1,098,335		$	730,849
AC Technical		20,427			20,060
Consolidated Total	$	1,118,762		$	750,909
INTEREST EXPENSES:
Cancable	$	487,897			500,853
AC Technical		-			1,650
Iview		71,096			101,011
AC Acquisition		24,859			24,155
Creative Vistas, Inc.		5,232,531			671,620
CONSOLIDATED TOTAL	$	5,816,383			1,299,289
Net (Loss):
Cancable	$	(3,231,567	)	$	1,087,989
AC Technical		400,784			42,160
Iview		(150,023	)		(65,440	)
AC Acquisition		(24,859	)		(24,155	)
Corporate (1)		(6,329,107	)		(1,380,926	)
Consolidated Total	$	(9,334,772	)	$	(340,372	)
TOTAL ASSETS
Cancable	$	16,444,277		$	10,009,446
AC Technical		3,712,508			3,762,839
Iview		1,301,630			1,526,031
AC Acquisition		-			-
Creative Vistas, Inc.		9,045,782			4,337,629
Consolidated Total	$	30,504,197		$	19,635,945
CAPITAL ASSETS
Cancable	$	8,033,961		$	4,879,244
AC Technical		828,795			817,507
Consolidated Total	$	8,862,756		$	5,696,751
CAPITAL EXPENDITURES
Cancable	$	3,811,432		$	2,425,482
AC Technical		10,948			3,917
Iview		-			-
AC Acquisition		-			-
CONSOLIDATED TOTAL	$	3,822,380		$	2,429,399

(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:

	June 30, 2008		June 30, 2007
Contract	$	3,265,514	$	2,861,264
Service		20,095,102		14,477,444
Others		15,600		31,493
Total sales to external customers	$	23,376,216	$	17,370,201

Revenue generated by the Company in Canada and the United States was $22,072,321 (2007:$17,370,201) and $1,303,895 (2007: $Nil), respectively.

12. Subsequent Events

All the shares of 180 Connect Inc. owned by the Company recorded as Other Investment (see Note 3) was subsequently acquired by a third party.

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

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 Month Period Ended June 30, 2008

to Period Ended June 30, 2007

For purposes of this “Management’s Discussion and Analysis or Plan of Operation”, we compared the three month period ended June 30, 2008, to the comparable period in 2007.

Sales : Sales for the three month period ended 2008 increased 31.5% to $12,594,900 from $9,576,600 for the three month period ended 2007. The increase in revenue was mainly due to the increase in service revenue of the Cancable Segment to $10,395,900 for the three month period ended 2008 from $7,679,800 for the same period in 2007.

(a) Cancable Segment - This segment includes Cancable Inc., 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 previously have a presence. Total revenue of this segment for the second quarter of fiscal 2008 was $10,395,900 from $7,679,800 for the same period in fiscal 2007. The increase reflects continued growth in revenue, particularly from having Rogers Cable Inc as a customer. We continued to allocate resources to support the growth of our business. Total revenue generated in the United States in the second quarter of fiscal 2008 was $1,024,300 and there was no such revenue in the same period of fiscal 2007. Rogers Cable Inc. is Cancable Group’s largest customer and the revenue from this customer for the second quarter of fiscal 2008 was approximately $6,853,800 or 65.9% of its total Cancable revenue compared to $5,772,300 or 75.2% for the three month ended June 30, 2007. The increase was mainly primarily to the acquisition of XL Digital. (b) AC Technical segment - Total revenue of AC Technical segment was $2,157,800 for the second quarter of fiscal year 2008 compared to $1,854,400 for the second quarter of fiscal year 2007. Contract revenue increased to $1,786,200 for the three months ended June 30, 2008 compared to $1,534,000 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 $407,200 for the three months ended June 30, 2008 from $343,700 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 June 30, 2008 was $9,752,400 or 77.0% of revenues compared to $6,625,500 or 69.2% of revenues for the three month period ended June 30, 2007. The increase in cost of sales as a percentage of sales resulted principally from the increase in cost of sales of the service revenue from $5,736,000 for the three month period ended June 30, 2007 to $8,669,4 00 for the three month period ended June 30, 2008. (a) Cancable segment - Cost of sales of this segment was $8,509,400 for the three months ended June 30, 2008, which is comprised principally of labor expenses $6,621,100, vehicle expenses $911,800 and material cost $688,900. 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 $1,054,500. The material cost was $535,800 or 24.8% of the AC Technical revenue for the three months ended June 30, 2008 compared to $630,400 or 34.0% 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 increased to $491,600 or 22.7% of AC Technical revenues for the three months ended June 30, 2008 and $360,500 or 19.4% of AC Technical revenues for fiscal 2007. The increase in labor and subcontractor cost was mainly due to the increase in revenue.

Project, Selling, General and Administrative Expenses : Project, selling, general and administrative expenses for the three months ended June 30, 2008 was $4,481,600 or 35.6% of revenues compared to $2,513,900 or 26.3% of revenues for the same period of fiscal 2007. The balance is mainly comprised of the following:

Project cost was decreased to $266,000 or 2.1% of revenue for the three months ended June 30, 2008, compared to $323,600 or 3.4% 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 $163,300 in the second quarter of fiscal 2008 compared to $181,700 for the same period of fiscal 2007. The decrease was mainly due to the decrease in the number of indirect staff. The automobile and travel expenses were approximately $58,600 for the three months ended June 30, 2008 compared to $81,900 for the same period of fiscal 2007. The decrease was mainly due to less travel by the staff this year.

Selling expense was $261,400 or 2.1% of revenues for the second quarter of 2008 compared to $211,800 or 2.2% of revenues for the first quarter of fiscal 2007. Selling expenses were mainly related to AC Technical segment. As at June 30, 2008, we have the same number of salespersons, 5, in AC Technical segment as we did at June 30, 2007. salaries and commission to salespersons for the three months ended June 30, 2008 of $133,200 compared to $139,000 for the same period of fiscal 2007 amount with no material fluctuation. The advertising and promotion and trade show expenses were $39,700 in the second quarter of fiscal 2008 compared to $15,600 for the same period of fiscal 2007.

General and administrative expenses were $3,954,200 or 31.4% of revenues for the three month period ended June 30 31, 2008 compared to $1,996,600 or 20.8% for the same period of fiscal 2007. The balance for the three months ended June 30, 2008 is mainly comprised of $124,900 of professional fees related to fees for the quarterly reports and other corporate matters. In addition, investor relations expenses amounted to $353,300 for the three month period ended June 30, 2008 compared to $231,000 for the same period last year. Total salaries and benefits to administrative staff were $1,173,500 for the second quarter of 2008 compared to $628,200 for the same period last year. The increase in balance was a result of the Company hiring additional employees who were required for the expansion of the business. Total depreciation of property plant and equipment was $617,800 for the second quarter of fiscal 2008 compared to $405,600 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 June 30, 2008, was $1,309,700 or 10.4% of revenues compared to net expenses of $227,400 or 2.4% of 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 $45,700 compared to $46,600 for the same period of fiscal 2007. Additionally, net financing expenses increased to $1,383,500 or 11.0% of revenues compared to $740,100 or 7.7% of revenues for the same period of fiscal 2007. The Company has issued 324,000 warrants with a value of $354,000 to defer the principal repayment in the second quarter of fiscal 2008. For the same period of fiscal 2007, the Company issued 324,000 warrants with a value of $206,900 to defer the principal repayment. The interest due with respect to the Company’s credit facility was $312,500 for the three months ended June 30, 2008 compared to $527,433 in the same period of 2007. The decrease in the balance was due to the decrease in interest rate and outstanding payables of the term notes. Additionally, the Company entered an amendment with Laurus to extend certain Stock Purchase Warrants, the changes in value was $536,700 which was recorded under net financing costs and there was no such expenses for the same period of last year.

Income taxes : No income tax was paid for the period ended June 30, 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 June 30, 2008 was $2,948,900 compared to net income of $191,800 for the three month period ended June 30, 2007. The Company’s operating loss was $1,639,200 for the second quarter of fiscal 2008 compared to operating income of $419,200 for the same period of fiscal 2007. The loss was primarily attributed to the Company’s allocation of resources to grow the business in the United States and more costs incurred.

Results of Operations

Comparison of Six Month Period Ended June 30, 2008

to Period Ended June 30, 2007

For purposes of this “Management’s Discussion and Analysis or Plan of Operation”, we compared the first six month period ended June 30, 2007, to the comparable period in 2006.

Sales : Sales for the six month period ended 2008 increased 34.6% to $23,376,200 from $17,370,200 for the six month period ended 2007. The increase in revenue was mainly due to the increase in service revenue of Cancable Segment to $19,267,800 for the six month period ended 2008 from $13,816,300 for the same period in 2007.

(a) Cancable Segment - This segment includes Cancable Inc., Cancable, Inc., XL Digital and OSS-IM View (collectively, “Cancable Group”). Total revenue of this segment for the six month period ended 2008 was $19,267,800 from $13,816,300 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. Total revenue generated in the United States in the second quarter of fiscal 2008 was $1,303,900 and there was no such revenue for the same period of last year. Rogers Cable Inc. is Cancable Group’s largest customer and the revenue from this customer for the six month period ended June 30, 2008 was approximately $13,361,900 or 69.3% of its total Cancable revenue compared to $10,136,000 or 74.7% for the six months ended June 30, 2007. (b) AC Technical segment - Total revenue of AC Technical segment was $4,004,500 for the six months ended June 30, 2008 compared to $3,492,200 for the six months ended of fiscal year 2007. Contract revenue increased to $3,177,200 for the six months ended June 30, 2008 compared to $2,824,000 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 $827,300 for the six months ended June 30, 2008 from $661,100 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 six months ended June 30, 2008 was $18,060,400 or 77.3% of revenues compared to $12,157,200 or 70.0% of revenues for the six month period ended June 30, 2007. (a) Cancable segment - Cost of sales of this segment was $16,076,600 for the six months ended June 30, 2008 which is mainly comprised of labor expenses $11,944,600, vehicle expenses $1,617,200 and material cost $1,228,700 (b) AC Technical segment - Cost of sales of this segment was $1,919,400. The material cost was $1,127,700 or 28.1% of the AC Technical revenue for the six months ended June 30, 2008 compared to $1,227,100 or 35.1% of revenues in the same period of fiscal 2007. The decrease in percentage of the material cost was mainly due to some contracts requiring less materials. On the other hand, the labor and subcontractor cost increased to $755,100 or 18.9% of AC Technical revenues for the six months ended June 30, 2008, from $657,500 or 18.8% of AC Technical revenues for the six months ended June 30, 2007 with no material fluctuation.

Project, Selling, General and Administrative Expenses : Projects, selling, general and administrative expenses for the six months ended June 30, 2008 was $8,608,500 or 36.8% of revenues compared to $4,740,420 or 27.3% of revenues for the same period of fiscal 2007. The balance is mainly comprised of the following:

Project cost was $592,100 or 2.5% of revenue for the six months ended June 30, 2008, compared to $605,300 or 4.4% 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 $357,900 for the six months ended June 30, 2008, compared to $339,500 for the same period of fiscal 2007. The decrease in expenses was mainly due to the decrease in indirect staff. The automobile and travel expenses were approximately $124,600 for the six month period ended June 30, 2008 compared to $146,500 for the same period of fiscal 2007. The decrease in balance was mainly due to the decrease in number of vehicles and less travel for the six months ended June 30, 2008.

Selling expenses were $479,900 or 2.1% of revenues for the six month period ended 2008 compared to $387,600 or 2.2% of revenues for the same period of fiscal 2007. Selling expenses were mainly related to the AC Technical segment. The balance for the six months ended June 30, 2008 is mainly comprised of salaries and commission to salespersons of $307,700 compared to $219,600 for the same period of fiscal 2007. The increase was mainly due to the increase in commission and the hiring of additional employees. The advertising, promotion and trade show expenses were $67,700 for the six months ended June 30, 2008, and $50,900 for the same period of fiscal 2006. There was no material fluctuation for two fiscal years.

General and administrative costs were $7,546,500 or 32.2% of revenues for the six month period ended June 30, 2008 compared to $3,747,500 or 21.5% for same period of fiscal 2007. The balance for the six month period ended June 30, 2008, is comprised of $328,200 of professional fees related to fees for the quarterly reports and other corporate matters. The investor relations expenses increased to $495,500 for the six month period ended June 30, 2008, compared to $288,000 for the same period last year. Total salaries and benefits to administrative staff increased to $2,259,800 for the six month period ended June 30, 2008 compared to $1,143,100 for the same period last year. The increase was mainly due to the increase in headcounts. Total depreciation of property plant and equipment was $1,188,800 for the six months ended June 30, 2008, compared to $750,900 for the same period of last year. The increase was mainly due to the addition of capital assets.

Interest and other Expenses (Income) : Interest and net other expenses for the six months ended June 30, 2008, of $6,042,100 or 25.8% of revenues compared to net expenses of $813,000 or 4.7% 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 $89,900 compared to $91,900 for the same period of fiscal 2007. Additionally, net financing expenses increased to $5,816,400 or 24.9% of revenues compared to $1,299,300 or 7.5% 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 $631,400 for the six months ended June 30, 2008 compared to $846,400 in the same period of 2007. The decrease in the balance was due to the decrease in interest rate and outstanding payables of the term notes.

Income taxes : No income tax provision for the period ended June 30, 2008 which was mainly due to the Company has losses carried forward to offset all income generated from the Company. All prior taxes 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 six months ended June 30, 2008 was $9,334,800 compared to net loss of $340,300 for the six month period ended June 30, 2007. The Company’s operating loss was $3,292,700 for the six months ended 2008 compared to operating income of $472,700 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 June 30, 2008, we had $2,540,200 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 $1,941,400 for the six months ended June 30, 2008. The changes in operating assets and liabilities resulted in a net cash of $4,270, which included a $220,300 increase in accounts receivable, a $48,400 decrease in inventory, a $569,600 increase in prepaid expenses, a $506,300 increase in accounts payable, a $147,500 increase in income tax recoverable and a $92,000 increase in deferred revenue.

Comparison of the balance sheet as at June 30, 2008 to December 31, 2007

Accounts Receivable

Our accounts receivable increased to $6,266,800 as at June 30, 2008 from $6,187,600 as at December 31, 2007. Accounts receivable of the Cancable segment were $4,452,900 as at June 30, 2008 compared to $3,989,100 as at December 31, 2007. The increase in balance was mainly due to the increase in revenue. Accounts receivable of the AC Technical segment were $1,690,300 as at June 30, 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 June 30, 2008 was $976,700 compared to $1,043,800 as at December 31, 2007. The inventory of the Cancable segment as at June 30, 2008 was $319,100 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 June 30, 2008 was $453,400 compared to $638,900 as at December 31, 2007. The level of inventory was higher as at December 31, 2007 as we had purchased the inventory closed to year ended for jobs to be started during the first quarter of 2008.

Accounts Payable and Accrued Liabilities

Accounts payable increased to approximately $6,428,900 as at June 30, 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 $181,800 as at June 30, 2008 compared to a balance of $91,900 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 $1,259,800 for the six months ended June 30, 2008, compared to $195,600 used for the six months ended June 30, 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 six month period ended June 30, 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 $3,756,500 for the six months ended June 30, 2008 compared to net cash used of $1,007,900 for the six months ended June 30, 2007. Last year’s balance mainly represents the repayment of capital leases and term notes in the amount of $1,138,700. The current year balance represents net proceeds received from new banking facilities set up with a Canadian financial institution in the amount of $2,860,700. The balance was offset with the repayment of term notes and capital leases in the amount of $1,490,600. Additionally, the Company has issued a term loan to LV Administration Service Inc. in the amount of $2,500,000 with total financing cost of $167,380. Total net proceeds from this term loan were $2,332,620.

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. In June 2008, the Company and its subsidiary, Cancable Inc., entered into a financing transaction whereby the Company issued to Valens Offshore SPV II, Corp. (“Valens Offshore”) and Valens U.S. SPV I, LLC (“Valens U.S.”) secured term notes in the amount of $1,700,000 and $800,000, respectively (collectively, the “Company Second Notes”). The Company also issued to Valens Offshore and Valens U.S. warrants to purchase up to 1,333,333 and 627,451 shares of common stock, respectively, of the Company with an exercise price of $0.01 per share. The loans are secured by all of the assets of the Company and all its subsidiaries.

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 May 2008, the FASB issued FAS 163 (“FAS 163”), “Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60 ”. This Statement interprets Statement 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of this Statement. FAS 163 is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2008, the FASB issued FAS 162 (“FAS 162”), “The Hierarchy of Generally Accepted Accounting Principles.” This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. Although this statement formalizes the sources and hierarchy of GAAP within the authoritative accounting literature, it does not change the accounting principles that are already in place. This statement will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” FAS 162 is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142, Goodwill and Other Intangible Assets (“FAS 142”). The intent of FSP FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141(R) and other applicable accounting literature. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and must be applied prospectively to intangible assets acquired after the effective date. The Company has not determined the impact, if any, of the adoption of FSP FAS 142-3.

Effective January 1, 2008, we adopted the provisions of FAS 157, Fair Value Measurements, except as it applies to those nonfinancial assets and nonfinancial liabilities as noted in proposed FSP FAS 157-b. The partial adoption of FAS 157 did not have a material impact on our consolidated financial position, results of operations or cash flows. FAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. In February 2008, the FASB issued FASB Staff Position (“FSP”) 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

In March 2008, the FASB issued FAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133, which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under FAS 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. FAS 161 is effective for us beginning January 1, 2009. We are currently assessing the potential impact that adoption of FAS 161 may have on our financial statements.

Effective January 1, 2008, we adopted the provisions of FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities . The adoption did not have a material impact on our consolidated financial position, results of operations or cash flows. FAS 159 gives us the irrevocable option to carry many financial assets and liabilities at fair values, with changes in fair value recognized in earnings.

In December 2007, the FASB issued FAS 141R, Business Combinations , which replaces FAS 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. FAS 141R is effective for us beginning January 1, 2009 and will apply prospectively to business combinations completed on or after that date.

In December 2007, the FASB issued FAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, which changes the accounting and reporting for minority interests. Minority interests will be re-characterized as non-controlling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. FAS 160 is effective for us beginning January 1, 2009 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. We are currently assessing the potential impact that adoption of FAS 160 may have on our 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 June 30, 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: August 14, 2008

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