­UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
20-F
  ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
  For
fiscal year ended: December
31, 2007
 Commission
File Number: 000-51180
  Poly-Pacific
International Inc.
 (Exact
Name of the Registrant as Specified in its Charter)
  Alberta,
Canada
 (Jurisdiction
of Incorporation or Organization)
  1279
E. 51st
Avenue
 Vancouver,
BC
 V5X
1E9
 (Address
of Principal Executive Offices)
  Securities
registered or to be registered pursuant to Section 12(b) of the Act: NONE
  Securities
registered or to be registered pursuant to Section 12(g) of the
Act:
  Common  shares, no
par value
 (Title of
Class)
  Preferred  shares,
no par value
 (Title of
Class)
  Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:
NONE
  The
number of outstanding shares of each of the issuer's classes of capital or
common shares as of the close of the period covered by the annual
report:
 58,720,279Common Shares and 0 (zero)
Preferred Shares
  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: No:
  Indicate
by check mark which financial statement item the registrant has elected to
follow:
  Item
17:Item
18:
  Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
  Not
applicable
  1
  TABLE OF CONTENTS
  EXPLANATORY
      NOTE REGARDING FORM 20-F
              5GENERAL
              5FORWARD
      LOOKING STATEMENTS
              5PART
      I
              6ITEM
      1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
              6A.
      Directors and Senior Management
              6Table
      1.1--Company Directors and Officers
              6B.
      Advisers
              6C.
      Auditors
              6ITEM
      2. OFFER STATISTICS AND EXPECTED TIME TABLE
              6ITEM
      3. KEY INFORMATION
              7A.
      Selected Financial Data
              7Table
      3.1--Summary of Financial Statements in United States GAAP
              7Table
      3.2--Effects of Currency Translation and Conversion
              8B.
      Capitalization and Indebtedness
              8C.
      Reasons for the Offer and Use of Proceeds
              8D.
      Risk Factors
              8ITEM
      4. INFORMATION ON THE COMPANY
              10A.
      History and Development of the Company
              10B.
      Business Overview
              10
  2
  ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
              13Company's
      Critical Accounting PoliciesA.
      Operating Results
              16Table
      5.1--Summary of Operations for the Blasting Media
              17Table
      5.2--Summary of Operations for the Plastic Lumber
              17B.
      Liquidity and Capital Resources
              19D.
      Trend Information
              21E.
      Off Balance Sheet Arrangements
              21F.
      Tabular Disclosure of Contractual Obligations
              21ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
              21A.
      Directors and Senior Management
              21B.
      Compensation
              23C.
      Board Practices
              27D.
      Employees
              27E.
      Share Ownership
              27ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
              28A.
      Major Shareholders
              28B.
      Related Party Transactions
              28C.
      Interests of Experts and Counsel
              28ITEM
      8. FINANCIAL INFORMATION
              29A.
      Consolidated Financial Statements and Other Financial
      Information
              30Consolidated
      Financial Statements for December 31, 2007, 2006 and 2005
              30B.
      Significant Changes
              30ITEM
      9. THE OFFER AND LISTING
              60Table
      9.1--History on TSX Venture Exchange (in Canadian Dollars)
              60ITEM
      10. ADDITIONAL INFORMATION
              61A.
      Share Capital
              61Common
      Shares
              61Preferred
      Shares
              61Stock
      options
              61B.
      Memorandum and Articles of Association
              65C.
      Disclosure controls and Procedures update
              65D.
      Material Contracts
              66E.
      Exchange Controls
              66F.
      Taxation
              68G.
      Dividend and Paying Agents
              71H.
      Statement by Experts
              71I.
      Documents on Display
              71J.
      Subsidiary Information
              72
  3
  ITEM
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
              72ITEM
      12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
              72PART
      II
              72ITEM
      13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
              72ITEM
      14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
              72ITEM
      15. CONTROL AND PROCEDURES
              72ITEM
      16. RESERVED
              72A.
      Audit Committee Financial Expert
              72B.
      Code Of Ethics
              72C.
      Principal Accountant Fees And Services
              72D.
      Exemption From Listing Standards For Audit Committees
              73E.
      Purchases Of Equity Securities By The Issuer And Affiliated
      Persons
              73PART
      III
              73ITEM
      17. FINANCIAL STATEMENTS
              73ITEM
      18. FINANCIAL STATEMENTS
              73ITEM
      19. EXHIBITS
              74SIGNATURE
              75
  4
 
 EXPLANATORY
NOTE REGARDING FORM 20-F
  This Form
20-F is filed for the years ended December 31, 2007, 2006, and
2005.
  GENERAL
  Unless
the context otherwise requires, the "Registrant" means Poly-Pacific
International Inc. and the "Company" means the Registrant.
  The
Registrant uses the Canadian dollar as its reporting currency. Unless otherwise
indicated, all references in this document to "dollars" or "$" are expressed in
Canadian dollars. Also, see Item 3 "Key Information" Table 3.2 for more detailed
currency and conversion information.
  FORWARD
LOOKING STATEMENTS
  Some of
the statements contained in this Report that are not historical facts,
including, statements made in the sections entitled Item 3-"Key Information,"
Item 4-"Information on the Company," “New Opportunities/Direction for the
Company,” and Item 5-"Operating and Financial Review and Prospects," are
statements of future expectations and other forward-looking statements that are
based on management's current views and assumptions and involve known and
unknown risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied in the statements.
Actual results, performance or events may differ materially from those in the
statements due to, without limitation, (i) general economic conditions, (ii)
performance of financial markets, (iii) interest rate levels, (iv) currency
exchange rates, (v) changes in laws and regulations, (vi) changes in the
policies of central banks and/or foreign governments, and (vii) competitive
factors, in each case on a global, regional and/or national basis. See Item
5-"Operating and Financial Review and Prospects."
  The
forward looking statements contained herein are based on the Company's
assumptions regarding world economic and market conditions the price and supply
of raw materials. Among the factors that have a direct bearing on the Company's
future results of operations and financial conditions are the successful
development of the Company's projects and a change in government regulations,
leverage and debt service, competition, cost of certain raw materials, currency
fluctuations and restrictions, technological changes, and other factors
discussed herein. The Company's actual results of operations may vary
significantly from the performance projected in the forward looking
statements.
  5
 
 PART I
  ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  A.
Directors and Senior Management
 
 Table
1.1—Company Directors and Officers
 
 Name
              Position
              Business
      AddressRandy
      Hayward (appointed Feb 16, 2007)
              President,
      Acting Chief Executive officer and Active Chief Financial Officer and
      Director
              1279
      E. 51st
      Avenue, Vancouver, British Columbia,  V5X 1E9Richard
      Oravec (appointed Feb. 16, 2007)
              Director
              New
      York, New York, USAGreg
      Pendura (appointed July 6, 2007)
              DirectorDick
      Sharples (appointed Nov. 2, 2007)
              DirectorDavid
      Tam (resigned Nov. 2, 2007)
              Director,
      Secretary and Canadian Counsel
              1500
      Manulife Place
                10180-101
      Street
                Edmonton,
      Alberta  T5J 4K1Mike
      Duff (resigned Nov. 2, 2007)
              Director
              2380
      Commerce Place
                10155-102
      Street
                Edmonton,
      Alberta  T5J 4G8Edward
      Chambers (resigned Nov. 2, 2007)
              Director
              2835
      Lansdowne Road
                Victoria,
      British Columbia  V3R 3P8
  B.
Advisers
  The
Company banks with the Bank of Nova Scotia (ScotiaBank) at 11508 Jasper Avenue,
Edmonton, Alberta T5K 0M8. The telephone number for the ScotiaBank is
780-448-7930.  The Company’s Canadian corporate legal advisor is Roy
Hudson who is a partner in Davis LLP. The address for Davis LLP is 1500
Livingston Place, 1000-250 2nd St. SW.
Calgary, Alberta, Canada, and T2P. The telephone number for Roy
Hudson  is 403-698-8708.
  C.
Auditors
  The
Company’s auditor is K.R. Margetson Ltd. located at 5588 Inlet Avenue, Sechelt,
British Columbia, Canada V0N 3A1.  The audit contact partner is Keith
Margetson, C.A. and C.P.A.
  
 ITEM
2. OFFER STATISTICS AND EXPECTED TIME TABLE
  Not
applicable.
  6
  ITEM
3. KEY INFORMATION
  A.
Selected Financial Data
  The
selected financial data set forth below have been derived from our audited
consolidated financial statements. Our consolidated financial statements for
fiscal years ended December 31, 2007 have been audited by K.R.Margetson
Ltd.  Consolidated financial statements for fiscal years ending
December 31, prior to 2007 have been audited by Collins Barrow Edmonton LLP,
Chartered Accountants. The selected financial data should be read in conjunction
with and are qualified by reference to the Consolidated Financial Statements and
notes thereto for the years ended December 31, 2007 and 2006 included elsewhere
in the Exhibits to this Report.
  Our
financial statements have been prepared in accordance with the standards of the
Public Company Accounting Oversight Board (PCAOB) pursuant to generally accepted
accounting principles (GAAP) in the United States.
  All
amounts are shown in Canadian dollars, unless otherwise specified.
  Table
3.1—Summary of Financial Statements in United States GAAP
  Summary
of annual financial statements for the prior five years are presented in this
table. All amounts are shown in Canadian dollars and prepared in accordance with
U.S. GAAP.  The summaries for 2006, 2005, 2004, 2003 and 2002 are
taken from the audited financial statements included elsewhere in this
report.  The summary of 2001 is taken from financial statements that
were previously audited in accordance with Canadian GAAP with unaudited
adjustments made to convert the summaries to U.S. GAAP reporting
requirements.
  Poly-Pacific
      International Inc.Year
      ended
                31/12/2007
              
              
              Year
      ended
                31/12/2006
              
              
              Year
      ended
                31/12/2005
              
              
              Year
      ended
                31/12/2004
              
              
              Year
      ended
                31/12/2003Total
      Consolidated Revenues
              
              
              --
              
              
              
              1,470,357
              
              
              
              3,052,716
              
              
              
              3,819,057
              
              
              
              4,242,326Total
      Operating Expenses
              
              
              2,975,383
              
              
              
              2,281,996
              
              
              
              4,389,138
              
              
              
              4,041,414
              
              
              
              4,554,582Income
      tax expense (recovery)
              
              
              ---
              
              
              
              --
              
              
              
              174,750
              
              
              
              19,392
              
              
              
              (154,134)Net
      Loss
              
              
              (2,975,383)
              
              
              
              (1,970,479)
              
              
              
              (1,161,662)
              
              
              
              (241,749)
              
              
              
              (158,122)Discount
      on Redemption of Preferred Shares
              
              
              
              
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              613,806Net
      Income (Loss) available to Common Shareholders
              
              
              (2,975,383)
              
              
              
              (1,970,479)
              
              
              
              (1,161,662)
              
              
              
              (241,749)
              
              
              
              455,684Net
      Income (Loss) per share
              
              
              (0.06)
              
              
              
              (0.09
              )
              
              
              (0.09)
              
              
              
              (0.03)
              
              
              
              0.05Diluted
      Earnings (Loss) per share
              
              
              (0.06)
              
              
              
              (0.09
              )
              
              
              (0.09)
              
              
              
              (0.03)
              
              
              
              0.04Total
      Assets
              
              
              497,356
              
              
              
              1,313,837
              
              
              
              2,111,503
              
              
              
              3,628,977
              
              
              
              3,911,897Long
      term obligations
              
              
              171,749
              
              
              
              2,045,778
              
              
              
              --
              
              
              
              137,820
              
              
              
              1,785,766Additional
      Paid in Capital
              
              
              1,791,076
              
              
              
              778,796
              
              
              
              731,170
              
              
              
              697,474
              
              
              
              672,202Accumulated
      Comprehensive Income
              
              
              53,195
              
              
              
              53,195
              
              
              
              53,195
              
              
              
              53,195
              
              
              
              53,195Common
      Shares Capital
              
              
              5,488,253
              
              
              
              2,467,602
              
              
              
              1,998,538
              
              
              
              865,584
              
              
              
              865,584Preferred
      Shares Capital
              
              
              ---
              
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              --Accumulated
      Deficit
              
              
              (7,006,917)
              
              
              
              (4,031,534)
              
              
              
              (2,061,055)
              
              
              
              (899,393)
              
              
              
              (657,644)Total
      Shareholders Equity
              
              
              325,607
              
              
              
              (731,941)
              
              
              
              721,848
              
              
              
              716,860
              
              
              
              933,337Common
      Shares outstanding
              
              
              58,720,279
              
              
              
              25,237,740
              
              
              
              18,885,456
              
              
              
              9,361,624
              
              
              
              9,361,624Weighted
      Average – Diluted Shares
              
              
              47,146,785
              
              
              
              22,817,241
              
              
              
              12,536,235
              
              
              
              9,361,624
              
              
              
              12,031,813
  7
  Table
3.2--Effects of Currency Translation and Conversion
  The
following tables set forth: (i) the rates of exchange for the Canadian dollar,
expressed in U.S. dollars, in effect at each of the periods indicated; (ii) the
average exchange rates in effect on the last day of each period; (iii) the high
and low exchange rate during such periods, in each case based on the noon buying
rate in New York City for cable transfers in Canadian dollars as certified for
customs purposes by the Federal Reserve Bank of New York; (iv) annual prices
based for the period January 1 to December 31 yearly; and (v) monthly prices
based for the first to last reported day each month for the most recent six
months, and quoted in U.S. dollars.
  Annual
      Periods
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Rate
      at end of period
              
              
              1.0120
              
              
              
              0.8671
              
              
              
              0.8576
              
              
              
              0.8310
              
              
              
              0.7738Average
      rate during period
              
              
              0.9309
              
              
              
              0.8700
              
              
              
              0.8253
              
              
              
              0.7696
              
              
              
              0.7159High
      Rate
              
              
              0.8437
              
              
              
              0.8629
              
              
              
              0.8672
              
              
              
              0.8493
              
              
              
              0.7738Low
      Rate
              
              
              1.0908
              
              
              
              0.8700
              
              
              
              0.7853
              
              
              
              0.7158
              
              
              
              0.6349
 
 Monthly
      Periods
              
              May/08
              
              
              Apr/08
              
              
              Mar/08
              
              
              Feb/08
              
              
              Jan/08
              
              
              Dec/07Rate
      at end of period
              
              
              1.0062
              
              
              
              0.9909
              
              
              
              0.9732
              
              
              
              1.0208
              
              
              
              0.9982
              
              
              
              1.0120Average
      rate during period
              
              
              1.0007
              
              
              
              0.9865
              
              
              
              0.9971
              
              
              
              1.0014
              
              
              
              0.9902
              
              
              
              0.9979High
      Rate
              
              
              0.9816
              
              
              
              0.9909
              
              
              
              0.9732
              
              
              
              0.9843
              
              
              
              0.9714
              
              
              
              0.9789Low
      Rate
              
              
              1.0163
              
              
              
              0.9979
              
              
              
              1.0162
              
              
              
              1.0291
              
              
              
              1.0096
              
              
              
              1.0221
  On June
20, 2008, the noon buying rate in New York City for cable transfer in Canadian
dollars as certified for customs purposes by the Federal Reserve Bank of New
York as $.9830 USD = $1.00 CDN.
  B.
Capitalization and Indebtedness
 
 Capitalization
      of Poly-Pacific International Inc. in Canadian DollarsDescription
              Authorized
              Balance
      at  December 31, 2007Debentures
              N/A
              $102,000Common
      Shares
              Unlimited
      (58,720,279 issued and outstanding
                as
      of December 31, 2007)
              $5,488,253
  C.
Reasons for the Offer and Use of Proceeds
  Not
applicable.
  D. Risk Factors
  The
following is a brief discussion of those distinctive or special characteristics
of the Company's operations and industry which may have a material impact on the
Company's business development, or constitute risk factors in respect of the
Company's financial performance.
 
 We are authorized to issue
preferred shares which, if issued, may reduce the price of the common
shares.
 
 Although
no preferred shares are currently issued and outstanding, our directors are
authorized by our Articles of Incorporation, as amended, to issue preferred
shares in series without the consent of our shareholders. Our preferred shares,
if and when issued, may rank senior to common shares with respect to payment of
dividends and amounts received by shareholders upon liquidation, dissolution or
winding up. The issuance of preferred shares in series and the preferences given
the preferred shares must be made by a Resolution of Directors, but do not need
the approval of our shareholders. The existence of rights, which are senior to
common shares, may reduce the price of our common shares.
  8
  Because we do not have a
compensation committee, shareholders will have to rely on the entire board of
directors,  one members of which are not independent, to perform this
function.
 
 We do not
have a compensation committee comprised of independent
directors.  Indeed, we do not have a compensation
committee.  This function is performed by the board of directors as a
whole in respect of compensation of officers of the corporation.  Mr.
Randy Hayward, President as a member of the board of directors is not an
independent directors.  The Board of Directors does not have a
formally appointed compensation committee, but performs this function as a whole
in respect of compensation of officers of the corporation, with any officer who
is also a director being excluded from the deliberations of the other directors
in respect of that officer’s compensation.  Thus, there is a potential
conflict in that board members who are not independent may participate in
discussions concerning management compensation other than their compensation and
other issues that may affect management decisions.
 
 Penny
Stocks.
 
 Because
our common shares are a penny stock, trading in the common shares involves
increased risks­­ concerning price fluctuation, additional disclosure
requirements and a lack of a liquid market.
 
 Our
shares will be "penny stocks" as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00.  Our shares thus will be subject to rules that impose
sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.
 
 Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer or accredited investor must make a special
suitability determination regarding the purchaser and must receive the
purchaser's written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt.
 
 Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling
shareholders or other holders to sell their shares in the secondary market and
have the effect of reducing the level of trading activity in the secondary
market.  These additional sales practice and disclosure requirements
could impede the sale of our securities.  This lower trading volume
can cause price fluctuations.  In addition, the liquidity for our
securities will be decreased, with a corresponding decrease in the price of our
securities.  Accordingly, our shareholders will, in all likelihood,
find it difficult more to sell their securities.
 
 Because a portion of
convertible debentures issued in 2003 remains outstanding as at the date of
this  report, there is a potential for some dilution in share
values.
 
 The
holders of the $102,000 in convertible debentures outstanding as at the date of
this  report might decide to act on the conversion if the common
shares value rises above the conversion price.  If this event was to
occur it would have the effect of diluting the earnings per share by about 0.2%
which could decrease the value of the Company’s common shares.
  9
 
 ITEM
4. INFORMATION ON THE COMPANY
  A.
History and Development of the Company
 
 Poly-Pacific
International Inc. is an Alberta Canada corporation number 20671721, which was
registered on October 25, 1995 with the purpose of forming a Junior Capital
Pool.  The initial public offer raised $300,000 in equity capital upon
closing on January 22, 1996.  Back then, the common shares traded only in Canada
on the TSX Venture Exchange, symbol PMB. The Junior Capital Pool acquired the
business of Poly-Pacific Inc., a privately held company that began operations in
1989, through an exchange of shares that brought in the $500,000 previously
raised through private placements.
 
 In 1989
the predecessor company, Poly-Pacific Inc., a plastics injection molder, had
initiated research to develop plastic blasting media from the scrap by products
of its production operations.  The intent was to reduce the quantities
of scrap being buried in landfills, and to create products suitable to US
Military needs for stripping paint from aircraft.  The research
resulted in the development of MultiCut plastic blasting media that is made from
scrap thermoset plastics and scrap acrylic thermoplastics.  By 1995
the processes were refined to produce consistent quality products meeting US
Military specifications as well as those of the defense industries in Canada and
the U.K.  The media business was vended into Poly-Pacific
International Inc. in 1996.
 
 At the
urging of the US military, in 1996 the plastic blasting media industry began
moving away from simply selling the media by adding a service to take back the
used media and recycle it into other products, saving the customers from having
to find alternate means of disposal.  Through research in conjunction
with the Alberta Research Council, the Company developed a process for
incorporating spent media into recycled plastic lumber in a manner that
satisfied regulatory control needs of government environmental departments and
protection agencies.   The Company proceeded to acquire the
equipment for producing recycled plastic lumber as a second product line to be
marketed throughout Canada and the USA.  A wholly owned subsidiary,
Everwood Agricultural Products International Inc., an Ontario, Canada
corporation number 1308111, was formed on July 29, 1998 upon the purchase of the
assets of Everwood Agricultural Products Inc.
 
 The
plastic blasting media contracts, whether for provision of product only or for
lease and recycle sales, are issued on the same product performance and delivery
terms for both commercial and government customers.  However, many of
the commercial customer contract can be for one year or less, with some being
for up to three years, while the US Military contracts are for five-year terms
with agreed prices for each year.
 
 The
proprietary technology processes and the equipment used to manufacture both
product lines have been further improved over the years.  The Company
developed a continuous line process for producing MultiCut plastic blasting
media to specified sizes.  Then, when the events of 9/11 resulted in
more pressure for the military to buy primarily from US Small Business, the
Company determined that it was advisable to relocate the media manufacturing to
its second wholly owned subsidiary, Poly-Pacific Technologies Inc., a California
corporation number C2045209, that was formed on June 24, 1999.  The
new media line was installed and perfected at a leased plant facility in
Ontario, California in 2002, and it became the primary facility for
manufacturing and operations.  In October 2003 the Company added
equipment to produce dimensional recycled plastic lumber at this
plant.
 
 Stock
listing Information:
 
 As
discussed above, Poly-Pacific International Inc. is a junior industrial company
that was first listed in Canada in 1995 and trades as a Tier 1 company on the
TSX Canadian Venture Exchange (TSX-V:PMB).  Poly-Pacific was also
listed on the USA on December 30, 2005, on the NASDAQ Over The Counter Bulletin
Board (OTCBB: PLYPF), on the German Stock Exchange in January 2007 (POZ), and
the Berlin Stock Exchange (AOLGDN) also in January 2007.
 
 The
address of our principal executive offices is 1279 51st Avenue
East, Vancouver, British Columbia, V5X 1E9:  (604)
324-2110.   The name and address of our registered agent in
Canada is:  Davis LLP, :Livingston Place, 1000-250 2nd St. SW,
Calgary, Alberta, T2P 0C1.
 10
 
 Discontinued
Operations
 
 At
December 31, 2006, as a result of continued losses and Everwood’s inability to
obtain an adequate supply of raw materials to make posts and attain
cost-efficient production, the Company decided to permanently cease its
operations in St. Thomas, Ontario, in order to mange costs and to focus its
efforts in developing the McAdoo Nylon Reclamation Project in Kingston,
Ontario.  On November 1, 2007, due to the continuing losses as a
result of decreasing market share and lack of demand for plastic media, the
Company announced the closure of its wholly owned subsidiary, Poly-Pacific
Technologies Inc. and its operations in Ontario
  B.
Business Overview
  As
discussed earlier, Since its inception, the Company has worked to refine its
MultiCut TM plastic blasting media by developing the technology to provide
consistent, high quality products for military, commercial and industrial
customers.
  During
the previous four years, worldwide demand for plastic blast media has declined.
This is due in large part to the high cost of plastics, which are largely
petroleum based, combined with other less expensive competing products that have
entered the market, such as starches, that are gaining in popularity. Starches
are less abrasive than plastic blast media, allowing them to become a preferred
method in the removal of paint on the aluminum fuselages in the airline and
aerospace industries. Starches are also deemed to be more environmentally
friendly than plastic. In addition to this, one of the largest consumer’s of
blast media, the U.S. Military, has demanded ever increasing standards on the
product.  Complying with these military specifications (“Mil-Spec”) is
a very costly venture. Currently in North America, there are too many plastic
blast media manufacturers competing in a shrinking market.
  Management
at Poly-Pacific has concluded that being a manufacturer of plastic blast media
is no longer economically viable. Recognizing this, they have made the decision
to redirect the company from being a buyer of plastics to being a provider of
the commodity. Poly-Pacific has a long history in recycled plastics, purchasing
the majority of its scrap plastic from China. As such, it has identified the
worldwide shortage in certain types of plastics, specifically petroleum based
polymers. As a result of this decision, the company is now focusing its efforts
in the reclamation of polymers, specifically nylon, that have strategically been
buried in landfill sites around the world.
  Utilizing
its expertise in the recycling of plastics, Poly-Pacific has sought out several
landfill sites in North America that contain vast quantities commercial grade of
nylon. These nylon deposits were as a result of over-production by the various
manufactures during the 1950’s, 60’s and 70’s. Nylon, being a synthetic fibre,
takes hundreds of years to decompose. Nylon which was deposited underground
thirty to forty years ago will still retain most of its virgin commercial value.
As a commodity, nylon is one of the most popular polymers in use today. When
first invented in the 1940’s, nylon was mainly used for parachutes, toothbrushes
and stockings. Nylon was also a principle component in the manufacturing of
automotive tires up until the 1960’s. Today, nylons largest market, motor
vehicles, accounted for 45% of total demand. Other major markets include
electrical and electronics, consumer and institutional goods, packaging and
industrial products. Advances in the motor vehicle market will fuel gains, as
nylon will continue to penetrate new applications in engine and mechanical
areas. Electrical and electronic markets will be bolstered by gains in wire,
cable and electronic component uses. Worldwide nylon demand is estimated to
increase by 40% by 2015.
  The
Company has a long standing experience in the recycling industry and have built
a reputation on manufacturing and distributing environmentally safe and
technologically advanced alternatives used in the paint stripping industry. With
growing landfill sites becoming a worldwide problem, landfill reclamation
projects provide Poly-Pacific with a unique opportunity to assist in cleaning
our environment, while earning revenue for the Company and enhancing shareholder
value. The Company will continue to pursue its business model to include the
reclamation of landfill sites and industrial polymer fibre throughout North
America.
  The
Company was introduced to the opportunity to bid on a Request for Proposal by
the City of Kingston, Ontario in the spring of 2006 for a landfill site
(McAdoo), which is purported to contain up to 350 million pounds of Nylon Type
6/6. In February 2007, the City of Kingston awarded Poly-Pacific the right to
conduct an assessment of this property to determine the viability of this
operation.  To capitalize on this opportunity, Poly-Pacific plans to
utilize its expertise as a recycler to reclaim the McAdoo Site, along with other
landfill sites containing nylon throughout North America. The company has well
established connections into the Chinese market for which the nylon will be sold
into.
  11
  Background
of Polyran Reclamation Inc.
 
 Polyran
Reclamation Inc. (“Polyran”) was incorporated under the laws of Alberta on
September 11, 2006.  Polyran was founded with an intention to
participate in a joint venture with Poly-Pacific which was pursuing a nylon
reclamation project near Kingston, Ontario.  At the time of
incorporation, the sole officer and director of Polyran was Mr. Randy Hayward
who became the President of Poly-Pacific on October 10, 2006 and subsequently
became a director of Poly-Pacific on February 16, 2007.  Due to a
potential conflict of interest Mr. Hayward resigned as officer and director of
Polyran on January 10, 2007, at which time, Mr. John Primose assumed the duties
of President and sole director; and Ms. Angela Cole assumed duties as
Secretary-Treasurer.
 
 On June
20, 2007 purchased all of the issued and outstanding shares of Polyran
Reclamation Inc. (“Polyran”) pursuant to an exempt take over bid.  In
consideration for the shares of Polyran, the Company has issued an aggregate of
7,999,996 of its common shares at a deemed price of $0.23 per share pro rata to the shareholders
of Polyran.  The acquisition of the Polyran shares was completed as an
Expedited Acquisition under the policies of the TSX Venture Exchange and is
subject to the Exchange’s final approval.
 
 Joint
Venture Agreement
 
 Further
to the Company’s press release of May 1, 2007 whereby the Company signed an
access agreement with the city of Kingston, Ontario the Company had a 100%
interest in the “McAdoo Project”.     Polyran had
raised $600,000 through share subscriptions proceeds which was advanced by
Polyran to the Company in tranches from September 11, 2006 through April 30,
2007.   These funds were used for the purposes of evaluation and
due diligence with respect to the nylon deposit joint venture.  This
was recorded in the Company’s balance sheet as a non-controlling interest of a
variable interest entity.
 
 To assist
in the joint venture evaluation, management of Polyran sourced and retained
experts in polymer reclamation, specialized cleaning and processing equipment,
engineering expertise, and individuals with in-depth knowledge of the North
American and Asian markets.  Polyran has earned a 30% financial
interest in the McAdoo Project by providing financial and technical
contributions to the Company.  As a result, a joint venture agreement
was formalized on May 15, 2007 between the Company and Polyran.
 
 With the
acquisition of Polyran, Poly-Pacific will now have a 100% interest in the McAdoo
Project.
 
 The
Company is also actively pursuing a number of additional polymer landfill
opportunities in North America.
 
 Property,
Plants and Equipment
  With the
decision to discontinue Everwood and Poly Pacific Technologies Inc., the
facilities in St. Thomas, Ontario and Ontario, California no longer
exists.
  12
  ITEM
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
 Nature
of Business
 
 Poly-Pacific
International Inc. was incorporated under the Alberta Business Corporations Act
on October 25, 1995.  The Company is in the business of manufacturing
plastic blasting media and manufacturing plastic lumber using recycled plastic
materials.
 
 Going
Concern
 
 These
consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles on a going concern basis, which
presumes that the Company will be able to realize its assets and discharge its
liabilities in the normal course of business for the foreseeable
future.
 
 The
Company incurred a net loss for the year ended December 31, 2007 of $2,975,383
with a total accumulated deficit of $7,006,917.  There is substantial
doubt about the Company’s ability to continue as a going concern.  The
Company’s continuation as a “going concern” is dependent upon its ability to
achieve profitable operations, upon the continued financial support of its
shareholders and upon its ability to obtain additional financing or
equity.  Management is implementing a plan to obtain additional equity
financing in amounts sufficient to sustain operations.  The outcome of
this matter cannot be determined at this time.
 
 These
consolidated financial statements do not include any adjustments to the amounts
and classification of assets and liabilities that may be necessary should the
Company be unable to continue as a going concern.
  Significant
Accounting Policies
 
 Basis
of Presentation
 
 These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (U.S.
GAAP).  All amounts herein are expressed in Canadian dollars unless
otherwise noted.  These consolidated financial statements conform in
all material respects with Canadian generally accepted accounting principles
(“Canadian GAAP”), except as discussed in Note 17.
 
 Principles
of Consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, Everwood Agricultural Products International Inc.
(“Everwood”) and Poly-Pacific Technologies Inc. (“PPT”).  As discussed
in Note 12, on December 31, 2007, Poly-Pacific Technologies Inc. was classified
as a discontinued operation and Everwood Inc. was classified as a discontinued
operation as of December 31, 2006.  All inter-company transactions
have been eliminated on consolidation.
 
 Polyran
Reclamation Inc. (“Polyran” was accounted for as variable interest entity in
2006.  During the 2007 year, the Company completed an Expedited
Acquisition under the policies of the TSX Venture Exchange whereby it purchased
all the issued and outstanding shares of Polyran.  The result of the
acquisition is that the Company became the sole owner of all the assets of
Polyran and accordingly all its operations have been included in the accounts of
the Company.
 
 Measurement
uncertainty
 
 The
preparation of financial statements is in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ
from those estimates.
 
 Through
the ordinary course of business, a number of claims are pending in which the
Company or its subsidiaries may be the plaintiff or defendant.  The
likely outcome of these claims cannot be determined at this time and no
provision has been made in the consolidated financial statements.  As
a result, the range of measurement uncertainty is not determinable.
  13
  Revenue
Recognition
 
 Revenue
is recorded when significant risks and rewards of ownership have been
transferred to the customer.  This occurs at the time of shipment (FOB
shipping point) of the products from the Company’s warehouse and an invoice is
prepared.  Revenues are recognized only when the Company has
transferred to the customer the significant risk and rewards of ownership of the
goods, title to the products transfers, the amount is fixed and determinable,
evidence of an agreement exists, there is reasonable assurance of collection of
the sales proceeds, the Company has no future obligations and the customer bears
the risk of loss.
 
 Cash
and cash equivalents
 
 The
Company considers all highly liquid investments and short term debt instruments
with original maturities of three months or less to be cash
equivalents.  As at December 31, 2007, there were cash equivalents of
$20,000 (2006 - $nil).
 
 Equipment
 
 Equipment
is recorded at cost and amortized over its estimated useful
life.  Amortization is calculated at the following annual
rates:
  Computer
      equipment
              -30% declining
      balanceOffice
      equipment
              -20% declining
      balance
  Impairment
of Long-Lived Assets
 
 The
Company reviews the carrying values of long-lived assets for existence of facts
or changes in circumstances that might indicate a condition of
impairment.  If estimates of undiscounted cash flows expected to
result from the use of an asset and its eventual disposition are less than the
carrying amount then the carrying amount of the asset is written down to its
fair value.
 
 Translation
of Foreign Currency
 
 The
functional currency of the Company and all of its subsidiaries is the Canadian
dollar.  Monetary assets and liabilities of the company are translated
into Canadian dollars at the rate of exchange in effect at the balance sheet
date.  Revenue and expense items are translated at average rates of
exchange in effect at the respective transaction months.  The
resulting exchange gains or losses are included in
earnings.  Non-monetary assets and liabilities, arising from
transactions denominated in foreign currencies, are translated at rates of
exchange in effect at the date of the transaction.
 
 Monetary
assets and liabilities of the integrated foreign subsidiary are translated into
Canadian dollars at a rate of exchange in effect at the balance sheet
date.  Non-monetary assets and liabilities are translated at
historical exchange rates.  Revenue and expense items other than
amortization are translated at the average rate of exchange for the
year.  Amortization of assets translated at historical exchange rates
are translated at the same exchange rates as the assets to which they
relate.
 
 Inventories
 
 Inventories
are recorded at the lower of cost or net realizable value.  Cost of
inventories is determined on an average cost basis.
  14
  Deferred
Taxes
 
 The
Company accounts for and measures deferred tax assets and liabilities in
accordance with the asset and liability method.  Under this method,
deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be reversed or settled.  The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment of the
change.  When the future realization of income tax assets does not
meet the test of being more likely than not to occur, a valuation allowance in
the amount of the potential future benefit is taken and no net asset is
recognized.
 
 Stock-Based
Compensation Plan
 
 Effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
Board (“SFAS”) No. 123(R) “Share-Based Payment”, a revision to SFAS 123
“Accounting for Stock-Based Compensation”.  SFAS 123(R) requires the
Company to recognize in the income statement the grant date fair value of
share-based compensation awards granted to employees over the requisite service
period.  Compensation expense recognized reflects estimates of award
forfeitures and any change in estimates thereof are reflected in the period of
change.  The risk-free interest rate assumption is based upon observed
interest rates appropriate for the expected term of the Company’s employee stock
options.  The Company used its historical volatility as a basis to
estimate the expected volatility assumption used in the Black-Scholes model
consistent with SFAS 123(R).  The Company has not paid any dividends
on common stock since its inception and does not anticipate paying dividends on
its common stock in the foreseeable future.  The expected life of
employee stock options is based on historic forfeiture rates.
 
 Direct
Costs
 
 Direct
costs consist primarily of purchasing costs, freight, direct labour and other
specific costs.
 
 General
and Administrative
 
 General
and administrative costs consist primarily of office expenses, management
salaries, administrative salaries and other expenses.
 
 Occupancy
Costs
 
 Occupancy
costs consist primarily of rent, utilities and telephone expenses.
 
 Net
Income (loss) Per Common Share
 
 Net
income (loss) per common share is calculated using the weighted average number
of common shares outstanding during the period.  Diluted net income
(loss) per common share is calculated using the treasury stock method which uses
the weighted average number of common shares outstanding during the period and
also includes the dilutive effect of potentially issuable common
shares.
 
 Advertising
 
 The
Company expenses advertising costs as incurred.
 
 Deposit
 
 Deposit
consists of refundable amounts held by vendors.
  15
 
 Recent
Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
Measurements”.  SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value
measurements.  SFAS 157 is effective as of the beginning of the first
fiscal year that begins after November 15, 2007.  As such, the Company
is required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2008.  The Company is currently evaluating the impact of
SFAS 157 on its consolidated financial statements.
 
 In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities, including an amendment of
FASB Statement No. 115”.  SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value at
specified election dates.  SFAS 159 is effective as of the beginning
of an entity’s first fiscal year that begins after November 15,
2007.  As such, the Company is required to adopt these provisions at
the beginning of the fiscal year ended December 31, 2008.  The Company
is currently evaluating the impact of SFAS 159 on its consolidated financial
statements.
 
 In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 141(R), "Business
Combinations”.  SFAS 141(R) establishes principles and requirements
for how the acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, an any non-controlling
interest in the acquiree, recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  SFAS
141(R) is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  As such, the Company
is required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009.  The Company is currently evaluating the impact of
SFAS 141(R) on its consolidated financial statements.
 
 In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”.  SFAS
160 establishes accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2008.  As such, the Company is required to adopt these provisions at
the beginning of the fiscal year ended December 31, 2009.  The Company
is currently evaluating the impact of SFAS 160 on its consolidated financial
statements.
 
 In March,
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No 161. This Statement requires enhanced
disclosures about an entity’s derivative and hedging activities and thereby
improves the transparency of financial reporting. This Statement is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application encouraged. This Statement
encourages, but does not require, comparative disclosures for earlier periods at
initial adoption.   The Company is currently evaluating the
impact of SFAS 160 on its consolidated financial statements.
 
 Comprehensive
Income
 
 In
accordance with SFAS 130, "Reporting Comprehensive Income" ("SFAS 130"),
comprehensive income consists of net income and other gains and losses affecting
stockholder's equity that are excluded from net income, such as unrealized gains
and losses on investments available for sale, foreign currency translation gains
and losses and minimum pension liability.
 
 
 A.
Operating Results
  Prior to
2007, the Company's activities from 2001 thru to 2006 can be divided into two
different product lines: (1) blasting media, (2) plastic lumber. The
expenditures for operations and capital incurred for these product lines are
itemized in the Tables 5.1 and 5.2.
 16
  Table
5.1—Summary of Operations for the Blasting Media
  The
summary of operations for the blasting media products (in Canadian $), as
reported pursuant to U.S. GAAP, are presented in this table.
  Poly-Pacific
      International Inc.Summary
      of Financial Information in Canadian DollarsProduct
      -
                Blasting
      Media
              
              Year
      ended
                31/12/2006
              
              
              Year
      ended
                31/12/2005
              
              
              Year
      ended
                31/12/2004Blasting
      Media Sales in Canada
              
              
              ---
              
              
              
              65,086
              
              
              
              167,700Blasting
      Media Sales outside Canada
              
              
              1,462,113
              
              
              
              2,436,932
              
              
              
              2,968,006Total
      Blasting Media Sales Revenues
              
              
              1,462,113
              
              
              
              2,502,018
              
              
              
              3,135,706Income
      Tax Expense (Recovery)
              
              
              ---
              
              
              
              174,750
              
              
              
              19,316Blasting
      Media Net Income (Loss)
              
              
              (1,561,652
              )
              
              
              (1,108,299
              )
              
              
              (132,850
              )Capital
      Expenditures
              
              
              ---
              
              
              
              2,704
              
              
              
              32,430
 
 Table
5.2—Summary of Operations for the Plastic Lumber
  The
summary of operations for plastic lumber products (in Canadian $), as reported
pursuant to U.S. GAAP, are presented in this table.
  Poly-Pacific
      International Inc.Summary
      of Financial Information in Canadian DollarsProduct
      -
                Plastic
      Lumber
              
              Year
      ended
                31/12/2006
              
              
              Year
      ended
                31/12/2005
              
              
              Year
      ended
                31/12/2004Plastic
      Lumber Sales in Canada
              
              
              ---
              
              
              
              93,295
              
              
              
              281,875Plastic
      Lumber Sales outside Canada
              
              
              8,244
              
              
              
              457,403
              
              
              
              401,012Total
      Plastic Lumber Sales Revenues
              
              
              8.244
              
              
              
              550,698
              
              
              
              682,887Income
      Tax Expense (Recovery)
              
              
              ---
              
              
              
              ---
              
              
              
              76Plastic
      Lumber Net Income (Loss)
              
              
              (408,827
              )
              
              
              (53,363
              )
              
              
              (108,899
              )Capital
      Expenditures
              
              
              ---
              
              
              
              ---
              
              
              
              18,264
  Summary
of Unaudited Quarterly Results
 
 The
following table presents the unaudited selected financial data for each of the
last eight quarters ended December 31, 2007:
 
 Year
      ended December 31, 2007Q4
                Q3
                Q2
                Q1Revenues
      from continuing operations ($)
                -
                -
                -
                -Loss
      from continuing operations ($)
                (715,291)
                (609,277)
                (668,014)
                (769,345)Recovery
      (loss) from discontinuing operations ($)
                1,070,217
                (541,443)
                (436,014)
                (306,306)Basic
      and diluted loss per share from continuting operations ($)
                (0.02)
                (0.01)
                (0.01)
                (0.02)Basic
      and diluted earnings (loss) per share ($)
                0.01
                (0.01)
                (0.03)
                (0.03)Year
      ended December 31, 2006Q4
                Q3
                Q2
                Q1Revenues
      from continuing operations ($)
                -
                -
                -
                -Loss
      from continuing operations ($)
                (445,267)
                (144,986)
                (180,948)
                (85,837)Recovery
      (loss) from discontinuing operations ($)
                (390,890)
                (644,428)
                (88,730)
                10,607Basic
      and diluted loss per share from continuting operations ($)
                (0.02)
                (0.01)
                (0.01)
                -Basic
      and diluted loss per share ($)
                (0.04)
                (0.04)
                (0.01)
                -
  17
  Results
of Continuing Operations
 
 Overall,
the Company recorded a consolidated net loss of $2,975,383 ($0.06 per common
share) for the year ended December 31, 2007 as compared with a consolidated net
loss of $1,970,470 ($0.09 per common share) for the year ended December 31,
2006.  The difference of $1,004,904 is attributed to an increase of
$1,904,889 in operating expenses of the continued operations and a decrease of
$899,985 in losses from discontinued operations.
 
 Operating
Expenses of the continued operations:
 
 Overall,
operating expenses were $2,761,927 for the year December 31, 2007 compared to
$857,038 for the year period ended December 31, 2006.  The changes in
operating expenses for the year ending December 31, 2007 are attributed to the
following:
 
 General
and administrative expenses increased by $533,712 from $516,952 to $1,050,664
for the year ended December 31, 2006.  With an increase in corporate
activity, in particular, the change in corporate focus to fibre reclamation, the
company incurred additional consulting and contractor expenses.  Along
with this, additional travel expenses were incurred for various site visits
conducted during this process including trips to the McAdoo Landfill Site in
Kingston, Ontario.
 
 Occupancy
costs increased by $68,648 from $26,421 to $94,769 as the Company operated
satellite offices in Nanaimo, Chilliwack and Burnaby, British Columbia during
the 2007 as compared to one in Burnaby in 2006.
 
 Professional
fees increased by $117,743 from $229,701 to $347,444.  This was
primarily due to an increase in legal fees relating to the overall increase in
corporate activities relating the acquisition of Polyran, stock options and
warrant exercises, discontinuance of Poly-Pacific Technologies and Everwood and
in other corporate and legal matters.
 
 Amortization
of equipment decreased by $1,471 from $5,393 to $3,922.  There were no
additions or disposals of any capital assets during the year.
 
 Management
fees, paid to a corporation controlled by a former director, was nil for
2007.  This was a decrease $48,300 for the year ended December 31,
2006.
 
 Foreign
exchange loss for year ended December 31, 2007 was $17,889 as compared to $1,458
in the prior year. The change is due to timing differences (difference in the
amount recorded as compared to the amount paid and when the funds were
transferred from one company to another) in the foreign exchange rate between
the Canadian dollar and the US dollar.
 
 Interest
expense increased $27,436 to $30.675 for the year ended December 31,
2007.  This increase is primarily due to the interest from the
$300,000 convertible debenture raised and paid for during 2007.
 
 The
company also incurred $182,239 of engineering fees in 2007 for the Kingston
McAdoo Project.
 
 The
company had other income of $148.894 which was the result of costs recovered
from the Joint Venture with Fando Holding (Canada) Ltd.
 
 Income
taxes:
 
 The
Company had a $nil balance for current taxes due to losses for year ended
December 31, 2007.  The Company recognized a deferred income taxes
expense of $nil for the year ended December 31, 2007.
 
 Fourth
Quarter - Results of Continuing Operations
 
 The loss
for the fourth quarter ended December 31, 2007 was $715,291 compared to a loss
of $445,267 for the fourth quarter ended December 31, 2006.  The
increase of $270,028 is mainly attributable to stock based compensation
expense.
  18
  Discontinued
Operations:
 
 On
November 1, 2007, due to the continuing losses as a result of decreasing market
share and lack of demand for plastic media, the Company announced the closure of
its wholly owned subsidiary, Poly-Pacific Technologies Inc. and its operations
in Ontario California.
 
 In
addition, during fiscal 2006, as a result of continued losses and Everwood’s
inability to obtain an adequate supply of raw materials to make posts and attain
cost-efficient production, the Company decided to permanently cease Everwood’s
operations in St. Thomas, Ontario.
 
 As a
result of these discontinued operations, the Company’s principal focus is fibre
reclamation of industrial landfill sites.
 
 Contingencies
 
 Through
the ordinary course of business, there is one claim against the Company for
$12,182.  There are also claims totalling $326,561 against the
Company’s subsidiaries, whose operations are now discontinued.  As at
the date of these consolidated statements, no claim against the Company has been
made in connection with its subsidiaries’ operations.  The likely
outcome in either instance cannot be determined at this time and no provision
has been made in the consolidated statements for any potential
payment.
 
 Measurement
uncertainty
 
 The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ
from those estimates.
 
 Through
the ordinary course of business, a number of claims are pending in which the
Company or its subsidiaries may be the plaintiff or defendant.  The
likely outcome of these claims cannot be determined at this time and no
provision has been made in the consolidated financial statements.  The
range of measurement uncertainty is not determinable.
  
 B.
Liquidity and Capital Resources
  The
following table presents major Company financial data in summary form, as
reported pursuant to U.S. GAAP, as at the years ended December 31, 2006, 2005
and 2004:
  Year
              Current
      assets
              Total
      assets
              Current
      liabilities2007
              181,637
              497,356
              171,7492006
              409,486
              1,313,837
              1,765,1892005
              994,796
              2,111,503
              1,389,655
 
 Working
capital as at December 31, 2007 was $9,888 as compared to working capital
deficiency of $1,355,703 as at December 31, 2006.   This large
increase in the working capital was due to the Company’s ability to close 4
rounds of private placements during the year and the support from option and
warrant holders to exercise their holdings.
 
 The
Company’s cash position increased by $101,389 as at December 31, 2007, as
compared to a cash balance of $nil as at December 31, 2006. The Company used
$2,364,489 to fund continuing operations and used $638,276 to fund discontinued
operation, and received cash of $3,104,154 from financing activities for the
year ended December 31, 2007.  During the year, the Company did not
use or receive any funds from investing activities.
  19
  The
following table delineates the sources and uses of cash by the Company during
the most recent three years covered by the financial statements.
  POLY-PACIFIC
      INTERNATIONAL INCSTATEMENT
      OF CASH FLOWPOLY
      PACIFIC INTERNATIONAL2007
                
                
                2006
                
                
                2005Operating
      ActivitiesNet
      loss for the year from continuing operations
                
                $
                (2,761,927
                )
                
                $
                (857,038
                )
                
                $
                (861,883
                )Items
      not involving cashAmortization
      of equipment
                
                
                3,922
                
                
                
                5,393
                
                
                
                6,864Deferred
      income taxes
                
                
                -
                
                
                
                (174,750
                )
                
                
                174,750Stock-based
      compensation
                
                
                1,012,280
                
                
                
                47,626
                
                
                
                33,696Net
      change in non-cash operating assets and
                
                
                (618,764
                )
                
                
                221,969
                
                
                
                11,102liabilitiesFunds
      provided by (used in) continuing operations
                
                
                (2,364,489
                )
                
                
                (756,800
                )
                
                
                (635,471
                )Funds
      provided by (used in) discontinued
                
                
                (638,276
                )
                
                
                (82,735
                )
                
                
                498,561operationsCash
      provided by (used in) operating activities
                
                
                (3,002,765
                )
                
                
                (839,535
                )
                
                
                (136,910
                )Financing
      ActivitiesBank
      overdraft advances (repayment)
                
                
                -
                
                
                
                19,131
                
                
                
                (2,996
                )Funds
      provided by variable interest entity
                
                
                -
                
                
                
                280,589
                
                
                
                -Issuance
      of share capital, net of share issue costs
                
                
                3,104,154
                
                
                
                469,064
                
                
                
                1,132,954Debenture
      payable advances (repayment)
                
                
                -
                
                
                
                17,000
                
                
                
                (1,558,953
                )Funds
      provided by discontinued operations
                
                
                -
                
                
                
                48,304
                
                
                
                35,771Cash
      provided by (used in) financing activities
                
                
                3,104,154
                
                
                
                834,088
                
                
                
                (393,224
                )Investing
      ActivitiesFunds
      provided by discontinued operations
                
                
                -
                
                
                
                -
                
                
                
                402,296Cash
      provided by investing activities
                
                
                -
                
                
                
                -
                
                
                
                402,296Increase
      (decrease) in cash and cash equivalents
                
                
                101,389
                
                
                
                (5,447
                )
                
                
                (127,838
                )Cash
      and cash equivalents, beginning of year
                
                
                -
                
                
                
                5,447
                
                
                
                133,285Cash
      and cash equivalents, end of year
                
                $
                101,389
                
                
                $
                -
                
                
                $
                5,447
  20
  Capital
commitments:
 
 The
Company has no commitments for property and equipment expenditures for
2007.  The Company has forecasted that any property and equipment
expenditures incurred in 2008, based on future needs, will be funded from
working capital and/or from operating or capital leases.
 
 C.
Research and Development, Patents and Licenses
 
 Prior to
the discontinuance of Poly Pacific Technologies Inc as discussed earlier, the
Company policies for research and development are directed toward finding and
implementing technology to enhance the manufacturing processes for both plastic
blasting media and recycled plastic lumber.  For the plastic blasting
media, the culmination of much of the development was realized with the
installation of the new processing line in California in 2002.  The
continuation of research and development in 2003 resulted in further refinements
to the processing which improved the quality of product as well as increasing
available capacity.  For the recycled plastic lumber the research and
development has resulted in improvements to the process output of the extrusion
machines, the refinement of designs for molding systems that will enable
production of better dimensional lumber pieces, and completion of refinements
that make it possible to recycle all types of post consumer plastics into good
lumber products.  The last costs incurred for research and development
was in 2004 in the amount of $115,340.
 
 D.
Trend Information
  No trends
that will impact upon the Company’s results this year are known at this
time.
  E. Off Balance Sheet Arrangements
  There are
no off balance sheet arrangements.
  F.
Tabular Disclosure of Contractual Obligations
 
 With the
decision to discontinue operations in St. Thomas, Ontario and Ontario,
California, no contractual obligations exists as of December 31,
2007
  ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
  A.
Directors and Senior Management
  Randy
Hayward, B.Comm, LLB. – President, Chief Executive Officer & Acting Chief
Financial officer, and Director
  Randy
Hayward maintained a successful law practice in Edmonton, Alberta for 20
years.   During the latter phase of his law practice, he founded and
managed Canadian Dispute Resolution (Alberta) Ltd and marketed the service of
mediation to the legal community and the insurance industry. Mr. Hayward also
earned his Diploma in Counseling at P.D. Seminars from the Haven Institute on
Gabriola Island, B.C. After relocating to the west coast from Edmonton, he has
worked with numerous private and public companies for 15 years. Recently, Mr.
Hayward  has been a consultant to 4 successful public companies trading on
the TSX –Venture, raising investment capital and working in corporate
communications, business development and investor relations. In March of
this year, Mr. Hayward became involved with Poly-Pacific as a major shareholder
and consultant and has worked with the company in a variety of capacities since
then until assuming the office of President on August 22nd,
2006.
  Mr.
Richard Sharples - Director
 Mr.
Richard Sharples of Gabriola Island, British Columbia brings over twenty-five
years of business and financial expertise to the board. Mr. Sharples previously
served a two year term on the board of Titan Trading Analytics Inc.
  21
 Richard
Oravec, Director
 Mr.
Richard Oravec, a resident of New York, holds an MBA from
Fordham University and a BA from Boston University. Mr. Oravec is a
seasoned financial engineer of emerging technology companies, having
successfully structured corporate finance syndications and private placements in
small and medium sized public and private companies. Through his diverse network
in the public and private sectors, Mr. Oravec brings to Poly-Pacific his
experience and resources in the raising of capital, creating investment
structures, strategic planning, marketing and development, and developing
strategic business alliances for accelerated growth.
 Greg
Pendura, Director
 Mr.
Pendura has more than 35 years of experience in founding, financing and advising
emerging private and public companies. Mr. Pendura has spent the last 12 years
in the public sector with Resin Systems Inc. An original founder of the company,
he recently retired as President, CEO and Chairman of the Board. During his
tenure with Resin Systems Inc., Mr. Pendura was instrumental in the company
achieving a market capitalization of over $200 million as well as raising more
than $100 million of investment capital during its formative years.
 Rick
Gliege – V.P of Production & Sales
  Rick
Gliege comes to Poly-Pacific International Inc. with over 15 years experience as
a senior manager in the public and private sectors. As a provincial manager with
one of the largest automotive insurance company’s in North America, Mr. Gliege
was instrumental in the design, implementation and management of two new
divisions, Dispute Resolution and Road Improvement Strategies. Mr. Gliege, a
graduate from the University of Victoria and a certified commercial
mediator.  Mr. Gliege will now assume the position of Vice President
of Production and Sales for all of Poly-Pacific International’s subsidiary
companies in Canada and the United States.
  Stephen Koltai – Advisor -
International Business Development
 Stephen
Koltai has over thirty years of successful international management experience
at senior levels with public companies. Mr Koltai's expertise is in marketing,
finance, communications, high tech, corporate business development and joint
ventures. He has spent the last eighteen years of his management career,
successfully managing and developing business opportunities in Asia for a number
of private and public international businesses. Mr. Koltai currently acts as a
consultant to Poly Pacific by lending his experience, knowledge and expertise in
the Asian markets. This will greatly benefit the Company in its efforts to
expand its North American operations to China and other Asian
countries.
 Angus
Ross, M.Sc., P. Eng. - Director of Engineering
 Angus
Ross, from Kingston, Ontario, Canada, is a municipal and environmental engineer
with over twenty year’s experience in teaching, management and consulting
engineering. Mr. Ross had a long and successful career as a professor and senior
manager holding positions as Dean of Development and of Engineering Technology
at the St. Lawrence College in Kingston, Ontario. Mr. Ross previously worked as
an Engineer for the municipality of the Township of Kingston during the 1970’s
and was responsible for the planning of the major water and sewer projects in
addition to managing the technological operations, which included the McAdoo’s
Lane Landfill Site for the municipality. Mr. Ross is a member of the
Professional Engineers of Ontario, Canada. He is the author of a number of
technical paper and training programs in the environmental field. He has
organized and delivered training sessions for the Ontario Ministry of the
Environment and for Environment Canada.
  22
  B.
Executive Compensation
  Summary
Compensation Table
 
 The
following table sets forth all annual and long-term compensation for the three
(3) most recently completed financial years for services in all capacities to
the Corporation and its subsidiaries in respect of individual(s) who were acting
as, or were acting in a capacity similar to, a chief executive officer or chief
financial officer and the three most highly compensated executive officers whose
total salary and bonus exceeded $150,000 per annum (the “Named Executive
Officers”).
  SUMMARY
      COMPENSATION TABLEName
      and Principal Position
              Period
      Ended December 31
              Annual
      Compensation
              Long-term
      Compensation
              All
      Other Compensation
                ($)Salary
      ($)
              Bonus
      ($)
              Other
                Annual
      Compensation
                ($)
              Awards
              PayoutsSecurities
      Under Options/ SARS (1)
                Granted
      (#)
              Shares
      or Units Subject to Resale Restrictions ($)
              LTIP
      (2)
      Payouts ($)D.
      Randy Hayward(3)
                President
      and Acting CFO
              2007
                2006
              166,000
      (4)
                62,000
              Nil
                Nil
              Nil
                Nil
              500,000
                200,000
              Nil
                Nil
              Nil
                Nil
              Nil
                Nil
 
 Notes:
 (1)
              “SAR” or “Stock Appreciation
      Right” means a right, granted by the Corporation or its
      subsidiaries as compensation for employment services or office to receive
      cash or an issue or transfer of securities based wholly or in part on
      changes in the trading price of publicly traded securities of the
      Corporation.
 (2)
              “LTIP” or “Long-term Incentive
      Plan” means a plan providing compensation intended to motivate
      performance over a period greater than one financial year. LTIP’s do not
      include option or SAR plans or plans for compensation through shares or
      units that are subject to restrictions on
  resale.
 (3)
              Randy
      Hayward was appointed President of the Corporation on November 4,
      2006.
 (4)
              $26,500
      relates to amounts for 2006, which were paid in
  2007.
  Long-Term
Incentive Plans - Awards in Most Recently Completed Fiscal Year
  As of the
date hereof, the Corporation does not have any long-term incentive plans and no
long-term incentive plan awards were granted to the Named Executive Officers
during the Corporation’s most recently completed financial year ended December
31, 2007.  A “Long-Term Incentive Plan” is a plan under which awards
are made based on performance over a period longer than one fiscal year, other
than a plan for options, SARs or restricted share compensation.
  Stock
Options and Stock Option Plan
 
 General
 
 For a
description of the stock option plan of the Corporation (the “Plan”) see “PARTICULARS OF
MATTERS TO BE ACTED UPON – Approval of Stock Option Plan”.
  23
  Options
Granted During the Most Recently Completed Financial Year
 
 The
following table provides a summary of the stock options granted to the Named
Executive Officers during the twelve-month period ended December 31,
2007.
 
 Name
              Securities
      Under Options Granted
                (#)
              Percent
      of Total Options Granted to Employees in Financial Year
              Exercise
      or Base Price
                ($/Security)
              Market
      Value of Securities Underlying Options on the Date of Grant
                ($/Security)
              Expiration
      DateD.
      Randy Hayward
                President
      and Acting CFO
              250,000
                50,000
                200,000
                500,000
              3.82%
                0.76%
                3.05%
                7.63%
              $0.10
                $0.10
                $0.325
      (2)
              $0.120
                $0.130
                $0.325
              January
      11, 2012
                March
      12, 2012
                July
      23, 2012
 
 Notes:
 (1)
              The
      total number of options granted during the twelve-month period ended
      December 31, 2007 was 6,550,000.
 (2)
              On
      February 19, 2008 the Board of Directors approved the re-pricing of these
      options from $0.325 to $0.12.  The market price on February 19,
      2008 was $0.12.  The re-pricing of options is subject to TSX
      Venture and disinterested shareholder approval.  See
      “PARTICULARS OF MATTERS TO BE ACTED UPON – Disinterested Shareholder
      Approval of Exercise Price of Stock
Options”.
 
 Option
Exercises and Year-end Option Values
 
 The
following table sets out information concerning the exercise of options by the
Named Executive Officers during the year ended December 31, 2007 and the value
of unexercised options held by the Named Executive Officer as at December 31,
2007.
  Name
              Shares
      Acquired on Exercise
                (#)
              Aggregate
      Value Realized
                ($)
              Unexercised
      Options at  December 31, 2007
              Value
      of Unexercised in-the-money Options at
                December
      31, 2007Exercisable
                (#)
              Unexercisable
      (#)
              Exercisable
                ($)
              Unexercisable
                ($)D. Randy Hayward
      President and Acting CFO
              200,000
              5,000
              400,000
              100,000
              Nil
              Nil
  Long-term Incentive Plans –
Awards in Most Recently Completed Financial Year
 
 The
Corporation has not had and does not currently have any long-term incentive
plans.
  Stock Appreciation Rights
and Restricted Shares
 
 No stock
appreciation rights or restricted shares were granted by the Corporation to, or
exercised by, the Named Executive Officers of the Corporation since
incorporation. Furthermore, no stock appreciation rights have been
exercised.
  24
  Stock Option and SAR
Repricing
  The
following table sets out information concerning the re-pricing of options for
the Named Executive Officers during the year ended December 31,
2007.  See Section “PARTICULARS OF MATTERS TO BE ACTED UPON-
Disinterested Shareholder Approval of Exercise Price of Stock
Options”.
 
 Name
              Date
      of Repricing
              Securities
      Under Options/ SARs Repriced or Amended
                (#)
              Market
      Price of Securities at Time of Repricing or Amendment
                ($/Security)
              New
      Exercise Price
                ($/Security)
              Length
      of Original Option Term Remaining at Date of Repricing or
      AmendmentD.
      Randy Hayward
                President
      and Acting CFO
              February
      19, 2008
              200,000
              $0.12
              $0.12
              4.4
      years
   Pension and Retirement Plans
and Payments Made Upon Termination of Employment
 
 The
Corporation does not have in place any pension or retirement plan. The
Corporation has not provided compensation, monetary or otherwise, during the
preceding fiscal year, to any person who now acts or has previously acted as a
Named Executive Officer of the Corporation, in connection with or related to the
retirement, termination or resignation of such person and the Corporation has
provided no compensation to such persons as a result of a change of control of
the Corporation, its subsidiaries or affiliates. The Corporation is not party to
any compensation plan or arrangement with Named Executive Officers resulting
from the resignation, retirement or the termination of employment of such
person.
  Employment
Contracts
 
 During
the fiscal year ended December 31, 2007, the Corporation did not have in place
any employment contract between the Corporation or any subsidiary or affiliate
thereof and any Named Executive Officer.
  Other
Compensation
 
 Other
than as set forth herein, the Corporation did not pay any other compensation to
executive officers or directors (including personal benefits and securities or
properties paid or distributed which compensation was not offered on the same
terms to all full-time employees) during the last completed financial year other
than benefits and perquisites which equaled less than $50,000 and 10 percent of
the total of the annual salary and bonus for each individual.
  Compensation
of Directors
  At
December 31, 2007, the Corporation had four (4) directors, one (1) of whom was
also an executive officer.  In the most recently completed financial
year, the Corporation paid each director, other than the President an annual
retainer of $5,000.  The President did not receive any compensation
for serving as a director.  Directors were also reimbursed for
reasonable expenses.
 
 During
the most recently completed financial year, the Corporation granted 1,700,000
options to purchase Common Shares to current directors of the Corporation;
250,000 of these options having an exercise price of $0.10 and an expiry date of
January 11, 2012, 50,000 of these options having an exercise price of $0.10 and
an expiry date of March 12, 2012 and 1,400,000 of these options having an
exercise price of $0.325 and an expiry date of July 23, 2012.  On
February 19, 2008 the Board of Directors approved the re-pricing of 900,000
options from $0.325 to $0.12.  The market price on February 19, 2008
was $0.12.The
re-pricing of options is subject to TSX Venture and disinterested shareholder
approval.
  25
  SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
  The
following table sets forth securities of the Corporation that are authorized for
issuance under equity compensation plans as at the end of the Corporation’s most
recently completed financial year.
 
 Plan
      Category
              Number
      of Securities to be issued upon exercise of outstanding options, warrants
      and rights
              Weighted
      average exercise price of outstanding options, warrants and
      rights
              Number
      of securities remaining available for issuance under equity compensation
      plans (excluding outstanding securities reflected in Column
    1)Equity
      compensation plans approved by securityholders
              5,260,000
      Common Shares
              $0.23
      per Common Share
              3,122,059Common
      SharesEquity
      compensation plans not approved by securityholders
              Nil
              Nil
              NilTotal
              5,260,000
      Common Shares
              $0.23
      per Common Share
              3,122,059
      Common Shares
  MANAGEMENT
CONTRACTS
 
 Other
than as set forth herein, during the most recently completed financial year, no
management functions of the Corporation were to any substantial degree performed
by a person or company other than the directors or executive officers (or
private companies controlled by them, either directly or indirectly) of the
Corporation.
  INDEBTEDNESS OF DIRECTORS,
EXECUTIVE OFFICERS AND SENIOR OFFICERS
 
 Other
than advances for expected travel expenses to be incurred on behalf of the
Corporation, no director, executive officer, former director, or employee of the
Corporation or its subsidiaries nor any of their associates or affiliates, is,
or has been at any time since the beginning of the last completed financial
year, indebted to the Corporation or its subsidiaries nor has any such person
been indebted to any other entity where such indebtedness is the subject of a
guarantee, support agreement, letter of credit or similar arrangement or
understanding, provided by the Corporation.
  INTERESTS OF INFORMED
PERSONS IN MATERIAL TRANSACTIONS
 
 Other
than as set forth herein and below, or as previously disclosed, the Corporation
is not aware of any material interests, direct or indirect, of any director or
executive officer, proposed nominee for election as a director or any
shareholder holding more than 10% of the voting rights attached to the Common
Shares or any associate or affiliate of any of the foregoing in any transaction
in the preceding financial year or any proposed or ongoing transaction of the
Corporation which has or will materially affect the Corporation.
  INTEREST OF CERTAIN PERSONS
OR COMPANIES IN MATTERS TO BE ACTED UPON
 
 Except as
otherwise set out herein, no director or executive officer of the Corporation or
any proposed nominee of management of the Corporation for election as a director
of the Corporation, nor any associate or affiliate of the foregoing persons has
any material interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in matters to be acted upon at the
Meeting.
  26
  C.
Board Practices
  National
Policy 58-201 Corporate
Governance Guidelines (the “National Policy”) recommends
that boards of directors of reporting issuers be composed of a majority of
independent directors.  The Board of Directors is currently comprised
of four (4) directors, each of whom is proposed for election at the
Meeting.  Pursuant to the Terms of Reference, the Board is responsible
for assessing director independence.  The Board of Directors has
assessed the independence of each director in accordance with National
Instrument 58-101 – Disclosure of Corporate Governance Practices and MI
52-110.  Following this assessment, the Board concluded that three of
four directors, being Messrs. Oravec, Sharples and Pendura are
independent.  Mr. Hayward is not considered independent by virtue of
his executive positions with the Corporation.
 
 The
Corporation and the Board of Directors recognize the significant commitment
involved in being a member of the Board of Directors.  The Board of
Directors generally meets as the need arises.  The frequency and
length of meetings and the nature of agenda items depend upon the circumstances.
When held, meetings are generally lengthy, detailed and well attended, and are
conducted in an atmosphere that encourages participation and
independence.  In order to promote candid discussion among the
independent directors, the independent directors determine at every board
meeting whether an in-camera session is required, from which Mr. Hayward, the
non-independent director, and any management invitees in attendance are
excused.
  In
accordance with the Articles of the Company the number of directors shall be
such number not less than one as the Company by ordinary resolution may from
time to time determine and each director shall hold office until the next annual
general meeting following his or her election or until his or her successor is
elected. The Company has five directors.
  The
officers of the Company are elected by the Board of Directors as soon as
possible following each annual general meeting and shall hold office for such
period and on such terms as the board may determine.
  The
members of the Company Audit Committee are appointed by the Board of Directors
as soon as possible following each annual general meeting.   The
current audit committee members are Randy Hayward, Gren Pendura (independent)
and Richard Oravec (independent). The Board of Directors does not have a
formally appointed compensation committee, but performs this function as a whole
in respect of compensation of officers of the corporation, with any officer who
is also a director being excluded from the deliberations of the other directors
in respect of that officer’s compensation.
  D.
Employees
  As at
December 31, 2007, the Company had the following full-time employees (or under
contract providing management, accounting and administrative):
  Poly-Pacific
International Inc. -  3 management, 1 consultant, 1 accounting and 1
administration
 
 E.
Share Ownership
 
 The
authorized capital of the Company consists of an unlimited number of common
shares without nominal or par value and an unlimited number of preferred
shares.
 
 Common Shares and
Warrants:
 As at
December 31, 2007, the numbers of issued common shares are 58,720,279 as
compared to 25,237,740 as at December 31, 2006.  No preferred shares
have been issued.
  As of
December 31, 2007, all directors, officers and key employees of the Company as a
group own and control approximately 2% of the Company's common shares
outstanding and could own and control approximately 3% of the Company's common
shares if all outstanding options and warrants were to be
exercised.
  27
  ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
  A.
Major Shareholders
  The
Company is not owned or controlled, either directly or indirectly, by any other
corporation or by any government. There are no arrangements, known to the
Company, the operation of which may at a future date result in a change of
control of the Company.  The people identified in the table below are
the only registered owners of more than 10% of the Company’s voting securities,
as of December 31, 2007.
  Identity of
      Owner
              Amount
      Owned and
                Controlled
              Percent
      of ClassNow
      Outstanding
              Fully Diluted(3)None
              -
              -
              -
  B.
Related Party Transactions
  During
the reporting years, the Company had the following related party transactions
with corporations under significant influence of the Company's
directors:
  Year
      Ended December 31
              2007
              2006
              2005Management
      Fees
              --
              48,300
              88,105.
 
 Prior to
Mr. Thomas Lam’s resignation in August 2006 as a CEO and President and
resignation as Director and Chairman of the Board in November 2006, these fees
are incurred pursuant to a Management Agreement between the Company and
Poly-Pacific Inc. and Mr. Thomas Lam, which is for two years effective January
1, 2002 and is subject to annual renewals at the end of the initial
term.  Poly-Pacific Inc., a private corporation, is the predecessor
company from which the plastic blasting media equipment and technology was
acquired by the Company in 1996.  Although Mr. Lam is only one of the
shareholders in the said private company, he is the only person who receives any
remuneration through Poly-Pacific Inc.
 
 As
disclosed in the notes to the financial statements, these transactions are in
the normal course of operations and are measured at the exchange amount, which
is the amount of consideration established and agreed to by the related
parties.
  C.
Interests of Experts and Counsel
  Not
applicable.
  28
  ITEM
8. FINANCIAL INFORMATION
  A.
Consolidated Financial Statements and Other Financial Information
  The
following financial statements of Poly-Pacific International Inc. for the years
ended December 31, 2007, 2006 and 2005 are incorporated with this Item 8 to this
report:
  
              Management
      Responsibility for Financial Reporting.
              Auditors'
      Report.
 
              Consolidated
      Balance Sheet at period end date.
              Consolidated
      Statement of Operations.
 
              Statement
      of Retained Earnings and Deficit.
              Consolidated
      Statement of Cash Flows.
 
              Notes
      to Consolidated Financial
Statements.
  The
Company has neither declared nor paid any dividends to date on its outstanding
shares. The Company intends to retain any future earnings to finance the
development of its properties, and accordingly, does not anticipate paying any
dividends in the foreseeable future.
  The
financial statements are presented on the immediately following
pages.
  29
          POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 
 Consolidated
Financial Statements
 
 December
31, 2007 and 2006
         30
  MANAGEMENT'S
RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
 
 The
accompanying consolidated financial statements of Poly-Pacific International
Inc. for the years ended December 31, 2007 and 2006 have been prepared by
management in accordance with U.S. generally accepted accounting
principles.
 
 Management
maintains systems of internal control designed to provide reasonable assurance
that the assets are safeguarded, all transactions are authorized and duly
recorded, and financial records are properly maintained to facilitate the
preparation of the consolidated financial statements in a timely
manner.  The Board of Directors is responsible for ensuring that
management fulfils its responsibilities for financial reporting and is
ultimately responsible for reviewing and approving the consolidated financial
statements.  The Board carries out this responsibility principally
through its Audit Committee.
 
 The Audit
Committee of the Board of Directors has reviewed the consolidated financial
statements with management and the external auditors.  K.R. Margetson
Ltd., an independent firm of chartered accountant (British Columbia,
Canada)  and a Certified Public Accountant (Illinois, US) , appointed
as external auditors by the shareholders, have audited the consolidated
financial statements and their report is included herein.
  /s/
“Randy Hayward”
 Signed
 Randy
Hayward
 President,
Chief Executive Officer
 
 April 28,
2008
  31
  K. R. MARGETSON
      LTD.
              Chartered
      AccountantKeith@krmargetson.com
              Cell:
      604.220.7704PO Box 45, 5588
      Inlet Avenue
              331 East 5th
      StreetSechelt
      BC  V0N 3A0
              North
      Vancouver BC  V7L 1M1Tel:  604.885-281:
              Tel:
      604.929.0819Fax
      604.885.2834
              Fax:
      604.929.0851
 
 Report
of Independent Registered Public Accounting Firm
 
 To the
Shareholders of
 Poly-Pacific
International Inc.
 
 We have
audited the accompanying consolidated balance sheet of Poly-Pacific
International Inc. (the “Company”) as at December 31, 2007 and the related
consolidated statements of operations, shareholders’ equity and cash flows the
year ended December 31, 2007.  These consolidated financial statements
are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audit provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as at December
31, 2007 and the results of its operations and its cash flows for each of the
year ended December 31, 2007 in accordance with U.S. generally accepted
accounting principles.
 
 The
financial statements as at December 31, 2007 and for the years ended December
31, 2006 and 2005, prior to the restatement to give effect to the discontinued
operations as described in Note 13, were audited by other auditors who expressed
an opinion without reservation on those statements in their report dated April
19, 2007.  We have audited the restatement to the 2006 financial
statement and in our opinion, such adjustments, in all material respects, are
appropriate and have been properly applied.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the financial statements, the Company has suffered recurring losses from
operations and has a net working capital deficiency that raise substantial doubt
about its ability to continue as a going concern.  Management’s plans
in regard to these matters are also described in Note 1.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 /s/
“K.R. Margetson Ltd.”
 
 Signed
 
 K.R.
Margetson Ltd., Chartered Accountant
 
 North
Vancouver, Canada
 April 23,
2008
 
 32
 
 Report
of Independent Registered Public Accounting Firm
 
 
 To the
Shareholders of
 Poly-Pacific
International Inc.
 
 
 We have
audited the accompanying consolidated balance sheets of Poly-Pacific
International Inc. (the “Company”) as at December 31, 2006 and 2005 and the
related consolidated statements of operations, shareholders’ equity and cash
flows for each of the years in the three year period ended December 31,
2006.  These consolidated financial statements are the responsibility
of the Company’s management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as at December
31, 2006 and December 31, 2005 and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 2006 in
accordance with U.S. generally accepted accounting principles.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the financial statements, the Company has suffered recurring losses from
operations and has a net working capital deficiency that raise substantial doubt
about its ability to continue as a going concern.  Management’s plans
in regard to these matters are also described in Note 1.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
  /s/
“Collins Barrow Edmonton LLP”
 Signed
 Collins
Barrow Edmonton LLP, Chartered Accountants
 Independent
Registered Chartered Accountants
 
 Edmonton,
Canada
 April 19,
2007
  33
 
 POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Consolidated
Balance Sheets
 As at
December 31, 2007 and 2006
  2007
                
                
                2006ASSETSCurrent
      AssetsCash
      and cash equivalents
                
                $
                101,389
                
                
                $
                -Sales
      tax receivable
                
                
                49,233
                
                
                
                13,746Loan
      receivable (Note 3)
                
                
                17,149
                
                
                
                -Prepaid
      expenses
                
                
                13,866
                
                
                
                -Current
      assets of discontinued operations (Note 14)
                
                
                -
                
                
                
                395,740Total
      current assets
                
                
                181,637
                
                
                
                409,486Security
      deposit (Note 4)
                
                
                304,603
                
                
                
                -Equipment
      (Note 5)
                
                
                11,116
                
                
                
                15,039Equipment
      of discontinued operations (Note 14)
                
                
                -
                
                
                
                889,312Total
      assets
                
                $
                497,356
                
                
                $
                1,313,837LIABILITIES
      AND SHAREOLDERS' EQUITYCurrent
      LiabilitiesBank
      indebtedness
                
                $
                -
                
                
                $
                19,131Accounts
      payable and accrued liabilities
                
                
                61,249
                
                
                
                317,408Debentures
      payable (Note 6)
                
                
                110,500
                
                
                
                102,000Current
      liabilities of discontinued operations (Note 14)
                
                
                -
                
                
                
                1,326,650Total
      current liabilities
                
                
                171,749
                
                
                
                1,765,189Non-controlling
      interest of variable interest entity
                
                
                -
                
                
                
                280,589Total
      liabilities
                
                
                171,749
                
                
                
                2,045,778Contingencies
      (Note 8)Subsequent
      events (Note 15)STOCKHOLDERS'
      EQUITYShare
      capital (Note 7)
                
                $
                5,488,253
                
                
                
                2,467,602Authorized:Unlimited
      common and preferred sharesCommon
      shared issued and outstandingDecember
      31, 2007 - 58,720,279December
      31, 2006 - 25,237,740December
      31, 2005 - 18,885,456Additional
      paid in capital
                
                
                1,791,076
                
                
                
                778,796Accumulated
      deficit
                
                
                (7,006,917
                )
                
                
                (4,031,534
                )Accumulated
      other comprehensive income
                
                
                53,195
                
                
                
                53,195Total
      stockholders' equity
                
                
                325,607
                
                
                
                (731,941
                )Total
      liabilities and stockholders' equity
                
                $
                497,356
                
                
                $
                1,313,837
     The
accompanying notes to the consolidated financial statements are an integral part
of the statements.
 
 Approved
on behalf of the Board
  /s/
      “Richard Oravec”
              /s/ “Dick
      Sharples”Signed
              SignedDirector
              Director
 
 34
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Consolidated
Statement of Operations
 For the
Years Ended December 31, 2007, 2006 and 2005
  2007
                
                
                2006
                
                
                2005ExpensesGeneral
      and administrative
                
                $
                1,050,664
                
                
                $
                516,952
                
                
                $
                256,077Occupancy
      costs
                
                
                94,769
                
                
                
                26,421
                
                
                
                66,248Professional
      fees
                
                
                347,444
                
                
                
                229,701
                
                
                
                269,635Amortization
      of property and equipment
                
                
                3,922
                
                
                
                5,393
                
                
                
                6,864Engineering
                
                
                182,239
                
                
                
                -
                
                
                
                -Foreign
      exchange loss
                
                
                17,889
                
                
                
                1,458
                
                
                
                -Regulatory
      costs
                
                
                175,998
                
                
                
                26,248
                
                
                
                17,896Stock
      compensation expense
                
                
                1,012,280
                
                
                
                47,626
                
                
                
                33,6962,885,205
                
                
                
                853,799
                
                
                
                650,416Operating
      loss from continuing operations
                
                
                (2,885,205
                )
                
                
                (853,799
                )
                
                
                (650,416
                )Interest
      income
                
                
                (5,059
                )
                
                
                -
                
                
                
                -Interest
      expense
                
                
                30,675
                
                
                
                3,239
                
                
                
                36,717Other
      income (Note 9)
                
                
                (148,894
                )
                
                
                -
                
                
                
                -Operating
      loss from continuing operations
                
                
                (2,761,927
                )
                
                
                (857,038
                )
                
                
                (687,133
                )before
      income taxesIncome
      taxes - deferred (Note 10)
                
                
                -
                
                
                
                -
                
                
                
                174,750Loss
      from continuing operations
                
                
                (2,761,927
                )
                
                
                (857,038
                )
                
                
                (861,883
                )Loss
      from discontinued operations (Note 14)
                
                
                (213,456
                
                
                
                (1,113,441
                )
                
                
                (299,779
                )Net
      loss for the year
                
                $
                (2,975,383
                )
                
                $
                (1,970,479
                )
                
                $
                (1,161,662
                )Loss
      per share from continuing operations
                
                $
                (0.06
                )
                
                $
                (0.04
                )
                
                $
                (0.07
                )(Note
      11)Net
      loss per share (Note 11)
                
                $
                (0.06
                )
                
                $
                (0.09
                )
                
                $
                (0.09
                )Loss
      per share from discontinued operations
                
                $
                -
                
                
                $
                (0.05
                )
                
                $
                (0.02
                )
  The
accompanying notes to the consolidated financial statements are an integral part
of the statements.
  35
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Consolidated
Statement of Shareholders’ Equity
 For the
Years Ended December 31, 2007, 2006 and 2005
 
 Number
      of Shares
                
                
                Amount
                
                
                Additional
      Paid in Capital
                
                
                Accumulated
      Deficit
                
                
                Accumulated
      Other Comprehensive Income
                
                
                Shareholders'
      Equity (Deficit)Balance
      at December 31, 2004
                
                
                9,361,624
                
                
                $
                865,584
                
                
                $
                697,474
                
                
                $
                (899,393
                )
                
                $
                53,195
                
                
                $
                716,860Conversion
      of debenture
                
                
                9,523,832
                
                
                
                1,132,954
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,132,954Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                33,696
                
                
                
                -
                
                
                
                -
                
                
                
                33,696Loss
      for the period
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,161,662
                )
                
                
                -
                
                
                
                (1,161,662
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      at December 31, 2005
                
                
                18,885,456
                
                
                
                1,998,538
                
                
                
                731,170
                
                
                
                (2,061,055
                )
                
                
                53,195
                
                
                
                721,848-Issuance
      of common shares
                
                
                6,352,284
                
                
                
                469,064
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                469,064Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                47,626
                
                
                
                -
                
                
                
                -
                
                
                
                47,626Loss
      for the period
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,970,479
                )
                
                
                -
                
                
                
                (1,970,479
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      at December 31, 2006
                
                
                25,237,740
                
                
                
                2,467,602
                
                
                
                778,796
                
                
                
                (4,031,534
                )
                
                
                53,195
                
                
                
                (731,941
                )Issuance
      of common shares
                
                
                16,385,987
                
                
                
                1,640,278
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,640,278Exercise
      of Options
                
                
                3,153,500
                
                
                
                315,350
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                315,350Exercise
      of Warrants
                
                
                2,770,848
                
                
                
                293,585
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                293,585Shares
      for debt settled
                
                
                3,172,208
                
                
                
                171,438
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                171,438Shares
      for Polyran
                
                
                7,999,996
                
                
                
                600,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                600,000Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                1,012,280
                
                
                
                -
                
                
                
                -
                
                
                
                1,012,280Loss
      for the period
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,975,383
                )
                
                
                -
                
                
                
                (2,975,383
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      at December 31, 2007
                
                
                58,720,279
                
                
                $
                5,488,253
                
                
                $
                1,791,076
                
                
                $
                (7,006,917
                )
                
                $
                53,195
                
                
                $
                325,607
  The
accompanying notes to the consolidated financial statements are an integral part
of the statements.
  36
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Consolidated
Statement of Cash Flows
 For the
Years Ended December 31, 2007, 2006 and 2005
  2007
                
                
                2006
                
                
                2005Operating
      ActivitiesNet
      loss for the year from continuing operations
                
                $
                (2,761,927
                )
                
                $
                (857,038
                )
                
                $
                (861,883
                )Items
      not involving cashAmortization
      of equipment
                
                
                3,922
                
                
                
                5,393
                
                
                
                6,864Deferred
      income taxes
                
                
                -
                
                
                
                (174,750
                )
                
                
                174,750Stock-based
      compensation
                
                
                1,012,280
                
                
                
                47,626
                
                
                
                33,696Net
      change in non-cash operating assets and
                
                
                (618,764
                )
                
                
                221,969
                
                
                
                11,102liabilities
      (Note 12)Funds
      provided by (used in) continuing operations
                
                
                (2,364,489
                )
                
                
                (756,800
                )
                
                
                (635,471
                )Funds
      provided by (used in) discontinued
                
                
                (638,276
                )
                
                
                (82,735
                )
                
                
                498,561operations
      (Note 14)Cash
      provided by (used in) operating activities
                
                
                (3,002,765
                )
                
                
                (839,535
                )
                
                
                (136,910
                )Financing
      ActivitiesBank
      overdraft advances (repayment)
                
                
                -
                
                
                
                19,131
                
                
                
                (2,996
                )Funds
      provided by variable interest entity
                
                
                -
                
                
                
                280,589
                
                
                
                -Issuance
      of share capital, net of share issue costs
                
                
                3,104,154
                
                
                
                469,064
                
                
                
                1,132,954Debenture
      payable advances (repayment)
                
                
                
                
                
                
                17,000
                
                
                
                (1,558,953
                )Funds
      provided by discontinued operations (Note 14)
                
                
                -
                
                
                
                48,304
                
                
                
                35,771Cash
      provided by (used in) financing activities
                
                
                3,104,154
                
                
                
                834,088
                
                
                
                (393,224
                )Investing
      ActivitiesFunds
      provided by discontinued operations
                
                
                -
                
                
                
                -
                
                
                
                402,296(Note
      14)Cash
      provided by investing activities
                
                
                -
                
                
                
                -
                
                
                
                402,296Increase
      (decrease) in cash and cash equivalents
                
                
                101,389
                
                
                
                (5,447
                )
                
                
                (127,838
                )Cash
      and cash equivalents, beginning of year
                
                
                -
                
                
                
                5,447
                
                
                
                133,285Cash
      and cash equivalents, end of year
                
                $
                101,389
                
                
                $
                -
                
                
                $
                5,447
  Supplemental
cash flow information (Note 12)
  The accompanying
notes to the consolidated financial statements are an integral part of
thestatements
  37
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
   1.        Nature of Business and Going
Concern
 
 Nature of Business
 
 Poly-Pacific
International Inc. was incorporated under the Alberta Business Corporations Act
on October 25, 1995.  The Company is in the business of manufacturing
plastic blasting media and manufacturing plastic lumber using recycled plastic
materials.
 
 Going Concern
 
 These
consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles on a going concern basis, which
presumes that the Company will be able to realize its assets and discharge its
liabilities in the normal course of business for the foreseeable
future.
 
 The
Company incurred a net loss for the year ended December 31, 2007 of $2,975,383
with a total accumulated deficit of $7,006,917.  There is substantial
doubt about the Company’s ability to continue as a going concern.  The
Company’s continuation as a “going concern” is dependent upon its ability to
achieve profitable operations, upon the continued financial support of its
shareholders and upon its ability to obtain additional financing or
equity.  Management is implementing a plan to obtain additional equity
financing in amounts sufficient to sustain operations.  The outcome of
this matter cannot be determined at this time.
 
 These
consolidated financial statements do not include any adjustments to the amounts
and classification of assets and liabilities that may be necessary should the
Company be unable to continue as a going concern.
 
 
 2.
              Significant Accounting
      Policies
 
 Basis
of Presentation
 
 These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (U.S.
GAAP).  All amounts herein are expressed in Canadian dollars unless
otherwise noted.  These consolidated financial statements conform in
all material respects with Canadian generally accepted accounting principles
(“Canadian GAAP”), except as discussed in Note 17.
 
 Principles
of Consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, Everwood Agricultural Products International Inc.
(“Everwood”) and Poly-Pacific Technologies Inc. (“PPT”).  As discussed
in Note 12, on December 31, 2007, Poly-Pacific Technologies Inc. was classified
as a discontinued operation and Everwood Inc. was classified as a discontinued
operation as of December 31, 2006.  All inter-company transactions
have been eliminated on consolidation.
  38
 
 POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 
 2.
              Summary of Significant
      Accounting Policies
(continued)
  Polyran
Reclamation Inc. (“Polyran” was accounted for as variable interest entity in
2006.  During the 2007 year, the Company completed an Expedited
Acquisition under the policies of the TSX Venture Exchange whereby it purchased
all the issued and outstanding shares of Polyran.  The result of the
acquisition is that the Company became the sole owner of all the assets of
Polyran and accordingly all its operations have been included in the accounts of
the Company.
  Measurement uncertainty
 
 The
preparation of financial statements is in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ
from those estimates.
 
 Through
the ordinary course of business, a number of claims are pending in which the
Company or its subsidiaries may be the plaintiff or defendant.  The
likely outcome of these claims cannot be determined at this time and no
provision has been made in the consolidated financial statements.  As
a result, the range of measurement uncertainty is not determinable.
 
 Revenue
Recognition
 
 Revenue
is recorded when significant risks and rewards of ownership have been
transferred to the customer.  This occurs at the time of shipment (FOB
shipping point) of the products from the Company’s warehouse and an invoice is
prepared.  Revenues are recognized only when the Company has
transferred to the customer the significant risk and rewards of ownership of the
goods, title to the products transfers, the amount is fixed and determinable,
evidence of an agreement exists, there is reasonable assurance of collection of
the sales proceeds, the Company has no future obligations and the customer bears
the risk of loss.
 
 Cash
and cash equivalents
 
 The
Company considers all highly liquid investments and short term debt instruments
with original maturities of three months or less to be cash
equivalents.  As at December 31, 2007, there were cash equivalents of
$20,000 (2006 - $nil).
 
 Equipment
 
 Equipment
is recorded at cost and amortized over its estimated useful
life.  Amortization is calculated at the following annual
rates:
  Computer
      equipment
                -30% declining
      balanceOffice
      equipment
                -20% declining
      balance
 39
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 2.
              Summary of Significant
      Accounting Policies
(continued)
 
 Impairment of Long-Lived
Assets
 
 The
Company reviews the carrying values of long-lived assets for existence of facts
or changes in circumstances that might indicate a condition of
impairment.  If estimates of undiscounted cash flows expected to
result from the use of an asset and its eventual disposition are less than the
carrying amount then the carrying amount of the asset is written down to its
fair value.
 
 Translation
of Foreign Currency
 
 The
functional currency of the Company and all of its subsidiaries is the Canadian
dollar.  Monetary assets and liabilities of the company are translated
into Canadian dollars at the rate of exchange in effect at the balance sheet
date.  Revenue and expense items are translated at average rates of
exchange in effect at the respective transaction months.  The
resulting exchange gains or losses are included in
earnings.  Non-monetary assets and liabilities, arising from
transactions denominated in foreign currencies, are translated at rates of
exchange in effect at the date of the transaction.
  Translation of Foreign Currency(continued)
 
 Monetary
assets and liabilities of the integrated foreign subsidiary are translated into
Canadian dollars at a rate of exchange in effect at the balance sheet
date.  Non-monetary assets and liabilities are translated at
historical exchange rates.  Revenue and expense items other than
amortization are translated at the average rate of exchange for the
year.  Amortization of assets translated at historical exchange rates
are translated at the same exchange rates as the assets to which they
relate.
 
 Inventories
 
 Inventories
are recorded at the lower of cost or net realizable value.  Cost of
inventories is determined on an average cost basis.
 
 Deferred
Taxes
 
 The
Company accounts for and measures deferred tax assets and liabilities in
accordance with the asset and liability method.  Under this method,
deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be reversed or settled.  The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment of the
change.  When the future realization of income tax assets does not
meet the test of being more likely than not to occur, a valuation allowance in
the amount of the potential future benefit is taken and no net asset is
recognized.
  40
 
 POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 
 2.
              Summary of Significant
      Accounting Policies
(continued)
  Stock-Based
Compensation Plan
 
 Effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
Board (“SFAS”) No. 123(R) “Share-Based Payment”, a revision to SFAS 123
“Accounting for Stock-Based Compensation”.  SFAS 123(R) requires the
Company to recognize in the income statement the grant date fair value of
share-based compensation awards granted to employees over the requisite service
period.  Compensation expense recognized reflects estimates of award
forfeitures and any change in estimates thereof are reflected in the period of
change.  The risk-free interest rate assumption is based upon observed
interest rates appropriate for the expected term of the Company’s employee stock
options.  The Company used its historical volatility as a basis to
estimate the expected volatility assumption used in the Black-Scholes model
consistent with  SFAS 123(R).  The Company has not paid any
dividends on common stock since its inception and does not anticipate paying
dividends on its common stock in the foreseeable future.  The expected
life of employee stock options is based on historic forfeiture
rates.
 
 Direct
Costs
 
 Direct
costs consist primarily of purchasing costs, freight, direct labour and other
specific costs.
 
 General
and Administrative
 
 General
and administrative costs consist primarily of office expenses, management
salaries, administrative salaries and other expenses.
 
 Occupancy
Costs
 
 Occupancy
costs consist primarily of rent, utilities and telephone expenses.
 
 Net
Income (loss) Per Common Share
 
 Net
income (loss) per common share is calculated using the weighted average number
of common shares outstanding during the period.  Diluted net income
(loss) per common share is calculated using the treasury stock method which uses
the weighted average number of common shares outstanding during the period and
also includes the dilutive effect of potentially issuable common
shares.
 
 Advertising
 
 The Company expenses advertising
costs as incurred.
 
 Deposit
 
 Deposit consists of refundable
amounts held by vendors.
  41
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
   Recent
Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
Measurements”.  SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value
measurements.  SFAS 157 is effective as of the beginning of the first
fiscal year that begins after November 15, 2007.  As such, the Company
is required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2008.  The Company is currently evaluating the impact of
SFAS 157 on its consolidated financial statements.
 
 In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities, including an amendment of
FASB Statement No. 115”.  SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value at
specified election dates.  SFAS 159 is effective as of the beginning
of an entity’s first fiscal year that begins after November 15,
2007.  As such, the Company is required to adopt these provisions at
the beginning of the fiscal year ended December 31, 2008.  The Company
is currently evaluating the impact of SFAS 159 on its consolidated financial
statements.
 
 In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 141(R), "Business
Combinations”.  SFAS 141(R) establishes principles and requirements
for how the acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, an any non-controlling
interest in the acquiree, recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  SFAS
141(R) is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  As such, the Company
is required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009.  The Company is currently evaluating the impact of
SFAS 141(R) on its consolidated financial statements.
 
 In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”.  SFAS
160 establishes accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2008.  As such, the Company is required to adopt these provisions at
the beginning of the fiscal year ended December 31, 2009.  The Company
is currently evaluating the impact of SFAS 160 on its consolidated financial
statements.
 
 In March,
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No 161. This Statement requires enhanced
disclosures about an entity’s derivative and hedging activities and thereby
improves the transparency of financial reporting. This Statement is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008, with early application encouraged. This Statement
encourages, but does not require, comparative disclosures for earlier periods at
initial adoption.   The Company is currently evaluating the
impact of SFAS 160 on its consolidated financial statements.
  42
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
  Recent Pronouncements(continued...)
  Comprehensive Income
  In
accordance with SFAS 130, "Reporting Comprehensive Income" ("SFAS 130"),
comprehensive income consists of net income and other gains and losses affecting
stockholder's equity that are excluded from net income, such as unrealized gains
and losses on investments available for sale, foreign currency translation gains
and losses and minimum pension liability.
  3.       
Loan
Receivable
  The loan is unsecured, bears interest at 8% and is due May 9, 2008.
  4.        Security Deposit
 
 The
security deposit represents a cash equivalent that the Company must maintain as
security for future site reclamations.
  5.         Equipment
 
 2007Cost
              
              
              Accumulated
      Amortization
              
              NetComputer
      equipment
              
              $
              61,419
              
              
              $
              55,016
              
              
              $
              6,403Office
      equipment
              
              
              31,785
              
              
              
              27,072
              
              
              
              4,713$
              93,204
              
              
              $
              82,088
              
              
              $
              11,1162006Cost
              
              
              Accumulated
      Amortization
              
              NetComputer
      equipment
              
              $
              61,419
              
              
              $
              52,271
              
              
              $
              9,148Office
      equipment
              
              
              31,785
              
              
              
              25,894
              
              
              
              5,891$
              93,204
              
              
              $
              78,165
              
              
              $
              15,039




43


POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 
 6.         Debentures
Payable
 
 A
$275,000 unsecured convertible debenture was issued during 2003.  The
convertible debenture bears interest at 10% per annum and was due on December
15, 2004.  The debenture is convertible at the option of the debenture
holder into fully paid, non-assessable common shares without par value in the
capital of the Company at a conversion price in the range of $0.15 to $0.20 per
common share.  The convertible debentures held by the public were
settled with the debenture holders during 2005 for cash consideration of
$161,856.  During 2005, a convertible debenture holder exercised his
option to convert his $10,000 convertible debenture to 161,332 common shares of
the Company at a negotiated price of $0.075 per share.  The remaining
convertible debentures of $110,500 are held by former directors of the
Company.  Of that amount, $70,724 has been demanded but the Company
has counterclaimed and refused payment.  The Company has provided
fully for the principal and interest.
  7.         Share Capital
 
 Authorized
 
 Unlimited
number of common voting shares and unlimited number of preferred non-voting
shares
  Number
      of Shares
                
                
                AmountBalance
      at December 31, 2004
                
                
                9,361,624
                
                
                $
                865,584Conversion
      of debenture
                
                
                9,523,832
                
                
                
                1,132,954Balance
      at December 31, 2005
                
                
                18,885,456
                
                
                
                1,998,538Issuance
      of common shares
                
                
                6,352,284
                
                
                
                469,064Balance
      at December 31, 2006
                
                
                25,237,740
                
                
                
                2,467,602Issuance
      of common shares
                
                
                16,385,987
                
                
                $
                1,640,278Exercise
      of stock options
                
                
                3,153,500
                
                
                
                315,350Exercise
      of warrants
                
                
                2,770,848
                
                
                
                293,585Shares
      for debt settled
                
                
                3,172,208
                
                
                
                171,438Shares
      for Polyran
                
                
                7,999,996
                
                
                
                600,000Balance
      at December 31, 2007
                
                
                58,720,279
                
                
                $
                5,488,253
  44
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
  7.         Share Capital
(continued)
 
 For
the fiscal year ended December 31, 2007
 
 On
January 4, 2007, the Company settled certain of its debt with various creditors
in the aggregate amount of $171,438 by issuing 3,172,208 common shares of the
Company ranging in price from $0.05 to $0.10 per common share.
 
 Pursuant
to the First private placement Agreement dated January 31, 2007, the Company
issued 6,000,000 units at a price of $0.05 per unit by way of a non-brokered
private placement for total proceeds of $290,906 (net of share issuance costs of
$9,094). Each unit comprises of one common share and one share purchase warrant
of the Company.  Each share warrant entitles the holder to purchase
one common share at $0.25 until Jan 31, 2009.
 
 Pursuant
to the Second private placement Agreement dated May 25, 2007, the Company issued
3,000,000 units at a price of $0.10 per unit by way of a non-brokered private
placement for total proceeds of $289,050 (net of share issuance costs of
$10,950).  Each unit comprises of one common share and one share
purchase warrant of the Company.  Each share warrant entitles the
holder to purchase one common share at $0.40 until May 25, 2009.
 
 On June
20, 2007, the Company purchased all of the issued and outstanding shares of
Polyran Reclamation Inc, (“Polyran”) pursuant to an exempt take over
bid.  In consideration for the shares of Polyran, the Company has
issued an aggregate of 7,999,996 of its common shares at a deemed price of $0.23
per share pro rata to the shareholders of Polyran. The acquisition of the
Polyran shares was completed as an Expedited Acquisition under the policies of
the TSX Venture Exchange.
 
 Pursuant
to the Third private placement Agreement dated July 19, 2007, the Company issued
a total of 4,803,130 units at a price of $0.18 per unit by way of a non-brokered
private placement for total proceeds of $796,669 (net of share issuance costs of
$67,895).  This placement was completed in two separate closing dates
with 3,352,853 units being closed on July 19, 2007 and 1,450,277 units being
closed on August 2, 2007.  Each unit comprises of one common share and
one share purchase warrant of the Company.  Each share warrant
entitles the holder to purchase one common share at $0.30 until the first
anniversary of the closing date and at $0.40 upon the second anniversary from
the closing date.
 
 Pursuant
to the Fourth private placement Agreement dated November 29, 2007, the Company
issued 2,582,857 units at a price of $0.105 per unit by way of a non-brokered
private placement for total proceeds of $263,654 (net of share issuance costs of
$7,546).  Each unit comprises of one common share and one share
purchase warrant of the Company.  Each share warrant entitles the
holder to purchase one common share at $0.14 until November 29,
2009.
  45
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
  7.         Share Capital
(continued)
 
 For the
fiscal year ended December 31, 2006
 
 Pursuant
to the First private placement Agreement dated April 12, 2006, the Company
issued 4,838,284 units at a price of $0.07 per unit by way of a non-brokered
private placement for total proceeds of $326,393 (net of share issuance costs of
$12,288). Each unit comprises one common share and one share purchase warrant of
the Company.  Each share warrant entitles the holder to purchase one
common share at $0.10 until March 30, 2008.
 
 Pursuant
to the Second private placement Agreement dated August 30, 2006, the Company
issued 1,514,000 units at a price of $0.10 per unit by way of a non-brokered
private placement for total proceeds of $142,671 (net of share issuance costs of
$8,729).  Each unit comprises one common share and one half share
purchase warrant of the Company.  Each share warrant entitles the
holder to purchase one common share at $0.25 until August 30, 2008.
 
 Stock-Based
Compensation Plan
 
 a)
              Summary
      of the stock option transactions are as
follows:
  Number
                  of
      Options
                
                
                Weighted
      Average Exercise PriceOutstanding
      at December 31, 2004
                
                
                1,637,000
                
                
                $
                0.10Granted
                
                
                -
                
                
                
                -Cancelled
                
                
                (550,400
                )
                
                
                0.10Outstanding
      at December 31, 2005
                
                
                1,086,600
                
                
                
                0.10Granted
                
                
                1,700,000
                
                
                
                0.10Cancelled
                
                
                (205,900
                )
                
                
                0.10Outstanding
      at December 31, 2006
                
                
                2,580,700
                
                
                
                0.10Granted
                
                
                6,550,000
                
                
                
                0.21Exercised
                
                
                (3,153,500
                )
                
                
                0.10Cancelled
                
                
                (717,200
                )
                
                
                0.10Outstanding
      at December 31, 2007
                
                
                5,260,000
                
                
                $
                0.23
 During
the year, a total of 6,550,000 options were granted to directors, officers and
consultants of the Company.
  46
 
 POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
  7.         Share Capital
(continued)
  On
January 11, 2007, 250,000 stock options were granted to an officer and director
of the Company.  These options expire on January 11, 2012. exercisable
at $0.10.   These options vested in 30 days. On the same day,
950,000 stock options were granted to consultants of the
Company.  These options expire on January 11, 2009, exercisable at
$0.10.  These options vested in the following
percentages:
 25% upon
grant, 25% on July 11, 2007, 25% on January 11, 2008 and the final 25% on July
11, 2008.
 
 On
February 1, 2007, 1,400,000 stock options were granted to consultants of the
Company.  These options expire on February 1, 2009, exercisable at
$0.18.  These options vested in 30 days.
 
 On March
12, 2007, 800,000 stock options were granted to directors of the
Company.  These options expire on March 12, 2012, exercisable at
$0.10.  On the same day, an additional 100,000 stock options were
granted to a consultant of the Company.  These options expire on March
12, 2008, exercisable at $0.10.  Both these options vested in 30
days.
 
 On May 4,
2007, 50,000 stock options were granted to a consultant of the
Company.  These options expire on May 4, 2008, exercisable at
$0.16.  These options vested in 30 days.
 
 On May
19, 2007, 500,000 stock options were granted to consultants of the
Company.   These options expire on May 19, 2009, exercisable at
$0.14.  These options vested in 30 days.
 
 On July
23, 2007, 2,500,000 stock options were granted to an officer, directors,
consultants and an employee of the Company.  These options expire on
July 23, 2012, exercisable at $0.325.  These options vested in the
following percentages:  50% upon grant, 25% on May 23, 2008 and
the
 remaining
25% on January 23, 2009.
 
 During
the year, 717,200 stock options were cancelled.
  47
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
   7.         Share Capital
(continued)
  b)  The
      following table summarizes information about stock options outstanding at
      December 31, 2007, 2006 and 2005.
 2007Options
      Outstanding
                  Weighted
                
                
                Options
      ExercisableNumber
      of Options
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Average
                  Remaining
                  Contractual
      Life
                  (Years)
                
                
                Number
                  of
                  Options
                
                
                Weighted
                  Average
                  Exercise
                  Price$
                810,000
                
                
                
                0.10
                
                
                
                4.00
                
                
                
                560,000
                
                
                $
                0.101,400,000
                
                
                
                0.18
                
                
                
                4.10
                
                
                
                1,400,000
                
                
                
                0.18550,000
                
                
                
                0.14
                
                
                
                4.42
                
                
                
                500,000
                
                
                
                0.142,500,000
                
                
                
                0.325
                
                
                
                4.50
                
                
                
                1,250,000
                
                
                
                0.325
 2006Options
      Outstanding
                    Weighted
                  
                  
                  Options
      ExercisableNumber
      of Options
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Average
                    Remaining
                    Contractual
      Life
                    (Years)
                  
                  
                  Number
                    of
                    Options
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price$
                  880,700
                  
                  
                  
                  0.10
                  
                  
                  
                  2.29
                  
                  
                  
                  880,700
                  
                  
                  $
                  0.10200,000
                  
                  
                  
                  0.10
                  
                  
                  
                  0.30
                  
                  
                  
                  150,000
                  
                  
                  
                  0.101,500,00
                  
                  
                  
                  0.10
                  
                  
                  
                  4.90
                  
                  
                  
                  ---
                  
                  
                  
                  0.10
 48
 
 POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
  7.         Share Capital
(continued)
  2005Options
      Outstanding
                  
                  
                  Options
      ExercisableNumber
      of Options
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Weighted
                    Average
                    Remaining
                    Contractual
      Life
                    (Years)
                  
                  
                  Number
                    of
                    Options
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price$
                  1,086,600
                  
                  
                  
                  0.10
                  
                  
                  
                  3.29
                  
                  
                  
                  1,086,600
                  
                  
                  $
                  0.10
 The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and is fully
transferable.  In addition, the valuation model calculates the
expected stock price volatility based on highly subjective
assumptions.
 
 Because
the Company’s employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimates, in management
opinion, the existing model does not necessarily provide a reliable single
measure of the fair value of its employee stock options.
 
 During
the year ended December 31, 2007, the Company recognized $1,012,280 (2006 -
$47,626; 2005 - $33,696) in stock-based compensation expense.
 
 As at
December 31, 2007, there was $434,388 (2006 - $70,338) of unrecognized
compensation cost related to non-vested stock options.
 
 The fair
value for stock options expensed was estimated using the Black-Scholes option
pricing model assuming no expected dividends and the following weighted average
assumptions:
 
 2007
              
              
              2006
              
              
              2005Expected
      volatility
              
              
              215
              %
              
              
              224
              %
              
              
              87
              %Interest
      rate
              
              
              4.39
              %
              
              
              4.15
              %
              
              
              2.58
              %Expected
      life options (in years)
              
              
              2.0
              
              
              
              4.53
              
              
              
              5.0Fair
      value
              
              $
              0.21
              
              
              $
              0.07
              
              
              $
              0.03
  49
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 7.         Share Capital
(continued)
  A summary of warrant transactions are as follows:
 
 Number
      of Warrants
                
                
                Weighted
      Average Exercise PriceBalance
      at December 31, 2004
                
                
                -
                
                
                $
                -Balance
      at December 31, 2005
                
                
                -
                
                
                
                -Issued:
                
                
                5,595,284
                
                
                
                0.12Balance
      at December 31, 2006
                
                
                5,595,284
                
                
                
                0.12Issued:
                
                
                16,385,987
                
                
                
                0.26Exercised:
                
                
                (2,770,848
                )
                
                
                0.11Balance
      at December 31, 2007
                
                
                19,210,423
                
                
                $
                0.24
 
 8.         Contingencies
 
 Through
the ordinary course of business, there is one claim against the Company for
$12,182.  There are also claims totalling $326,561 against the
Company’s subsidiaries, whose operations are now discontinued.  As at
the date of these consolidated statements, no claim against the Company has been
made in connection with its subsidiaries’ operations.  The likely
outcome in either instance cannot be determined at this time and no provision
has been made in the consolidated statements for any potential
payment.
  9;        
Other
Income
 
 The
Company received $148,894 for recovery of costs incurred relating to the joint
venture with Fando Holding (Canada) Ltd. regarding the McKendry landfill
site.
  50
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 
 10.       Income Taxes
 
 The
difference between the computed expected income tax provision based on a
statutory tax rate of 34.12% (2006 - 32.49%; 2005 - 33.62%) and the actual
income tax provision are summarized as follows:
 
 2007
              
              
              2006
              
              
              2005Computed
      expected income taxes (recovery)
              
              $
              (1,015,200
              )
              
              
              (640,209
              )
              
              $
              (390,551
              )Increase (decrease) in tax
      resulting from:Non-deductible
      costs
              
              
              354,026
              
              
              
              22,050
              
              
              
              70,976Capital cost
      allowance for tax in excessof amortization
              
              
              (4,495
              )
              
              
              (4,584
              )
              
              
              (413
              )Change in
      valuation allowance
              
              
              -
              
              
              
              -
              
              
              
              174,750Loss on
      discontinued operations
              
              
              72,831
              
              
              
              361,757
              
              
              
              100,786Unutilized
      loss carry forwards
              
              
              592,838
              
              
              
              260,986
              
              
              
              219,202Total income
      taxes
              
              $
              -
              
              
              $
              -
              
              
              $
              174,750
  The
following summarizes the components included in deferred income taxes as at
December 31:
  2007
                
                
                2006
                
                
                2005Assets:Tax benefits of
      losses carry forwardNon-capital
                
                $
                1,528,517
                
                
                $
                890,979
                
                
                $
                651,904Capital
                
                
                181,200
                
                
                
                181,200
                
                
                
                -Difference between
      tax value and book value of capital assets
                
                
                35,969
                
                
                
                38,531
                
                
                
                42,401Valuation
      Allowance
                
                
                (1,745,686
                )
                
                
                (1,110,710
                )
                
                
                (694,305
                )Net future tax
      assets
                
                $
                -
                
                
                $
                -
                
                
                $
                -
 As at
December 31, 2007, the Company has $4,479,827 in non-capital losses that may be
used to reduce future Canadian income taxes otherwise payable.  The
non – capital losses expire as follows:
 
 2009                                                     $    
195,297
 2010                                                     $    
394,901
 2014                                                     $    
696,840
 2015                                                     $    
651,998
 2026                                                     $     803,281
 2027                                                    $  
1,737,510
 
 In
addition, the Company has $531,066 in taxable capital losses that have no expiry
date but may only be utilized to reduce future taxable capital
gains.
  51
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 11.       Net Loss per Common
Share
 
 Loss per share was calculated as
follows:
  Numerator:
                
                2007
                
                
                2006
                
                
                2005Loss
      from continuing operations
                
                $
                (2,761,927
                )
                
                $
                (857,038
                )
                
                $
                (861,883
                )Gain/(Loss)
      from discontinued operations
                
                
                (213,456
                )
                
                
                (1,113,441
                )
                
                
                (299,779
                )Net
      loss
                
                $
                (2,975,383
                )
                
                $
                (1,970,479
                )
                
                $
                (1,161,662
                )Denominator:Basic
      and diluted weighted average common shares outstanding
                
                
                47,146,785
                
                
                
                22,817,241
                
                
                
                12,536,235Loss
      per common share:Continuing
      operations
                
                $
                (0.06
                )
                
                $
                (0.04
                )
                
                $
                (0.07
                )Discontinued
      operations
                
                
                -
                
                
                
                (0.05
                )
                
                
                (0.02
                )Total
                
                $
                (0.06
                )
                
                $
                (0.09
                )
                
                $
                (0.09
                )
 Diluted
net loss per common share is calculated using the treasury stock
method.  The effects of the potential exercise of options and
conversion of the convertible debentures are anti-dilutive for the year ended
December 31, 2006, 2005 and 2004 and were excluded from the calculation of
diluted net loss per common share.
 
 The following securities were
excluded from the diluted loss per share calculations:
  2007
                
                
                2006
                
                
                2005Convertible
      debentures
                
                
                425,000
                
                
                
                425,000
                
                
                
                425,000Warrants
                
                
                13,212,540
                
                
                
                5,595,284
                
                
                
                -Options
                
                
                3,493,333
                
                
                
                2,580,700
                
                
                
                1,086,600Total
                
                
                17,130,873
                
                
                
                8,600,984
                
                
                
                1,511,600
 
 52
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
  
 12.       Supplemental Cash Flow
Information
 
 2007
                
                
                2006
                
                
                2005Sales
      tax receivable
                
                $
                (35,487
                )
                
                $
                11,448
                
                
                $
                24,829Loan
      receivable
                
                
                (17,149
                )
                
                
                -
                
                
                
                -Prepaid
      expenses
                
                
                (13,866
                )
                
                
                9,358
                
                
                
                (5,583
                )Security
      deposit
                
                
                (304,603
                )
                
                
                -
                
                
                
                -Accounts
      payable and accrued liabilities
                
                
                (247,659
                )
                
                
                201,163
                
                
                
                (8,144
                )$
                (618,764
                )
                
                $
                221,969
                
                
                $
                11,102b)  Interest:Interest
      paid
                
                $
                2,423
                
                
                $
                3,239
                
                
                $
                36,717
  Significant
non-cash transactions during the year ended December 31, 2007 were as
follows:
 
 a)  settlement
of debt in the amount $171,438 by issuing 3,172,208 common shares
 
 13.       Related Party
Transactions
 
 During
the year, the Company had no related party transactions with corporations under
significant influence of one of the Company's former directors:
 
 2007
              
              
              2006
              
              
              2005Management
      fees
              
              $
              -
              
              
              $
              48,300
              
              
              $
              88,105
  The
Company has a management contract with an officer and director in the monthly
amount of $10,000 which has been included in general and administrative
expenses.
 
 In
addition, during the year, director fees of $5,000 were paid to each of three
(3) individual directors of the Company.
 
 The
transactions in 2006 and 2005 were made in the normal course of operations and
are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
  53
 
 POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 
 14.       Discontinued
Operations
 
 On
November 1, 2007, due to the continuing losses as a result of decreasing market
share and lack of demand for plastic media, the Company announced the closure of
its wholly owned subsidiary, Poly-Pacific Technologies Inc. and its operations
in Ontario California.
 
 In
addition, during fiscal 2006, as a result of continued losses and Everwood’s
inability to obtain an adequate supply of raw materials to make posts and attain
cost-efficient production, the Company decided to permanently cease Everwood’s
operations in St. Thomas, Ontario.
 
 As a
result of these discontinued operations, the Company’s principal focus is fibre
reclamation of industrial landfill sites.
 
 Discontinued
operations and their results of operations, financial position and cash flows
are shown separately for all periods presented.  Summarized financial
information for discontinued operations is set forth below:
  TOTAL
                
                2007
                
                
                2006
                
                
                2005Revenues
                
                $
                300,632
                
                
                $
                1,470,357
                
                
                $
                3,052,716Cost
      of Sales
                
                
                453,157
                
                
                
                1,269,440
                
                
                
                2,076,599Expenses
                
                
                60,931
                
                
                
                1,314,358
                
                
                
                1,275,896Net
      loss
                
                $
                (213,456
                )
                
                $
                (1,113,441
                )
                
                $
                (299,779
                )POLY-PACIFIC
      TECHNOLOGIESRevenues
                
                $
                300,632
                
                
                $
                1,462,113
                
                
                $
                2,503,302Cost
      of Sales
                
                
                453,157
                
                
                
                1,142,352
                
                
                
                1,797,061Expenses
                
                
                60,931
                
                
                
                1,024,375
                
                
                
                949,267Net
      loss
                
                $
                (213,456
                )
                
                $
                (704,614
                )
                
                $
                (243,026
                )EVERWOODRevenues
                
                $
                -
                
                
                $
                8,244
                
                
                $
                549,414Cost
      of Sales
                
                
                -
                
                
                
                127,088
                
                
                
                279,538Expenses
                
                
                -
                
                
                
                289,983
                
                
                
                326,629Net
      loss
                
                $
                -
                
                
                $
                (408,827
                )
                
                $
                (56,753
                )
  54
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
  14.       Discontinued Operations(continued)
 
 Summarized
Balance Sheets of the discontinued operation are as follow:
 
 TOTAL
                
                2007
                
                
                2006
                
                
                2005Current
      Assets
                
                $
                -
                
                
                $
                395,740
                
                
                $
                954,797Equipment
                
                
                -
                
                
                
                889,312
                
                
                
                1,096,276Current
      Liabilities
                
                
                -
                
                
                
                1,326,650
                
                
                
                1,188,410POLY-PACIFIC
      TECHNOLOGIESCurrent
      Assets
                
                $
                -
                
                
                $
                385,402
                
                
                $
                913,781Equipment
                
                
                -
                
                
                
                889,312
                
                
                
                1,032,867Current
      Liabilities
                
                
                -
                
                
                
                1,196,828
                
                
                
                1,065,910EVERWOODCurrent
      Assets
                
                $
                -
                
                
                $
                10,338
                
                
                $
                41,016Equipment
                
                
                -
                
                
                
                -
                
                
                
                63,409Current
      Liabilities
                
                
                -
                
                
                
                129,822
                
                
                
                122,500
  55
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 
 14.       Discontinued Operations(continued)
 
 Summarized
Statement of Cash flows:
  TOTAL
                
                2007
                
                
                2006
                
                
                2005Operating
      ActivitiesCash
      provided by (used in) operating activities
                
                $
                (638,276
                )
                
                $
                (82,735
                )
                
                $
                498,561Financing
      ActivitiesCash
      provided by financing activities
                
                
                -
                
                
                
                48,304
                
                
                
                35,771Investing
      ActivitiesCash
      provided by investing activities
                
                
                -
                
                
                
                -
                
                
                
                402,296Increase
      (decrease) in cash
                
                $
                (638,276
                )
                
                $
                (34,431
                )
                
                $
                936,628
  POLY-PACIFIC
      TECHNOLOGIES INCOperating
      ActivitiesCash
      provided by (used in) operating activities
                
                $
                (638,276
                )
                
                $
                224,688
                
                
                $
                442,443Financing
      ActivitiesCash
      provided by financing activities
                
                
                -
                
                
                
                48,304
                
                
                
                198,311Investing
      ActivitiesCash
      provided by investing activities
                
                
                -
                
                
                
                -
                
                
                
                (2,678
                )Increase
      (decrease) in cash
                
                $
                (638,276
                )
                
                $
                272,992
                
                
                $
                638,076
  EVERWOODOperating
      ActivitiesCash
      provided by (used in) operating activities
                
                $
                -
                
                
                $
                (307,423
                )
                
                $
                56,118Financing
      ActivitiesCash
      used in financing activities
                
                
                -
                
                
                
                -
                
                
                
                (162,540
                )Investing
      ActivitiesCash
      provided by investing activities
                
                
                -
                
                
                
                -
                
                
                
                404,974Increase
      (decrease) in cash
                
                $
                -
                
                
                $
                (307,423
                )
                
                $
                298,552
  56
 
 POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
  15.
              Subsequent
      Events
 
 On
      February 19, 2008, the Company granted 2,575,000 stock options to
      directors, officers, employees and consultants of the Company with an
      exercise price of $0.12 with a five year term to expiry.  In
      addition, the Company announced the amendment of the exercise price to an
      aggregate of 1,500,000 options originally granted on July 23, 2007 subject
      to shareholder approval.  The exercise price was originally set
      at $0.325 but now will be re-priced to $0.12, with all other terms of the
      options unchanged. The Company further announced that effective on this
      date, a Director of the Company had agreed to surrender 500,000 options
      originally granted to him under the Company’s Stock Option Plan on July
      23, 2007 at a price of $0.325.
 
 On
      March 10, 2008, the Company announced that it had closed a non-brokered
      private placement offering of 1,862,500 Units at a subscription price of
      $0.08 per Unit for gross proceeds of $149,000.  Each Unit will
      consist of one common share in the capital of the Company and one common
      share purchase warrant.  Each warrant will entitle the holder
      thereof to purchase one common share for a price of $0.15 for a period of
      twenty four (24) months from
closing.
 
 On March
6, 2008, the Company announced that it granted 280,000 stock options to
employees of the Company.  The options will have an exercise price of
$0.10, with a two year term to expiry. These options vested
immediately.
 
 On March
10, 2008, the Company also announced that it granted 200,000 stock options to a
director and officer of the Company.  The options will have an
exercise price of $0.10, with a two year term to expiry. These options vested
immediately.
  
 16.       Financial
Instruments
 
 Fair
Value
 
 Fair
value estimates are made as of a specific point in time using available
information about the financial instrument.  These estimates are
subjective in nature and often cannot be determined with precision.
 
 Financial
instruments of the company consist mainly of cash, accounts receivable, bank
indebtedness, accounts payable, accrued liabilities and
debentures.  As at December 31, 2007 and 2006, there were no
significant differences between the carrying amounts of these items and their
estimated fair values.
 
 Interest Rate Risk
 
 The
Company’s debentures payable are subject to interest rate price
risk.
  57
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
  
 17.       Differences Between United States and
Canadian Generally Accepted Accounting Principles
 
 The
financial statements of the Company have been prepared in accordance with U.S.
generally accepted accounting principles which, as they apply to the Company,
differ in certain material respects from those applicable in
Canada.  Significant differences between U.S. GAAP and Canadian GAAP
are set forth below:
  2007
                
                
                2006
                
                
                2005Balance
      Sheet Adjustments:Additional
      Paid In CapitalBalance
      under U.S. GAAP
                
                $
                1,791,076
                
                
                $
                778,796
                
                
                $
                731,170Adjustment
      for stock compensationfor
      employees (b)
                
                
                (58,396
                )
                
                
                (58,396
                )
                
                
                (58,396
                )Balance
      under Canadian GAAP
                
                $
                1,732,680
                
                
                $
                720,400
                
                
                $
                672.774Accumulated
      Comprehensive IncomeBalance
      under U.S. GAAP
                
                $
                53,195
                
                
                $
                53,195
                
                
                $
                53,195Translation
      adjustments (c)
                
                
                (53,195
                )
                
                
                (53,195
                )
                
                
                (53,195
                )Balance
      under Canadian GAAP
                
                $
                ---
                
                
                $
                ---
                
                
                $
                ---Retained
      earnings (deficit)Balance
      under U.S. GAAP
                
                $
                (7,006,917
                )
                
                $
                (4,031,534
                )
                
                $
                (2,061,055
                )Translation
      adjustment (c)
                
                
                53,195
                
                
                
                53,195
                
                
                
                53,195Cumulative
      adjustment of prioryear’s
      differences
                
                
                58,396
                
                
                
                58,396
                
                
                
                58,396Balance
      under Canadian GAAP
                
                $
                (6,895,326
                )
                
                $
                (3,919,943
                )
                
                $
                (1,949,464
                )Effect
      on consolidated statement of operationsNet
      loss under U.S. GAAP
                
                $
                2,975,383
                
                
                $
                1,970,479
                
                
                $
                1,161,662Additions
      to deferred charges (a)
                
                
                ---
                
                
                
                ---
                
                
                
                ---Amortization
      of deferred charges (a)
                
                
                ---
                
                
                
                ---
                
                
                
                ---Write-down
      of deferred charges (a)
                
                
                ---
                
                
                
                ---
                
                
                
                ---Net
      loss under Canadian GAAP
                
                $
                2,975,383
                
                
                $
                1,970,479
                
                
                $
                1,161,662Basic
      loss per share - Canadian GAAP
                
                $
                0.06
                
                
                $
                0.09
                
                
                $
                0.09
 
 There are
no other differences between U.S. GAAP and Canadian GAAP in amounts reported as
cash flows provided by (used in) operating, financing or investing
activities.
 
 58
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
 
 17.
              Differences Between United
      States and Canadian Generally Accepted Accounting Principles -
      (continued)
 
 a)
              Deferred
      Charges
 
 Under
Canadian GAAP, when a development cost meets Canadian GAAP criteria for deferral
and amortization amounts incurred for project development are capitalized and
amortized over the expected useful life.  Development costs incurred
in 2007, 2006 and 2005 have been expensed as incurred.
 
 b)
              Stock
      Based Compensation
 
 Under
Canadian GAAP, the Company did not adopt the policy of expensing stock options
until January 1, 2002.  Prior to this, no stock based compensation
expense was required to be recorded.
 
 c)
              Translation
      Adjustment
 
 Under
Canadian GAAP, the foreign currency translation adjustment would be recorded as
a cumulative translation adjustment rather than as accumulated other
comprehensive income.
 
 
 18.       Comparative
figures
 
 Comparative
figures have been restated to conform with the statement presentation adopted
for the current year.
  59
  POLY-PACIFIC
INTERNATIONAL INC.
 (Expressed
in Canadian Dollars)
 Notes to
the Consolidated Financial Statements
   ITEM
9. THE OFFER AND LISTING
  Not
applicable except for Item 9.A.4. and Item 9.C.
  The
principal trading market for the Company's Common Shares is the TSX Venture
Exchange (TSX-V) under the symbol "PMB". The following table sets forth, for the
periods indicated, the high and low sales prices per share of the Company's
Common Shares on the TSX-V.
  Table
9.1—History on TSX Venture Exchange (in Canadian Dollars)
 
 Year
              Period
              High
              Low2000
              1
      Year
              0.4
              0.152001
              1
      Year
              0.35
              0.142002
              1
      Year
              0.29
              0.112003
              1
      Year
              0.24
              0.112004
              1
      Year
              0.175
              0.0752005
              Quarter
      1
              0.055
              0.0525Quarter
      2
              0.05
              0.045Quarter
      3
              0.0675
              0.063Quarter
      4
              0.13
              0.1Annual
              0.105
              0.062006
              Quarter
      1
              0.12
              0.05Quarter
      2
              0.13
              0.06Quarter
      3
              0.12
              0.07Quarter
      4
              0.08
              0.05Annual
              0..13
              0.052007
              Quarter
      1
              0.65
              0.06Quarter
      2
              0.41
              0.1Quarter
      3
              0.41
              0.17Quarter
      4
              0.27
              0.09Annual
              0.65
              0.062008
              Jan-08
              0.12
              0.09Feb-08
              0.13
              0.11Mar-08
              0.17
              0.1Apr-08
              0.14
              0.1May-08
              0.14
              0.09Jun-08
              0.14
              0.09
  60
  ITEM
10. ADDITIONAL INFORMATION
  A.
Share Capital
 
 The
following description is a summary of the material terms of the provisions of
our Articles of Incorporation.  The Articles of Incorporation have
been filed as exhibits to the registration statement.
 
 Common
Shares
 
 The
Company is authorized to issue an unlimited number of common shares with no par
value. As of December 31, 2007, there were 58,720,279 common shares issued
and outstanding that were held by approximately 66 shareholders of
record.
 
 Each
share of common stock entitles the holder to one vote, either in person or by
proxy, at meetings of shareholders. The holders are not permitted to vote their
shares cumulatively. Accordingly, the shareholders of our common shares who
hold, in the aggregate, more than fifty percent of the total voting rights can
elect all of our directors and, in such event, the holders of the remaining
minority shares will not be able to elect any of the such directors. The vote of
the holders of a majority of the issued and outstanding common shares entitled
to vote thereon is sufficient to authorize, affirm, ratify or consent to such
act or action, except as otherwise provided by law.
 
 Holders
of common shares are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of funds legally available. We have
not paid any dividends since our inception, and we presently anticipate that all
earnings, if any, will be retained for development of our business. Any future
disposition of dividends will be at the discretion of our Board of Directors and
will depend upon, among other things, our future earnings, operating and
financial condition, capital requirements, and other factors.
 
 Holders
of our common shares have no preemptive rights or other subscription rights,
conversion rights, redemption or sinking fund provisions. Upon our liquidation,
dissolution or winding up, the holders of our common shares will be entitled to
share ratably in the net assets legally available for distribution to
shareholders after the payment of all of our debts and other liabilities. There
are not any provisions in our Articles of Incorporation that would prevent or
delay change in our control.
 
 The
authorized capital of the Company consists of an unlimited number of common
shares without nominal or par value and an unlimited number of preferred
shares.
 
 Common Shares and
Warrants:
 As at
December 31, 2007, the numbers of issued common shares are 58,720,279 as
compared to 25,237,740 as at December 31, 2006.  No preferred shares
have been issued.
 
 During
fiscal year 2007, the Company had the following private placements:
 
 On
January 4, 2007, the Company settled certain of its debt with various creditors
in the aggregate amount of $171,438 by issuing 3,172,208 common shares of the
Company ranging in price from $0.05 to $0.10 per common share.
  61
  Pursuant
to the First private placement Agreement dated January 31, 2007, the Company
issued 6,000,000 units at a price of $0.05 per unit by way of a non-brokered
private placement for total proceeds of $290,906 (net of share issuance costs of
$9,094). Each unit comprises of one common share and one share purchase warrant
of the Company.  Each share warrant entitles the holder to purchase
one common share at $0.25 until Jan 31, 2009.
 
 Pursuant
to the Second private placement Agreement dated May 25, 2007, the Company issued
3,000,000 units at a price of $0.10 per unit by way of a non-brokered private
placement for total proceeds of $289,050 (net of share issuance costs of
$10,950).  Each unit comprises of one common share and one share
purchase warrant of the Company.  Each share warrant entitles the
holder to purchase one common share at $0.40 until May 25, 2009.
 
 On June
20, 2007, the Company purchased all of the issued and outstanding shares of
Polyran Reclamation Inc, (“Polyran”) pursuant to an exempt take over
bid.  In consideration for the shares of Polyran, the Company has
issued an aggregate of 7,999,996 of its common shares at a deemed price of $0.23
per share pro rata to the shareholders of Polyran. The acquisition of the
Polyran shares was completed as an Expedited Acquisition under the policies of
the TSX Venture Exchange.
 
 Pursuant
to the Third private placement Agreement dated July 19, 2007, the Company issued
a total of 4,803,130 units at a price of $0.18 per unit by way of a non-brokered
private placement for total proceeds of $796,669 (net of share issuance costs of
$67,895).  This placement was completed in two separate closing dates
with 3,352,853 units being closed on July 19, 2007 and 1,450,277 units being
closed on August 2, 2007.  Each unit comprises of one common share and
one share purchase warrant of the Company.  Each share warrant
entitles the holder to purchase one common share at $0.30 until the first
anniversary of the closing date and at $0.40 upon the second anniversary from
the closing date.
 
 Pursuant
to the Fourth private placement Agreement dated November 29, 2007, the Company
issued 2,582,857 units at a price of $0.105 per unit by way of a non-brokered
private placement for total proceeds of $263,654 (net of share issuance costs of
$7,546).  Each unit comprises of one common share and one share
purchase warrant of the Company.  Each share warrant entitles the
holder to purchase one common share at $0.14 until November 29,
2009.
 
 Preferred
Shares
 
 The
Company is authorized to issue an unlimited number of preferred shares in series
as fixed by the Directors without par value. As of the date of this registration
statement, there are no preferred shares outstanding.
 
 Preferred
shares may be issued in series with preferences and designations as the Board of
Directors may from time to time determine. The board may, without shareholders
approval, issue preferred shares with voting, dividend, liquidation and
conversion rights that could dilute the voting strength of our common
shareholders and may assist management in impeding an unfriendly takeover or
attempted changes in control.  There are no restrictions on our
ability to repurchase or reclaim our preferred shares while there is any
arrearage in the payment of dividends on our preferred shares.
 
 During
2003, a total of 3,030,200 preferred shares were redeemed at a value of
$2,353,230 in exchange for an unsecured, non-interest bearing debenture in the
amount of $1,586,250 USD.  There have been no preferred shares
issuances or redemptions by the Company since December 31, 2003.  The
authorization for preferred shares remains unlimited.
  62
  There is
a convertible debenture remaining as at the date of this report, for a total
principal value of $115,000, held by 2 subscribers, who are all former directors
of the Company, which is convertible to common shares of the Corporation at the
rate of $0.15 to $0.20 per share.
  Stock
Options
 
 As at
December 31, 2007, there were 5,260,000 stock options outstanding with a
weighted average exercise price of $0.23 as compared to 2,580,700 stock options
outstanding with a weighted average exercise price of $0.10, at December 31,
2006.
 
 During
the year, a total of 6,550,000 options were granted to directors, officers and
consultants of the Company.
 
 On
January 11, 2007, 250,000 stock options were granted to an officer and director
of the Company.  These options expire on January 11, 2012. exercisable
at $0.10.   These options vested in 30 days. On the same day,
950,000 stock options were granted to consultants of the
Company.  These options expire on January 11, 2009, exercisable at
$0.10.  These options vested in the following
percentages:  25% upon grant, 25% on July 11, 2007, 25% on January 11,
2008 and the final 25% on July 11, 2008.
 
 On
February 1, 2007, 1,400,000 stock options were granted to consultants of the
Company.  These options expire on February 1, 2009, exercisable at
$0.18.  These options vested in 30 days.
 
 On March
12, 2007, 800,000 stock options were granted to directors of the
Company.  These options expire on March 12, 2012, exercisable at
$0.10.  On the same day, an additional 100,000 stock options were
granted to a consultant of the Company.  These options expire on March
12, 2008, exercisable at $0.10.  Both these options vested in 30
days.
 
 On May 4,
2007, 50,000 stock options were granted to a consultant of the
Company.  These options expire on May 4, 2008, exercisable at
$0.16.  These options vested in 30 days.
 
 On May
19, 2007, 500,000 stock options were granted to consultants of the
Company.   These options expire on May 19, 2009, exercisable at
$0.14.  These options vested in 30 days.
 
 On July
23, 2007, 2,500,000 stock options were granted to an officer, directors,
consultants and an employee of the Company.  These options expire on
July 23, 2012, exercisable at $0.325.  These options vested in the
following percentages:  50% upon grant, 25% on May 23, 2008 and
the
 remaining
25% on January 23, 2009.
 
 During
the year, 717,200 stock options were cancelled.
  63
  Consolidated
Statement of Shareholders’ Equity
 For
the Years Ended December 31, 2007, 2006 and 2005
  Number
      of Shares
                
                
                Amount
                
                
                Additional
      Paid in Capital
                
                
                Accumulated
      Deficit
                
                
                Accumulated
      Other Comprehensive Income
                
                
                Shareholders'
      Equity (Deficit)Balance
      at December 31, 2004
                
                
                9,361,624
                
                
                $
                865,584
                
                
                $
                697,474
                
                
                $
                (899,393
                )
                
                $
                53,195
                
                
                $
                716,860Conversion
      of debenture
                
                
                9,523,832
                
                
                
                1,132,954
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,132,954Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                33,696
                
                
                
                -
                
                
                
                -
                
                
                
                33,696Loss
      for the period
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,161,662
                )
                
                
                -
                
                
                
                (1,161,662
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      at December 31, 2005
                
                
                18,885,456
                
                
                
                1,998,538
                
                
                
                731,170
                
                
                
                (2,061,055
                )
                
                
                53,195
                
                
                
                721,848-Issuance
      of common shares
                
                
                6,352,284
                
                
                
                469,064
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                469,064Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                47,626
                
                
                
                -
                
                
                
                -
                
                
                
                47,626Loss
      for the period
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,970,479
                )
                
                
                -
                
                
                
                (1,970,479
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      at December 31, 2006
                
                
                25,237,740
                
                
                
                2,467,602
                
                
                
                778,796
                
                
                
                (4,031,534
                )
                
                
                53,195
                
                
                
                (731,941
                )Issuance
      of common shares
                
                
                16,385,987
                
                
                
                1,640,278
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,640,278Exercise
      of Options
                
                
                3,153,500
                
                
                
                315,350
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                315,350Exercise
      of Warrants
                
                
                2,770,848
                
                
                
                293,585
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                293,585Shares
      for debt settled
                
                
                3,172,208
                
                
                
                171,438
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                171,438Shares
      for Polyran
                
                
                7,999,996
                
                
                
                600,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                600,000Stock
      based compensation
                
                
                -
                
                
                
                -
                
                
                
                1,012,280
                
                
                
                -
                
                
                
                -
                
                
                
                1,012,280Loss
      for the period
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,975,383
                )
                
                
                -
                
                
                
                (2,975,383
                )Comprehensive
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      at December 31, 2007
                
                
                58,720,279
                
                
                $
                5,488,253
                
                
                $
                1,791,076
                
                
                $
                (7,006,917
                )
                
                $
                53,195
                
                
                $
                325,607
  64
 
 B.
Memorandum and Articles of Association
  The
Articles of Association of the Company, as amended to date, has been filed as
Exhibit 1.0 to the Company's Registration Statement on Form 20-F, filed with the
Securities and Exchange Commission. The Articles of Association were approved by
shareholders on October 25, 1995.  Amendments were registered on April
23, 1999 and on June 12, 2003.
  The
Company is incorporated pursuant to the Companies Act, Chapter 21, Revised
Statutes of Alberta 2000 (Companies Act), which provides for the powers,
rights and responsibilities of all corporations registered within the
jurisdiction of the Province of Alberta.
  The
primary requirements and provisions of the Company’s articles of association are
included in the Companies Act and apply to the Company, subject only to changes
that have been made through Directors’ Resolutions that have been filed as
certificates and amendment and registration of restated articles, as included in
Exhibit 1.0.  Pursuant to the Companies Act, (a) a director may not
vote on a proposal, arrangement or contract in which the director has a material
interest; (b) the directors may not, in the absence of an independent quorum,
vote compensation to themselves or any members of their body; (c) the directors
may only exercise borrowing powers, or vary those powers, through the approval
of a majority of their number attendant at a duly convoked meeting of directors,
with the vote results being recorded in the minutes of the meeting; (d) there is
no age limit requirement in respect of retirement or non-retirement of
directors; and (e) ownership of shares is not required for director’s
qualification.
  Any
change in the rights of holders of the stock, however proposed, must be approved
by at least a two-thirds majority vote of the common
shareholders.  Pursuant to the Companies Act and the regulations of
the Alberta Securities Commission, the vote may be conducted through a formal
polling of shareholders, or it may be taken at a duly convoked general or
special meeting of shareholders.   The law requires that at least
one general meeting of shareholders must be convoked each year.  The
notice for a general or extraordinary meeting must be promulgated at least 45
days in advance of the meeting date through delivery to all shareholders of
record as at a date, prior to the date of issuance of the notice, which must be
published with the notice.
 
 C.   Disclosure
Controls and Procedures Update
 
 Disclosure
controls and procedures have been designed to ensure that information required
to be disclosed by the Company is accumulated and communicated to its management
as appropriate to allow timely decisions regarding disclosure. The Company’s
Acting Chief Executive Officer and Acting Chief Financial Officer have
concluded, based on their evaluation as of the date of this Management’s
Discussion and Analysis that disclosure controls and procedures provide
reasonable assurance that material information is made known to them by others
within the Company.   It should be noted that while the Company’s
Acting Chief Executive Officer and Acting Chief Financial Officer believe that
disclosure controls and procedures provide a reasonable level of assurance and
that they are effective, they do not expect that the disclosure controls and
procedures would prevent all errors and fraud.  A control system, no
matter how well conceived or operated, can only provide reasonable assurance
that the objectives of the control system are met.
  Internal
Controls over Financial Reporting
 
 The
Acting Chief Executive Officer and Acting Chief Financial Officer of the Company
are responsible for designing internal controls over financial reporting or
causing them to be designed under their supervision in order to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
Canadian generally accepted accounting principles.
  65
 Further,
because the Company is a registrant under US securities legislation, the Acting
Chief Executive Officer and Acting Chief Financial Officer of the Company are
responsible for assessing the effectiveness of the internal controls over
financial reporting or causing them to be assessed under their supervision in
order to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with Canadian and United States generally accepted accounting
principles.
 
 The
Company has assessed the design of its internal controls over financial
reporting and during this process , the following observations were provided by
the Company’s auditors:
 
 a)
              Due
      to limited staff, the Company is not able to achieve complete segregation
      of incompatible duties and achieve a formal authorization and approval
      process for transactions and payments.  In order to compensate
      for this weakness, the Acting Chief Executive Officer and Acting Chief
      Financial Officer along with senior management oversee all material
      transactions and related accounting records. In addition, the Audit
      Committee reviews on a quarterly basis the financial
      statements.
  It should
be noted that while the Company’s Acting Chief Executive Officer and Acting
Chief Financial Officer believe that internal control over financial reporting
provides a reasonable level of assurance, they do not expect that the internal
controls over financial reporting would prevent all errors and
fraud.  A control system, no matter how well conceived or operated,
can only provide reasonable assurance that the objectives of the control system
are met.
  D.
Material Contracts
 
 Material
contracts, other than contracts entered into during the ordinary course of
business, entered into during the two years immediately preceding the date of
this submission are:
 
 None.
  E.
Exchange Controls
  There are
no government laws,decrees or regulations
in Canada relating to restrictions on the import/export of capital, or affecting
the remittance of interest, dividends or other payments to non-residential
holders of the Company's shares. Any such remittances to United States
residents, however, may be subject to a 15% tax pursuant to Article X of the
reciprocal tax treaty between Canada and the United States. The applicable rate
is dependent on the type of entity receiving the dividends. See Item 10 E -
Taxation, below.
  Except as
provided in the Investment
Canada Act (the "Act"), there are no limitations under the laws of
Canada, the Province of Alberta or in the charter or any other constituent
documents of the Corporation on the right of foreigners to hold and/or vote the
shares of the Company.
 
 The purpose of the Act is to provide for the review of significant
investments in Canada by non-Canadians in order to ensure benefit to Canada. The
legislation describing the "review function" and associated rules are complex
and any non-Canadian considering an investment to which the Act might apply can
obtain information about the Act and regulations from the Government of Canada
athttp://strategis.ic.gc.ca/epic/internet/inica-lic.nsf/en/Home.
  66
  The
provisions of the Act apply to any person who is not a Canadian citizen or a
permanent resident, within the meaning of the Immigration Act (ie. a person
who has been ordinarily resident in Canada for not more than one year after the
time at which he/she first became eligible to apply for Canadian
citizenship).  For the purposes of the Act, a non-Canadian includes
any entity that is not controlled or beneficially owned by
Canadians.
  Non-Canadians
must either file a Notification or an Application for Review of an investment
unless a specific exemption applies pursuant to section 10 of the
Act.  The determination of which action is required is dependent upon
the following conditions:
  1.
              A
      Notification must be filed by a non-Canadian when commencing a new
      business activity in Canada and when acquiring control of an existing
      Canadian business where the establishment or acquisition of control is not
      a reviewable transaction.  Pursuant to the Act, a Notification
      must be filed no later than thirty days after the implementation of the
      investment.
  2.
              An
      Application for Review of the investment must be submitted when it is for
      an acquisition of a Canadian business and the asset value of the Canadian
      business being acquired equals or exceeds any of the following
      thresholds:
  (a)
              For
      an investor who is not from a World Trade Organization country, the
      threshold is $5 million for a direct acquisition and $50 million for an
      indirect acquisition; the $5 million threshold will apply, however, for an
      indirect acquisition if the asset value of the Canadian business being
      acquired exceeds 50% of the total assets of the
  business.
  (b)
              Except
      as specified in paragraph (c) below, a threshold is calculated annually
      for reviewable direct acquisitions by investors who are from a World Trade
      Organization country, such as the United States of America. The threshold
      that was set for 2004 was $237 million. Pursuant to Canada's international
      commitments, indirect acquisitions by investors who are from World Trade
      Organization countries are not
reviewable.
  (c)
              The
      limits set out in paragraph (a) apply to all non-Canadian investors for
      acquisitions of a Canadian business
that:
  (i)
              engages
      in the production of uranium and owns an interest in a producing uranium
      property in Canada;
  (ii)
              provides
      any financial service;
  (iii)
              provides
      any transportation service; or
  (iv)
              is
      a cultural business.
  67
  3.
              Notwithstanding
      the above, any investment for which only a Notification is usually
      required, including the establishment of a new Canadian business, and
      which falls within a specific business activity listed in Schedule IV of
      the Regulations
      Respecting Investment in Canada, may be reviewed if an
      Order-in-Council from the Government of Canada directing a review is made
      and a notice is sent to the non-Canadian investor within 21 days following
      the receipt of a certified complete notification.  The types of
      businesses included in Schedule IV are those involved
  in:
  (a)
              The
      publication, distribution or sale of books, magazines, periodicals or
      newspapers in print or machine readable form.(b)
              The
      production, distribution, sale or exhibition of film or video
      products.
  (c)
              The
      production, distribution, sale or exhibition of audio or video music
      recordings.
  (d)
              The
      publication, distribution or sale of music in print or machine readable
      form.
  F.
Taxation
  The
discussion under this heading summarizes the material Canadian federal income
tax consequences of acquiring, holding and disposing of common shares of the
Registrant for a shareholder of the Registrant who is not resident in Canada and
who is resident in the United States. It is based on the current provisions of
the Income Tax Act
(Canada) (the "Tax Act") and the regulations thereunder. The provisions
of the Tax Act are subject to income tax treaties to which Canada is a party,
including the Canada-United States Income Tax Convention (1980) (the
Convention). Generally, dividends paid by Canadian corporations to non-resident
shareholders are subject to a withholding tax of 25% of the gross amount of such
dividends. However, Article X of the reciprocal tax treaty between Canada and
the United States reduced to 15% the withholding tax on the gross amount of
dividends paid to residents of the United States. A further 9% reduction, in
1996, and a 10% reduction in 1997 and thereafter, in the withholding tax rate on
the gross amount of dividends is applicable when a US corporation owns at least
10% of the voting  shares of the Canadian corporation paying the
dividends.
  A
non-resident who holds shares of the Company as capital property will not be
subject to tax on capital gains realized on the disposition of such shares
unless such shares are "taxable Canadian Property" within the meaning of the
Income Tax Act (Canada)("Tax Act'), and no relief is afforded under any applicable tax treaty.
The shares of the Company would be taxable Canadian property of a non-resident
ifat any time
during the five year period immediately preceding a disposition
by the non-resident of such shares (a) not less than 25% of the issued shares of
any class of the Company belonged to the non-resident (b) the person with whom
the nonresident dealt did not deal at arm's length, or (c) to the non-resident
and any person with whom the non-resident did not deal at arm's
length.
  As a
foreign corporation with US shareholders, the Company could be treated as a
passive foreign investment Corporation ("PFIC"), as definedin Section 1296 of the
Internal Revenue Code. This determination is dependent upon the percentage of
the Company's passive income, or the percentage of the Company's assets, which
are producing passive income. US shareholders owning shares of a PFIC may defer
the U.S. tax with respect to that investment until the US holder disposes of the
PFIC shares or receives certain distributions. At that time, the U.S. holder is
subject to US tax, plus interest, based on the value of the tax deferral for the
period during which the shares of the PFIC are owned, in addition to treatment
of any gain realized on the disposition of the shares of the PFIC as ordinary
income rather than as a capital gain.
  68
  Gain from
a disposition of PFIC shares or certain distributions are treated as income
earned ratably over the period during which the shareholder has held the shares.
That portion allocable to the current year and to years when the corporation was
not a PFIC is included in the shareholder's gross income in the year of
distribution as ordinary income, rather than as a capital gain. That portion of
the distribution or disposition which is not allocable to the current year is
subject to deferred U.S. tax (the amount of tax that wouldhave been owed if the
allocated amount had been included in income in the earlier year), plus
interest.
  However,
if the U.S. shareholder makes a timely election to treat a PFIC as a qualified
electing fund ("QEF") with respect to such shareholder's interest therein, the
above-described rules generally will not apply. Instead, the electing U.S.
shareholder would include annually in his gross income his pro-rata share of the
PFIC's earnings and profits and any net capital gain, regardless of whether such
income or gain was actually distributed. A U.S. Holder of a QEF can, however,
elect to defer the payment of United States Federal Income tax on such income
inclusions income not currently received. Special rules apply to U.S.
shareholders who own their interests in a PFIC through intermediate entities or
persons.
  This
section describes the material United States federal income tax consequences of
owning shares. The United States Taxation subsection applies to you only if you
hold your shares as capital assets for tax purposes. The United States Taxation
subsection does not apply to you if you are a member of a special class of
holders subject to special rules, including:
 
 ●
              a
      dealer in securities;
 
 ●
              a
      trader in securities that elects to use a mark-to-market method of
      accounting for your securities
holdings;
 
 ●
              a
      tax-exempt organization;
 
 ●
              a
      life insurance company;
 
 ●
              a
      person liable for alternative minimum
tax;
 
 ●
              a
      person that actually or constructively owns 10% or more of our voting
      stock;
 
 ●
              a
      person that holds shares as part of a straddle or a hedging or conversion
      transaction; or,
 
 ●
              a
      US holder (as defined below) whose functional currency is not the US
      dollar.
  69
  This
section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations, published rulings and
court decisions These laws are subject to change, possibly on a retroactive
basis.
 
 You are a
"U.S. holder" if you are a beneficial owner of shares and you are:
 
 ●
              a
      citizen or resident of the United
States;
 
 ●
              a
      domestic corporation;
 
 ●
              an
      estate whose income is subject to United States federal income tax
      regardless of its source; or,
 
 ●
              a
      trust, if a United States court can exercise primary supervision over the
      trust's administration and one or more United States persons are
      authorized to control all substantial decisions of the
    trust.
 
 Taxation
of dividends
 
 Under the
United States federal income tax laws, and subject to the passive foreign
investment company, or PFIC, rules discussed below, if you are a United States
holder, you must include in your gross income the gross amount of any dividend
paid by us out of our current or accumulated earnings and profits (as determined
for United States federal income tax purposes). This includes any supplementary
dividend or any additional dividends that we may elect to distribute to
shareholders not tax resident in Canada, as explained in the Canada Taxation
subsection. Dividends paid by us will not constitute qualified dividend income
that would be eligible for the special tax rate applicable to qualified dividend
income. Withholding tax is deducted from the ordinary dividend, any
supplementary dividend and any additional dividend. You should include any
supplementary dividend and any additional dividends and Canada tax withheld from
the dividend payments in this gross amount even though you do not in fact
receive the withholding tax. Any dividend is taxable to you when you receive the
dividend, actually or constructively. Any such dividend will not be eligible for
the dividends-received deduction generally allowed to United States corporations
in respect of dividends received from other United States corporations. The
amount of the dividend distribution that you must include in your income as a
United States holder will be the US dollar value of the Canada dollar payments
made, determined at the spot Canada dollar/US dollar rate on the date the
dividend distribution is includible in your income, regardless of whether the
payment is in fact converted into US dollars. Generally, any gain or loss
resulting from currency exchange fluctuations during the period from the date
you include the dividend payment in income to the date you convert the payment
into US dollars will be treated as ordinary income or loss. The gain or loss
generally will be income or loss from sources within the United States for
foreign tax credit limitation purposes. Distributions in excess of current and
accumulated earnings and profits, as determined for United States federal income
tax purposes, will be treated as a non-taxable return of capital to the extent
of your basis in the shares and thereafter as capital gain.
 
 Subject
to certain limitations, the Canada tax withheld and paid over to Canada should
be creditable against your United States federal income tax liability However,
it is not certain that withholding tax deemed paid from a supplementary dividend
will be creditable, because that tax may not be considered withheld or may be
considered a non-creditable subsidy.
  70
  Dividends
will be income from sources outside the United States. Dividends paid in taxable
years beginning before January 1, 2007 generally will be "passive" or "financial
services" income, and dividends paid in taxable years beginning after December
31, 2006 will, depending on your circumstances, be "passive" or "general" income
which, in either case, is treated separately from other types of income for
purposes of computing the foreign tax credit allowable to you.
 
 Taxation
of capital gains
 
 Subject
to the PFIC rules discussed above, if you are a United States holder and you
sell or otherwise dispose of your shares, you will recognize capital gain or
loss for United States federal income tax purposes equal to the difference
between the US dollar value of the amount that you realize and your tax basis,
determined in US dollars, in your shares. Capital gain of a non-corporate United
States holder that is recognized on or after May 6, 2003 and before January 1,
2009 is generally taxed at a maximum rate of 15% where the holder has a holding
period greater than one year.
 
 The gain
or loss will generally be income or loss from sources within the United States
for foreign tax credit limitation purposes.
  G.
Dividend and Paying Agents
  The
Company has not declared any dividends in any of its years of operations, and
has therefore not appointed a dividend paying agent.  The Company’s
articles of association do not contain any provision to prohibit the payment of
dividends to its shareholders.  However, the Companies Act stipulates
that no dividend shall be declared if a company is insolvent, if the dividend
would render the company insolvent, or if the dividend would impair the capital
of the company.  Further, if a dividend was to be declared and paid by
a company under the preceding stated conditions, the directors of the company
would be jointly and severally liable to the company and its creditors for the
debts that would exist after the declaration and payment of such a
dividend.
  H.
Statement by Experts
  Included
as Exhibit 10.1 in respect of the audited financial statements of the Company
for the year ending December 31, 2007.
  I.
Documents on Display
  It is
possible to read and copy documents referred to in this annual report on Form
20-F that have been filed with the SEC at the SEC's public reference room
located at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms and their
copy charges.
  Other
documents concerning the Company, which are referred to in this report, or which
are otherwise deemed to be public information, may be inspected during normal
business hours at the Principal Executive Offices of the Company located 1279 –
51st
Avenue; Vancouver, BC; V5X 1E9 Requests for documents from the Company may be
made at (604) 324-2110, by fax to (604) 677-6200, or by e-mail to
info@poly-pacific.com.
 
 71
  J.
Subsidiary Information
 
 Not
applicable, since it is included in the financial statements pursuant to
generally accepted accounting principles.
  ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  Not
applicable.
   ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  Not
applicable.
  PART
II
  ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  Not
applicable.
  ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
  Not
applicable.
  ITEM
15. CONTROL AND PROCEDURES
  Not
applicable.
  ITEM
16. RESERVED
  A.
Audit Committee Financial Expert
  Not
applicable.
  B.
Code Of Ethics
  Not
applicable.
  C. Principal Accountant Fees And Services
  External Auditor Service
Fees
 The
aggregate fees billed by the Corporation’s external auditors in each of the last
two fiscal years for audit and other fees are as follows:
 
 Financial
      Year Ending
              Audit
      Fees
              Audit
      Related Fees
              Tax
      Fees
              All
      Other Fees2007
              $43,000
              Nil
              $7,500
              $5,100
      (1)
 Note:
 (1)           Fees
relate to the review of joint venture agreements.
  72
  D.
Exemption From Listing Standards For Audit Committees
  Not
applicable.
 
 E.
Purchases Of Equity Securities By The Issuer And Affiliated Persons
 
 Not
applicable.
 
  PART
III
  ITEM
17. FINANCIAL STATEMENTS
  Incorporated
by Reference to Item 8.
  ITEM
18. FINANCIAL STATEMENTS
  Not
applicable.
  73
  ITEM
19. EXHIBITS
 
 Number
              Description
      of Exhibit10.1
              Consent
      of accountants pursuant to Item 10.G99.1
              Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14 of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200299.2
              Certification
      of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14 of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200299.3
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C section 135099.4
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C section
  1350
  74
  SIGNATURE
  The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
  Poly-Pacific
      International Inc.
                  (Registrant)
                  Pursuant
      to the requirements of the Securities Act of 1933, this Form 20-F Filing
      has
                  been
      signed by the following person in the capacity and on the date
      indicated.Date: July
      2, 2008
                By:
                /s/ Randy
      HaywardName:  signed
      "Randy
      Hayward"Title: President