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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB/A

Amendment No. 2

(Mark one)

[
X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES

EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2004

OR

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

EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 0-16819

CREATIVE VISTAS, INC.

(Exact name of registrant as specified in its charter)

|Arizona
(State or other jurisdiction of
incorporation or organization | 6770
(Primary Standard Industrial
Classification Code Number) | 86-0464104
(I.R.S. Employer
Identification No.)
|--------------------------------------------------------------------- | ------------------------------------------------------------- | -----------------------------------------------

2100 Forbes Street
Unit 8-10
Whitby, Ontario, Canada L1N 9T3
(905) 666-8676
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)

|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                        
      Yes [ X ]  No [___]Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of August 10, 2005, there were 30,516,716 shares of common stock, no par value per share, outstanding.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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TABLE OF CONTENTS



PART I.
Financial Information

Item 1.

Financial Statements

1

Item 2.

Management's Discussion And Analysis or Plan of Operation

15

Item 3.

Controls and Procedures

22

PART II.
OTHER INFORMATION

Item 1.

Legal Proceedings

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 3.

Defaults upon Senior Securities

23

Item 4.

Submission of Matters to a Vote of Security Holders.

23

Item 5.

Other Information

23

Item 6.

Exhibits and Reports on Form 8-K

23







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EXPLANATORY NOTE



The sole purpose of this Form 10-QSB Amendment No. 2 is to include restated financial statements of businesses acquired related to the transaction described on item 1 of our Form 10-QSB, filed on November 22, 2004 (the "Original 10-QSB") pursuant to management's classification of the transactions as a business acquisition and leveraged buyout.

|PART I.  FINANCIAL INFORMATION |  |  | 
|------------------------------ |  |  | 
|                               |  | 

Item 1. Financial Statements

|Creative Vistas, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) | September 30, 2004
|----------------------------------------------------------------------- | ------------------
|Assets                                                                  |                   
|Current Assets                                                          |                   
|Cash and bank balances                                                  | $
1,562,039       
|Accounts receivable, net of allowance for doubtful accounts $106,385    | 2,209,000         
|Income tax recoverable                                                  | 69,458            
|Inventory, net of reserve of $nil                                       | 546,975           
|Deferred income taxes                                                   | 35,000            
|Prepaid expenses                                                        | 26,523            
|Due from related parties                                                | 3,611             
|                                                                        | 4,452,606         
|Property and equipment, net of depreciation                             | 795,682           
|Restricted Cash                                                         | 1,250,000         
|Deferred financing costs, net (Note 4)                                  | 1,176,365         
|Deferred income taxes                                                   | 119,689           
|Customer list (Note 5)                                                  | 8,917             
|Goodwill                                                                | 503,900           
|                                                                        | $
8,307,159       
|Liabilities and Shareholders' Deficiency                                |                   
|Current Liabilities                                                     |                   
|Bank indebtedness (Note 6)                                              | $
2,250,000       
|Accounts payable and accrued liabilities                                | 2,080,332         
|Deferred income                                                         | 343,356           
|Current portion of convertible notes (Note 7)                           | 900,000           
|Current portion of other notes payable (Note 9)                         | 102,558           
|Due to related parties                                                  | 54,969            
|                                                                        | 5,731,215         
|Convertible notes (Note 7)                                              | 26,648            
|Notes payable to related parties (Note 8)                               | 1,500,000         
|Other notes payable (Note 9)                                            | 158,529           
|Due to related parties                                                  | 127,487           
|                                                                        | 7,543,879         
|Shareholders' deficiency                                                |                   
|Share capital                                                           |                   
|Authorized                                                              |                   
|100,000,000 no par value common shares                                  |                   
|50,000,000 shares of preferred stock                                    |                   
|Issued                                                                  |                   
|30,000,000 Common shares                                                |                  
|Accumulated paid-in capital                                             | 4,132,668         
|Accumulated other comprehensive income                                  | 39,459            



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|Continuing shareholders basis adjustments | (2,796,100)
|----------------------------------------- | -----------
|Deficit                                   | (612,747)  
|                                          | 763,280    
|                                          | $
8,307,159

The accompanying notes are an integral part of these financial statements



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Creative Vistas, Inc.
Consolidated Statement of Stockholders Equity (Deficiency) and Other Comprehensive Income

|                                                      | Shares     |   | Amount |   | Additional paid-in
capital |   | Accumulated
retained earnings
(deficit) |   | Accumulated
other
comprehensive
income (loss) |   | Continuing shareholders basis adjustments |   | Total Stockholders Equity (deficiency)
|----------------------------------------------------- | ---------- | - | ------ | - | -------------------------- | - | --------------------------------------- | - | --------------------------------------------- | - | ----------------------------------------- | - | ---------------------------------------
|Predecessor                                           |            |   |        |   |                            |   |                                         |   |                                               |   |                                           |   |                                        
|Balance, December 31, 2002                            | 30,000,000 | $ | 71     | $ | -                          | $ | 246,623                                 | $ | 5,363                                         | $ | -                                         | $ | 252,057                                
|Redemption during the year                            |            |   | (71)   |   | -                          |   | -                                       |   | -                                             |   | -                                         |   | (71)                                   
|Issuance of common shares                             |            |   | 2      |   | -                          |   | -                                       |   | -                                             |   | -                                         |   | 2                                      
|Net Income                                            | -          |   | -      |   | -                          |   | 162,757                                 |   | -                                             |   | -                                         |   | 162,757                                
|Translation adjustment                                | -          |   | -      |   | -                          |   | -                                       |   | 67,576                                        |   | -                                         |   | 67,576                                 
|Balance, December 31, 2003                            | 30,000,000 |   | 2      |   | -                          |   | 409,380                                 |   | 72,939                                        |   | -                                         |   | 482,321                                
|Net loss                                              | -          |   | -      |   | -                          |   | (765,653)                               |   | -                                             |   | -                                         |   | (765,653)                              
|Translation adjustment                                | -          |   | -      |   | -                          |   | -                                       |   | (27,038)                                      |   | -                                         |   | (27,038)                               
|Balance, September 29, 2004                           | 30,000,000 |   | 2      |   | -                          |   | (356,273)                               |   | 45,901                                        |   | -                                         |   | (310,370)                              
|Successor                                             |            |   |        |   |                            |   |                                         |   |                                               |   |                                           |   |                                        
|Continuing shareholders basis adjustment              | -          |   | (2)    |   | -                          |   | -                                       |   | -                                             |   | (2,796,100)                               |   | (2,796,102)                            
|Conversion features of options and warrants
(Note 10) | -          |   | -      |   | 4,132,668                  |   | -                                       |   | -                                             |   | -                                         |   | 4,132,668                              
|Net loss                                              | -          |   | -      |   | -                          |   | (256,474)                               |   | -                                             |   | -                                         |   | (256,474)                              
|Translation adjustment                                |            |   |        |   |                            |   |                                         |   | (6,442)                                       |   | -                                         |   | (6,442)                                
|Balance, September 30, 2004                           | 30,000,000 | $ | -      | $ | 4,132,668                  | $ | (612,747)                               | $ | 39,459                                        |   | (2,796,100)                               |   | (763,280)                              



The accompanying notes are an integral part of these financial statements





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|Creative Vistas, Inc.                          |           |                       |           |                     |         |                     |           |                       |           |                    
|---------------------------------------------- | --------- | --------------------- | --------- | ------------------- | ------- | ------------------- | --------- | --------------------- | --------- | -------------------
|Condensed Consolidated Statement of Operations |           |                       |           |                     |         |                    
|(Unaudited)                                    |           |                       |           |                     |         |                     |           |                       |           |                    
|                                               |           | Successor             |           | Predecessor         |         | Predecessor         |           | Successor             |           | Predecessor        
|                                               |           | Period from           |           | Period from         |         | Period from         |           | Period from           |           | Period from        
|                                               |           | September 29, 2004 to |           | July 1, 2004        |         | July 1, 2003        |           | September 29, 2004 to |           | January 1, 2004 to 
|                                               |           | September 30,  2004   |           | September 29,  2004 |         | September 30,  2003 |           | September 30,  2004   |           | September 29,  2004
|Contract                                       |           |                       |           |                     |         |                     |           |                       |           |                    
|Contract                                       | $         | -                     | $         | 1,982,482           | $       | 2,154,594           | $         | -                     | $         | 5,268,773          
|Service                                        |           | -                     |           | 281,794             |         | 217,984             |           | -                     |           | 783,184            
|                                               |           | -                     |           | 2,264,276           |         | 2,372,578           |           | -                     |           | 6,051,957          
|Cost of sales                                  |           |                       |           |                     |         |                     |           |                       |           |                    
|Contract                                       |           | -                     |           | 1,573,376           |         | 1,471,250           |           | -                     |           | 3,689,980          
|Service                                        |           | -                     |           | 311,288             |         | 111,022             |           | -                     |           | 418,563            
|                                               |           | -                     |           | 1,884,664           |         | 1,582,272           |           | -                     |           | 4,108,543          
|Gross margin                                   |           | -                     |           | 379,612             |         | 790,306             |           | -                     |           | 1,943,414          
|Operating expense                              |           |                       |           |                     |         |                     |           |                       |           |                    
|Project                                        |           | -                     |           | 358,680             |         | 316,858             |           | -                     |           | 1,087,741          
|Selling                                        |           | -                     |           | 237,632             |         | 186,208             |           | -                     |           | 733,138            
|General and administrative                     | 256,474   |                       | 382,231   |                     | 262,970 |                     | 256,474   |                       | 1,058,142 |                    
|                                               |           | 256,474               |           | 978,543             |         | 766,036             |           | 256,474               |           | 2,879,021          
|Income (loss) from operations                  | (256,474) |                       | (598,931) |                     | 24,270  |                     | (256,474) |                       | (935,607) |                    
|Interest                                       |           |                       |           |                     |         |                     |           |                       |           |                    
|Interest                                       |           | -                     |           | 8,069               |         | 7,342               |           | -                     |           | 23,550             
|                                               |           | -                     |           | 8,069               |         | 7,342               |           | -                     |           | 23,550             
|Income (loss) before income taxes              | (256,474) |                       | (607,000) |                     | 16,928  |                     | (256,474) |                       | (959,157) |                    
|Income taxes                                   |           | -                     |           | (155,105)           |         | 13,991              |           | -                     |           | (193,504)          
|Net income                                     |           | (256,474)             |           | (451,895)           |         | 2,937               |           | (256,474)             |           | (765,653)          
|Basic weighted average shares                  |           | 30,000,000            |           | 30,000,000          |         | 30,000,000          |           | 30,000,000            |           | 30,000,000         
|Basic earnings per share                       |           | (0.01)                |           | (0.02)              |         | 0.01                |           | (0.01)                |           | (0.03)             
|Diluted earnings per share                     |           | (0.01)                |           | (0.02)              |         | 0.01                |           | (0.01)                |           | (0.03)             

The accompanying notes are an integral part of these financial statements



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|Creative Vistas, Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)                  |                                                       |                                                  
|------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | -------------------------------------------------
|                                                                                                  | Successor                                             | Predecessor                                      
|                                                                                                  | Period from
September 30, 2004 
to
September 30, 2004 | Period from
January 1, 2004
to
September 29, 2004
|Cash provided by (used in)
Operating activities                                                   |                                                       |                                                  
|Net loss                                                                                          | $
(256,474)                                           | $
(765,653)                                      
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities |                                                       |                                                  
|Depreciation of capital assets                                                                    | -                                                     | 37,589                                           
|Amortization of customer lists                                                                    | -                                                     | 2,823                                            
|Bad debt expenses (recovery)                                                                      | -                                                     | 1,055                                            
|Deferred income taxes                                                                             | -                                                     | (125,740)                                        
|Changes in non-cash working capital balances                                                      |                                                       |                                                  
|Accounts receivable                                                                               | -                                                     | (60,518)                                         
|Inventory                                                                                         | -                                                     | 178,160                                          
|Prepaid expenses                                                                                  | -                                                     | (2,891)                                          
|Accounts payable and other accrued liabilities                                                    | 166,263                                               | 52,095                                           
|Bonus payable                                                                                     | -                                                     | -                                                
|Deferred revenue                                                                                  | -                                                     | 227,503                                          
|Income taxes payable                                                                              | -                                                     | (105,043)                                        
|                                                                                                  | (90,211)                                              | (560,620)                                        
|Investing activities                                                                              |                                                       |                                                  
|Purchase of property and equipment                                                                | -                                                     | (967)                                            



|Investment in subsidiary      | (1,800,000) | -        | (27,099)
|----------------------------- | ----------- | -------- | --------
|Financing activities          | (1,800,000) | (967)    | (26,356)
|Increase in bank indebtedness | 1,183,172   | 394,729  | 112,725 
|Deferred financing costs      | (751,289)   | -        | -       
|Due to related parties        | -           | (67,968) | 159,695 



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|Notes payable                                                           | -                             | 248,006                        | -                                 
|----------------------------------------------------------------------- | ----------------------------- | ------------------------------ | ----------------------------------
|Convertible notes                                                       | 4,500,000                     | -                              | -                                 
|Restricted cash                                                         | (1,250,000)                   | -                              | -                                 
|Repayment of mortgage principal                                         | (229,633)                     | (13,180)                       | (13,607)                          
|Redemption of common shares                                             | -                             | -                              | (71)                              
|Issuance of common shares                                               | -                             | -                              | 2                                 
|                                                                        | 3,452,250                     | 561,587                        | 258,744                           
|                                                                        |                               |                                |                                   
|Net change in cash and cash equivalents                                 | 1,562,039                     | -                              | -                                 
|Cash and cash equivalents, beginning of period                          | -                             | -                              | -                                 
|Cash and cash equivalents, end of period                                | 1,562,039                     | -                              | -                                 
|                                                                        |                               |                                |                                   
|Supplemental Cash Flow Information                                      |                               |                                |                                   
|Cash paid for interest                                                  | $
-                           | $
236,082                      | $
51,450                          
|Cash paid for income taxes                                              | $
-                           | $
37,278                       | $
-                               
|Non cash expenses relating to business acquisition and leveraged buyout | $                     134,239 | $                            - | $                                -



The accompanying notes are an integral part of these financial statements



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Creative Vistas, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1.
Nature of Business

On September 30, 2004 the ultimate stockholders of AC Technical Systems Ltd. (AC Technical) entered into a series of transactions to acquire a controlling stock interest in Creative Vistas, Inc. (CVAS). On September 30, 2004, the CVAS stockholders entered into a Common Stock Purchase Agreement (the Agreement) with Sayan Navaratnam, Dominic Burns, Randy Stern and Malar Trust, Inc. (a corporation controlled by Sayan Navaratnam). Pursuant to the Agreement, Miller Capital Corporation and Tudor Investments LTD agreed to sell 28,500,000 shares of CVAS to Sayan Navaratnam, Dominic Burns, Randy Stern and Malar Trust, Inc. for cash consideration of $300,000.

Prior to the consummation of the Agreement, CVAS completed a series of transactions resulting in AC Technical becoming a subsidiary of CVAS. On September 22, 2004, CVAS incorporated a new Ontario company, AC Technical Acquisition Corp.(AC Acquisition) controlled by CVAS through a voting agreement with Brent Swanick.  CVAS owns 50 VFV shares (voting fixed shares) and 100 NVE shares (non-voting equity). Brent Swanick owns the remaining 50 VFV shares.  The total issued share capital was $100 ($1 for each VFV share). There was no par value for the NVE shares; AC Acquisition is a subsidiary of Creative Vistas, Inc.  Subsequently, on September 29, 2004, pursuant to a Stock Purchase Agreement with The Burns Trust, The Navaratnam Trust and AC Technical, AC Acquisition acquired all of the issued and outstanding shares of AC Technical from The Burns Trust and The Navaratnam Trust for consideration consisting of promissory notes in the aggregate amount of $3,300,000.  AC Technical became a subsidiary of CVAS.

On September 30, 2004, concurrent with the consummation of the Agreement, the Registrant entered into a number of agreements with Laurus Master Fund, Ltd. (Laurus) for (i) a secured convertible term note (the Note) in the amount of $4.5 million and (ii) secured revolving notes (together with the Term Note, the Notes) in the aggregate maximum amount of $3 million, (iii) a related options to purchase up to 1,499,997 shares of our common stock at a price of two-thirds of a cent per share (the Option), and (iv) a seven year warrant to purchase up to 2,250,000 shares of our common stock at a price of $1.15 per share (the Warrant).  The Notes are secured by all of the assets of CVAS and its subsidiaries.

CVAS loaned the proceeds of the Notes to AC Acquisition. AC Acquisition used the funds received to repay an aggregate of $1.8 million of the principal amount of the promissory notes and to pay transaction costs. The inter-company balance is subject to interest at a negotiated interest rate.

After the completion of the business acquisition and leveraged buyout transactions AC Technicals previous ultimate stockholders Sayan Navaratnam and Dominic Burns controlled 56% and 37% respectively of the common shares of CVAS. Prior to the completion of the business acquisition and leverage buyout transactions, the Burns Trust and the Navaratnam Trust each held 50% of the common shares of AC Technical. Consequently, the acquisition of the controlling stock interest in the non-operating public shell corporation, CVAS (the legal acquirer), by the shareholders of AC Technical, has been accounted for as a business acquisition and leveraged buyout under Emerging Issues Task Force (EITF) Issue No. 88-16.

On September 30, 2004 the previous management and Directors of CVAS resigned and in addition to being appointed to the Board of Directors Sayan Navaratnam and Dominic Burns were appointed Chief Executive Officer and President respectively. Additionally, AC Technicals Chief Financial Officer, Heung Hung Lee, was appointed Chief Financial Officer of CVAS.

A.C. Technical Systems Ltd., a corporation incorporated under the laws of the Province of Ontario, is engaged in the engineering, design, installation, integration and servicing of various types of security systems. The Company operates under the trade name of AC Technical Systems.







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2.
Stock Splits

On December 23, 2004, the Companys board of directors declared a three-for-one stock split on the shares of the Companys common stock. Each shareholder of record on December 17, 2004, received two additional shares of common stock for each share of common stock then held. The Company retained the current par value of $Nil per share for all shares of common stock. All references in the financial statements to the number of shares outstanding, per share amounts, and stock option data of the Companys common stock have been restated to reflect the effect of the stock split for all periods presented.



3.
Summary of Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated balance sheet as at September 30, 2004 and statement of operations and statement of cash flows for the period of the day of September 30, 2004 include the accounts of CVAS, AC Acquisition and AC Technical. Intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed statement of operations and statement of cash flows for the period ended September 29, 2004 and September 30, 2003 include the account of AC Technical. No separate financial statements are presented for the company, Creative Vistas, Inc., prior to the business acquisition and leveraged buyout transactions because, prior to September 30, 2004, it had no material assets or results. The balance sheet at September 30, 2004 and the statements of operations for the nine months ended September 30, 2003 and 2004 and the statements of cash flows for the nine



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months ended September 30, 2003 and 2004 are unaudited. In the opinion of management, these condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for and as of the periods shown. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for such periods are not necessarily indicative of the results expected for 2004 or for any future period. These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and December 31, 2004 filed with the Securities and Exchange Commission.

Cash and Cash Equivalents

The Company considers all cash and highly liquid investments purchased with an initial maturity of three months or less to be cash and cash equivalents.

The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risks on cash and cash equivalents.

The Companys cash and cash equivalents were $1,562,039 as at September 30, 2004.

Accounts Receivable

The Company extends credit to its customers based upon a written credit policy. Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Companys best estimate for the amount of probable credit losses in the Companys existing accounts receivable. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Receivable balances are reviewed on an aged basis and account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Investment Tax Credits

Investment tax credits are accrued when qualifying expenditures are made and there is reasonable assurance that the credits will be realized.  Investment tax credits earned with respect to current expenditures for qualified research and development activities are included in the statement of operations as a reduction of expenses. Tax credits earned with respect to capital expenditures are applied to reduce the cost of the related capital assets.

Research and Development Expenditures

Research and development costs (other than capital expenditures) are expensed as incurred. Expenditures are reduced by any related investment tax credits.

Inventory

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

Property and Equipment

Property and equipment is stated at original cost. Expenditures for improvements that significantly add to productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are expensed when incurred. Depreciation per annum is computed over the estimated useful life as follows:



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|Industrial condominium | 4% declining balance basis
|---------------------- | --------------------------

|Furniture and fixtures | 20% declining balance basis
|---------------------- | ---------------------------
|Computer equipment     | 30% declining balance basis
|Equipment              | 20% declining balance basis
|                       |                            

Customer List

Customer list represents the acquisition cost of an acquired customer list and is recorded at cost less accumulated amortization. Amortization is provided on a straight-line basis over the period of expected benefit of 5 years. The Company reviews the revenues from the customer list at each balance sheet date to determine whether circumstances indicate that the carrying amount of the asset should be assessed.

Long-Lived Assets

The Company reviews its long-lived assets for impairment at each balance sheet date and whenever events or changes in circumstances indicate that the carrying amount of an asset should be assessed. To determine if an impairment exists, the Company estimates the future undiscounted cash flows expected to result from the use of the asset being reviewed for impairment.  If the sum of these expected future cash flows is less than the carrying amount of the asset, the Company recognizes an impairment loss in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss for the excess of the carrying value over the fair value.

Goodwill

Goodwill is evaluated for potential impairment on an annual basis or whenever events or circumstances indicate that an impairment may have occurred. Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, (SFAS No. 142) requires that goodwill be tested for impairment using a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the estimated fair value of the reporting unit containing goodwill with the related carrying amount. If the estimated fair value of the reporting unit exceeds its carrying amount, the reporting units goodwill is not considered to be impaired and the second step of the impairment test is unnecessary. If the reporting units carrying amount exceeds its estimated fair value, the second step test must be performed to measure the amount of the goodwill impairment loss, if any. The second step test compares the implied fair value of the reporting units goodwill, determined in the same manner as the amount of goodwill recognized in a business combination, with the carrying amount of such goodwill. If the carrying amount of the reporting units goodwill exceeds the implied fair value of the goodwill so calculated, an impairment loss is recognized in an amount equal to the excess.

Deferred Financing Costs

Deferred financing costs represent costs directly related to obtaining of financing. Deferred financing costs are amortized over the term of the related indebtedness using the effective interest method.

Continuing Shareholders Basis Adjustment

AC Technical was acquired by AC Acquisition on September 30, 2004 as described in Note 1. This transaction was accounted for as a purchase in accordance with Statement of Financial Accounting Standards No. 141 Business Combinations. As a result of a 87% continuing ownership interest in the Company by certain shareholders (Continuing Shareholders), 13% of the purchase price was allocated to the assets and liabilities acquired at their respective fair values with the remaining 87% ownership interest recorded at the Continuing Shareholders historical book values as of the date of acquisition in accordance with Issue No. 88−16 of the Emerging Issues Task Force of the Financial Accounting Standards Board “Basis in Leveraged Buyout Transactions” (“EITF 88−16”). As a result of the carryover of the Continuing Shareholders’ historical basis, shareholders equity of the Company has been reduced by $2,796,102 with a corresponding reduction in the amount assigned to goodwill.

Issuance of Equity Instruments for Services

Stock-based awards to non-employees are accounted for based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable in accordance with the



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provisions of Statement of Financial Accounting  Statements No. 123, Accounting for Stock-Based Compensation, and EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods and Services.

Revenue Recognition

Contract Revenue

Software Related Services  Software related services include services to customize or enhance the software so that the software performs in accordance with specific customer requirements. As these services are essential to provide the required functionality, revenue from these arrangements is recognized in accordance with Statement of Position (SOP) 81-1, Accounting for Certain Construction Type and Certain Production Type Contracts, using either the percentage-of-completion method or the completed contract method. The percentage-of-completion method is used when the required services are quantifiable, based on the estimated number of labor hours necessary to complete the project, and under that method revenues are recognized using labor hours incurred as the measure of progress towards completion but is limited to revenue that has been earned by the attainment of any milestones included in the contract. The completed contract method is used when the required services are not quantifiable, and under that method revenues are recognized only when we have satisfied all of our product and/or service delivery obligations to the customer.

Security Systems  Security systems revenue consists of fees generated from consulting, audit, review, planning, engineering and design, supply of hardwares, system installation and project management. Revenue from contracts where performance extends beyond one or more accounting periods is recognized in accordance with SOP 81-1, SEC Staff Accounting Bulletin 104, Update of Codification of Staff Accounting Bulletins and EITF 00-21, Revenue Arrangements with Multiple Deliverables. The recognition of revenue reflects the degree of completeness based upon project drawings, project schedules, progress of actual installation and are further validated by visual observations by product managers, quality inspectors and construction advisors, if applicable. When the current estimated costs to complete indicate a loss, such losses are immediately recognized for accounting purposes. Some projects have the equipment and installation as separate element specified in the contracts.  The revenue is recognized when each element has been satisfied. The fair value of each element was based on the negotiation with the customers.



For contracts of shorter duration, revenue is generally recognized when services are performed.  Contractual terms may include the following payment arrangements: fixed fee, full-time equivalent, milestone, and time and material.  In order to recognize revenue, the following criteria must be met:

·

Signed agreement  The agreement must be signed by the customer.

·

Fixed Fee  The signed agreement must specify the fees to be received for the services.

·

Delivery has occurred  Delivery is substantiated by time cards and where applicable, supplemented by an acceptance from the customer that milestones as agreed in the statement have been met.

·

Collectibility is probable  The Company conducts a credit review for significant transactions at the time of the engagement to determine the credit-worthiness of the customer. Collections are monitored over the term of each project, and if a customer becomes delinquent, the revenue may be deferred.

Service Revenue

Service revenue consists of fees generated by providing monitoring services, preventive maintenance and technical support, product maintenance and upgrades.  Monitoring services and preventive maintenance and technical support are generally provided under contracts for terms varying from one to six years. A customer typically prepays monitoring services and preventive maintenance and technical support fees for an initial period, and the related revenue is deferred and generally recognized over the term of such initial period. Rates for product maintenance and upgrades are generally provided under time and material contracts.  Revenue for these services is recognized in the period in which the services are provided.



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Warranty

The Company carries a reserve based upon historical warranty claims experience. Additionally, warranty accruals are established on the basis of anticipated future expenditures as specific warranty obligations are identified and they are charged against the accrual. Expenditures exceeding such accruals are expensed direct to cost of sales.

Loss per share

The Company applies Statement of Financial Accounting Standards No. 128, Earnings Per Share (FAS 128). Basic loss per share (LPS) is computed using the weighted average number of common shares outstanding during the period. Diluted LPS is computed using the weighted average number of common and dilutive potential common shares outstanding during the period.  Dilutive potential common shares consist of common stock issuable upon exercise of stock options and warrants using the treasury stock method. No adjustments to earnings were made for purposes of per share calculations. The Company has reported a net loss for the period ended September 30, 2004. As a result, 1,499,999 and 2,989,500 shares of common stock, which may be issued upon exercise of options and warrants respectively, have been excluded from the calculation of diluted loss per share, for the nine months ended September 30, 2004, because their inclusion would be anti-dilutive.

Financial Instruments

The carrying value of the Companys financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short maturities of those instruments. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of convertible notes and notes payable also approximates fair value except notes payable due to The Burns Trust and the Navaratnam Trust and related party balances for which the fair value is not determinable.

Credit Risk

The Companys financial assets that are exposed to credit risk consist primarily of cash and equivalents and accounts receivable. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers serviced by the Company and their generally short payment terms.

Foreign Currency Translation

The Company maintains its accounts in United States dollars and in Canadian dollars for Canadian-based subsidiaries.  The financial statements have been translated into United States dollars in accordance with SFAS No. 52, Foreign Currency Translation.

All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statement of operations amounts have been translated using the average exchange rate for the year. The gains and losses resulting from the changes in exchange rates from year to year have been reported separately as a component of comprehensive income.

Income Taxes

The Company accounts for income taxes using the asset and liability approach in accordance with SFAS No. 109, Accounting for Income Taxes. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The provision for income taxes consists of an amount for the taxes currently payable and a provision for the tax consequences deferred to future periods.



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Comprehensive Income

Comprehensive income equals net income plus other comprehensive income. Other comprehensive income refers to foreign currency translation adjustments.

Accounting Estimates

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon managements evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities. FIN 46 explains the concept of a variable interest entity and requires consolidation by the primary beneficiary where there is a controlling financial interest in a variable interest entity or where the variable interest entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties. The primary beneficiary is the party that is exposed to the majority of the risk or stands to benefit the most from the entitys activities. In December 2003, the FASB released a revised version of FIN 46 (hereafter referred to as FIN 46R) clarifying certain aspects of FIN 46 and providing certain entities with exemptions from the requirements of FIN 46. Based upon managements evaluation of FIN 46R, the adoption did not have a material effect on the consolidated financial statements.

In April 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) 129-1, Disclosure of Information about Capital Structure, Relating to Contingently Convertible Securities. The purpose of this FASB Staff Position is to interpret how the disclosure provisions of Statement 129apply to contingently convertible securities and to their potentially dilutive effects on EPS. FSP explains that Statement 129 applies to all contingently convertible securities, including those containing contingent conversion requirements that have not been met and are not otherwise required to be included in the computation of diluted EPS in accordance with FASB Statement No. 128, Earnings per share. To comply with paragraph 4 of Statement 129, the significant terms of the conversion features of the contingently convertible security should be disclosed to enable users of financial statements to understand the circumstances of the contingency and the potential impact of conversion, quantitative and qualitative terms of the contingently convertible security, disclosure of which would be helpful in understanding both the nature of the contingency and the potential impact of conversion. The guidance in this FSP is effective immediately. The Company adopted the disclosure provision required by FAS 129.

In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, Inventory Costs-an Amendment of ARB No. 43, Chapter 4. The standard adopts the view related to inventories that abnormal amounts of idle capacity and spoilage costs should be excluded from the cost of inventory and expensed when incurred. Additionally, the meaning of the term normal capacity was clarified.  Based on the managements evaluation of SFAS No. 151, the adoption is not expected to have a material effect on the consolidated financial statements.

In December 2004, the FASB issued FASB Statement No. 123R (Revised), Share-Based Payment which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and, for small business issuers, is effective at the beginning of the first annual period beginning after December 15, 2005..  During the year, the Company has not issued any stock-based awards to employees.

In September 2004, the FASB issued EITF 04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings per Share. This Issue addresses when contingently convertible instruments should be included in diluted earnings per share. The Task Force reached a consensus that contingently convertible instruments should be included in



---

diluted earnings per share (if dilutive) regardless of whether the market price trigger has been met. The Task Force also agreed that the consensus should be applied to instruments that have multiple contingencies if one of the contingencies is a market price trigger and the instrument is convertible or settleable in shares based on meeting a market condition. Based on managements evaluation of EITF 04-8, the adoption did not have a significant effect on the consolidated financial statements.

Accounting Estimates

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon managements evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements.



4.
Deferred Financing Costs, Net

Deferred financing costs, net are associated with the Companys revolving line of credit and term note from Laurus Master Fund, Ltd., a Cayman Islands company. For the period ended September 30, 2004, the amortization of deferred financing cost approximately $Nil  (2004 - $Nil).

The estimated amortization expense for each of the next four fiscal years is as follows:

|Year | Amount     
|---- | -----------
|2004 | $
125,379  
|2005 | 471,892    
|2006 | 379,058    
|2007 | 200,036    
|     | $
1,176,365



5.

Customer List

|              | 2004   
|------------- | -------
|              | Cost   
|Customer list | $15,852
|              |        
|              |        

Amortization expense for the period ended September 2004, amounted to $2,823 (2003-$2,623). The estimated amortization expense for each of the next three fiscal years is as follows:

|Year | Amount             
|---- | -------------------
|2004 | $
991              
|2005 | 3,963              
|2006 | 3,963              
|     | $             8,917
|     |                    



6.
Bank Indebtedness





---

The Company has a $3,000,000 secured revolving line of credit with Laurus which is renewable in September 30, 2007 which included a secured convertible minimum borrowing note amounted to $1,000,000 (see Note 7).  Advances under this facility of $2,250,000 at September 30, 2004 are collateralized by the assets of the Company.  Interest on these borrowings is payable monthly at a minimum of 6% interest rate on the outstanding balance or an agreed upon formula of prime plus 2%. The Company will irrevocably remit all of its present and future Account Debtors directly to bank account and repay the revolving line of credit.

The balance as at December 31, 2003 was related to a revolving credit facility with a Canadian Chartered Bank entered by A.C. Technical Systems Ltd., the wholly owned subsidiary of the Company.  The balance was settled during the year.



7.
Convertible Notes



On September 30, 2004, the Company entered into a series of agreements with Laurus Master Fund, Ltd., a Cayman Islands company, pursuant to which the Company issued a Secured Convertible Term Note in the principal amount of $4,500,000 due September 30, 2007, secured revolving note and secured convertible minimum borrowing note (the revolving note) of up to a maximum aggregate amount of $2,000,000 and $1,000,000 due September 30, 2007, a common stock purchase warrant and a stock purchase option.

Pursuant to the Secured Convertible Term Note, Laurus provided the Company with a $4,500,000 asset based credit facility in the form of a three-year Convertible Note secured by all the assets of the Company and its subsidiaries including accounts receivable, inventory and real property. The term note is convertible into shares of the Companys common stock at an initial fixed conversion rate of $1.00 per share.

At the closing of the transaction, Laurus funded $3,250,000 to the Company under the Convertible Note.  Pursuant to the Securities Purchase Agreement between Laurus and the Company and a restricted account agreement entered into by the Company, Laurus and a US bank, the remaining $1,250,000 was deposited into a restricted account for the benefit of Laurus as additional security for the obligations of the Company under the purchase agreement and the related agreements.  The restricted account is to be maintained at the US bank until the effectiveness of the registration statement and certain other conditions set out in the agreement are satisfied by the Company.  The ability to use the funds is subject to limitations and restrictions.  At Laurus discretion, the restricted account is a potential source of financing of future Company acquisitions without the Company having to negotiate new definitive documentation.  Subsequent to period end, Laurus has released $125,000 from the restricted account to the Company to fund the Companys loan to dataBahn on March 9, 2005.  The $1,250,000 restricted account amount as of September 30, 2004 is included on the Balance Sheet under the caption "Restricted Cash".

The principal amounts of the term note and the revolving notes bear interest at the prime rate plus two percent with a minimum rate of six percent. The effective interest rate of 9.89%, includes accretion of debt discount and amortization of the beneficial conversion feature.  Interest accrued on the term note but was not payable until October 31, 2004. Interest on the revolving note accrues but is not payable until October 31, 2004.  Interest is calculated on the basis of a 360 day year.  The minimum monthly payment on the term note is $100,000, plus the monthly interest payment, and may be paid in cash, the common stock of the Company or a combination thereof, dependant upon the occurrence of certain criteria.  Laurus has the option to convert the entire principal amount of the term note and revolving notes, together with interest thereon into shares of the Companys common stock at a conversion price of $1 per common share.  The amount convertible into the Companys common stock is subject to a restriction that Laurus beneficially own no more than 4.99% of the Companys outstanding common stock immediately after conversion. The balance of the secured revolving notes was $2,250,000 as at September 30, 2004.

Pursuant to the Secured Convertible Term Note, subject to certain volume limitations and other conditions, all or a portion of the monthly payment due on the Convertible Term Note will be converted into the common stock of the Company if the market price of the Company's common stock reaches a level, for 5 consecutive trading days, which is above 110% of $1.00 (the "Fixed Conversion Price").  If the average closing price of the common stock as reported by Bloomberg, L.P. for the 5 consecutive trading days immediately preceding the date of notice of conversion is greater than or equal to 110% of the Fixed Conversion Price and the amount of the conversion does not exceed 25% of the aggregate dollar trading volume of the common stock for the 22 day trading period immediately preceding delivery of the repayment notice then the Company must convert the monthly amount due into shares of the Companys common



---

stock.  If  the above criteria are not met, then the Company shall convert only the part of the monthly amount that meets the criteria.  Any amounts due that do not meet the criteria are to be paid by the Company in cash.  No amount can be converted until there is an effective registration statement.

Subject to certain conditions, if the average closing price of the common stock is less than 110% of the Fixed Conversion Price for the 5 trading days immediately preceding a repayment date, then Laurus shall provide the Company with a repayment notice requiring the conversion of the monthly amount at a Fixed Conversion Price equal to the lesser of 85% of the average of the closing prices of the common stock during the preceding 20 trading days and 85% of the average of the 3 closing prices of the common stock for the  preceding 3 trading days, provided that the conversion of the monthly amount due does not exceed 25% of the aggregate dollar trading volume of the common stock for the 22 days preceding delivery of a repayment notice.  Any amounts due that do not meet the criteria are to be paid by the Company in cash at the conversion price of less than $0.73.

Subject to certain conditions, if after the date a registration statement covering the resale of the conversion shares is declared effective, the closing price for any 10 consecutive trading days exceeds 135% of the then effective Fixed Conversion Price, Laurus will within 10 trading days convert all or part of the then outstanding principal amount of the term note plus all accrued but unpaid interest into shares of the Companys common stock.

Pursuant to the Secured Convertible Minimum Borrowing Note, subject to certain volume limitations and other conditions, if after the date a registration statement covering the resale of the conversion shares is declared effective, the closing price for any 10 consecutive trading days exceeds 135% of the then effective Fixed Conversion Price, Laurus will within 10 trading days convert all or part of the then outstanding amount of the secured convertible minimum borrowing note plus all accrued but unpaid interest into shares of the Companys common stock.  No amount can be converted until there is an effective registration statement.

The Fixed Conversion Price is subject to adjustment, with customary exceptions and on a weighted-average basis, for stock splits, combinations, stock dividends and similar events.

The Company has granted Laurus a right of first refusal with respect to any debt or equity financings for a period of 120 days after completion of the business acquisition and leveraged buyout transaction.

Convertible notes, net of current portions is comprised of:

|                                                                                       |   |             |         |  |   | 2004   
|-------------------------------------------------------------------------------------- | - | ----------- | ------- |  | - | -------
|7% convertible term note due to Laurus, collateralized by all assets of the Company    | $ | 4,500,000  
|by accounts receivable and other assets of                                             |   |            
|Less:                                                                                  |   |             |         |  |   |        
|Discount on notes, net of accumulated amortization of $Nil (2003 - $Nil)               |   | (1,786,676)
|Beneficial convertible features, net of accumulated amortization of $Nil (2003 - $Nil) |   | (1,786.676)
|                                                                                       |   |             |         |  |   | 926,648
|Less: current portion                                                                  |   |             | 900,000
|                                                                                       |   |             |         |  | $ | 26,648 



The amortization of discount on notes and beneficial conversion features for the period were $Nil.  No such expenses incurred in 2003.

Total interest for the period was $Nil (2003:$Nil).

Discount on notes represent the fair value of the option and warrant issued to Laurus in connection with the notes payable.  The fair value of the option and warrant were measured using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 3.5%, expected dividend yield of 0%, volatility of



---

55%, share price of $1.07 and expected lives of 10 and 7 years for the option and warrant, respectively.  Discounts on notes are amortized over the term of the related indebtedness using the effective interest method.

In accordance with the provisions of Emerging Issues Task Force (EITF)Issue 00-27, "Application of EITF Issue No. 98-5 'Accounting for Convertible Securities with Beneficial Conversion Features of Contingently Adjustable Conversion Ratios', to Certain Convertible Securities", the allocated value of the Convertible Note contained a beneficial conversion feature calculated based on the difference between the effective conversion price of the proceeds allocated to the Convertible Notes and the Warrant and Option at the date of issuance. The amount arising from the beneficial conversion feature aggregated approximately $1,786,676 and is being amortized as interest expense from the date of the issuance of the Note to the end of the term of the Note.  The Company valued the Convertible Note and the Warrant and Option at issuance. The fair value of the Warrant and Option at the time of issue was $2,963,000.  The Company marked the Warrant and Option to relative fair value at September 30, 2004 under EITF 98-5/00-27.  The net carrying value of the Note after allocation of the fair value of the Warrants is being accreted to interest expense over the life of the agreement using the effective interest method.

The principal payments for the next three years are as follows:

|Year | Amount     
|---- | -----------
|2005 | $
900,000  
|2006 | 1,200,000  
|2007 | 2,400,000  
|     | $
4,500,000
|     |            













8.
Note Payable to Related Parties



In September 2004, the Company issued two promissory notes with an aggregate principal amount of $3,300,000. On September 30, 2004, the Company repaid an aggregate of $1,800,000 of the principal balance. The outstanding principal bears interest at 3% per annum with no fixed terms of repayment. The notes each with an amount of $750,000 are due to The Burns Trust (the Companys president is one of the beneficiaries of the trust) and the Navaratnam Trust (the Companys CEO is one of the beneficiaries of the trust), respectively.

Interest expense recognized for the period was $Nil (2003 - $Nil).



9.
Other Notes Payable



As at September 30, 2004 balance comprises:

|                               |   |         |         |  |   | 2004   
|------------------------------ | - | ------- | ------- |  | - | -------
|                               |   |         |         |  |   |        
|10.5% promissory notes         | $ | 158,529 |        
|8% convertible promissory note |   | 102,558 |        
|                               |   |         |         |  |   | 261,087
|Less: current portion          |   |         | 102,558 | 
|                               |   |         |         |  | $ | 158,529





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In February 2004, the Company issued four promissory notes each with principal amounts of $39,632 and payable at 100% of the face or principal amount in the denomination of CAD $50,000.  The notes mature on February 26, 2007.  Interest is payable monthly and accrues at the rate of 10.5% per annum on the outstanding principal amount on the 26th day of each month.  The principal amount of the notes is repayable in twelve consecutive monthly payments commencing on March 26, 2006.

In September 2004, the Company issued a convertible promissory note payable at 100% of the face or principal amount of $100,000.  The note matures on October 15, 2005.  Interest on the note accrues at the rate of 8% per annum, payable monthly.

Interest expense recognized for the period was $9,000 (2003:$Nil).

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

|Year | Amount   
|---- | ---------
|2005 | $
102,558
|2006 | 132,107  
|2007 | 26,422   
|     | $
261,087





10.
Stockholders Equity and Stock Warrants



The Company has total authorized share capital of 100,000,000 shares.  On December 23, 2004, the Company declared a three-for-one stock split on the shares of the Companys common stocks. Each shareholder of record on December 17, 2004, received two additional shares of common stock for each share of common stock then held. The Company retained the current par value of $Nil per share for all shares of common stock. All references in the financial statements to the number of shares outstanding, per share amounts, and stock option data of the Companys common stock have been restated to reflect the effect of the stock split for all periods presented.

Options

For the period ended September 30, 2004, the Company granted 1,499,999 options to purchase a maximum of 1,499,999 shares of common stock.  All the options granted are pursuant to issuance of debt. These options allow the holders to buy the Companys common stock at a price of two-third of two cents per share and expire in September 30, 2014. No options were exercised during the year (see also Note 1).

Warrants

For the period ended September 30, 2004, the Company granted 2,989,500 warrants to purchase a maximum of 2,989,500 shares of common stock.  Of the warrants granted, 2,250,000 warrants were issued pursuant to issuance of debt with the balance of 739,500 warrants issued pursuant to consulting and investment banking fees.  The warrants related to the debt were recorded at fair value by using the Black-Scholes option pricing model as discounts on notes and beneficial convertible features of the convertible notes (see Note 7 for the conditions).  In addition, the warrants issued pursuant to consulting and investment banking fees were recorded at fair value by using the Black-Scholes option pricing model and part of the costs were recorded as deferred financing costs (also see Note 4). These warrants allow the holders to buy the Companys common stock at prices ranging from $0.33 to $1.15 per share and expire at various dates between September 30, 2009 and September 30, 2011. No warrants were exercised during the year (see also Note 1).



11.
Loss Per Share



The following table sets forth the computation of basic and diluted loss per share.  The effect of dilutive securities is included only when dilutive.



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|                                                                                                | Successor                                             | Predecessor                                       | Predecessor                                      
|----------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------------------- | -------------------------------------------------
|                                                                                                | Period from
September 30, 2004 
to
September 30, 2004 | Period from
January 1, 2004
to
September 29, 2004 | Period from
January 1, 2004
to
September 30, 2004
|Numerator                                                                                       |                                                       |                                                   |                                                  
|Net income (loss)                                                                               | $ (256,474)                                           | $ (765,653)                                       | $ 77,137                                         
|Denominator                                                                                     |                                                       |                                                   |                                                  
|Denominator for basic earnings per share weighted average shares outstanding                    | 30,000,000                                            | 30,000,000                                        | 30,000,000                                       
|Denominator for diluted earnings per share adjusted weighted average shares assumed conversions | 30,000,000                                            | 30,000,000                                        | 30,000,000                                       
|Basic earnings (loss) per share                                                                 | (0.01)                                                | (0.03)                                            | 0.01                                             
|Diluted earnings (loss) per share                                                               | (0.01)                                                | (0.03)                                            | 0.01                                             



Total number of shares excluded from the calculation of loss per share for the period ended September 30, 2004 was 4,489,499 because they are anti-dilutive.





12.
Acquisition



The Transaction described in under basis of presentation was accounted for as a business combination in accordance with SFAS No. 141 with the step-up in the basis of assets acquired and liabilities assumed limited by the requirements of EITF 88−16.  A summary of the Transaction is presented below:

|Proceeds from borrowings                           | $   3,300,000                           
|-------------------------------------------------- | ----------------------------------------
|Assumption of bank indebtedness                    | 63,746                                  
|Aggregate purchase price                           | 3,363,746                               
|Continuing shareholders’ basis adjustment (Note 3) | (2,796,100)                             
|Purchase price allocated                           | $      567,646                          
|                                                   |                                         
|Fair value of net tangible assets acquired         |                                         
|                                                   | Accounts receivable                     
|                                                   | Income taxes recoverable                
|                                                   | Inventory                               
|                                                   | Prepaid expenses                        
|                                                   | Other current assets                    
|                                                   | Property and equipment                  
|                                                   | Deferred income taxes                   
|                                                   | Accounts payable and accrued liabilities
|                                                   | Deferred income                         
|                                                   | Notes payable                           



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| | Mortgage payable              | (29,852)    
| | ----------------------------- | ------------
| | Loans payable                 | (23,740)    
| |                               |             
| | Net tangible assets acquired  | 97,181      
| |                               |             
| |                               | 470,465     
| |                               |             
| | Capitalized transaction costs | 33,435      
| |                               |             
| | Goodwill                      | $    503,900



13.
Contingencies



The Company is potentially liable for $21,400 relating to a claim by a former employee.  The outcome of the lawsuit is not determinable. The balance was settled in 2005.

In addition, the Company was assessed by the Ontario Ministry of Finance for uncollected Ontario sales tax on prior years taxable sales.  The Company may recover the sales tax from customers and administratively, the Ministry would assist the Company in recovering these amounts.  No accrual has been provided for this assessment. To the extent that there is any shortfall, it would be recorded as an expense in the year of determination.  It is managements expectation that the full amount of the sales tax will be recovered from customers.  As at September 30, 2004, the outstanding balance of the assessment was approximately $52,000. The balance was settled in 2005.



14.
Subsequent Events



On December 23, 2004 the Company affected a 3-for-1 stock.  The stock split has been retroactively reflected in these condensed consolidated financial statements.

On January 12, 2005, the Company announced that AC Technical entered into a letter of intent to acquire the privately-held dataBahn, Inc. (dataBahn). dataBahn is based in Farmers Branch, Texas, and provides solutions to connect consumers and commercial users by providing satellite-based internet, voice and data services to the emerging broadband mobile communications markets. The acquisition is subject, among other things, to due diligence and the negotiation of definitive documentation.  In furtherance of this acquisition, the Company entered into a Security Agreement and Secured Promissory Note Purchase Agreement with dataBahn, Inc. on March 9, 2005. Pursuant to these agreements, the Company is negotiating the terms of transaction with dataBahn to acquire all its outstanding capital stock or substantially all of its assets.   In order to meet certain financial obligations of dataBahn, the Company purchased a Secured Promissory Note amounting to $125,000 from dataBahn. The secured two-year promissory note bears interest at 10% and matured on March 9, 2007.  dataBahn pays interest on monthly basis from April 8, 2005 and the monthly principal amounted to $10,416 will start to be paid from April 8, 2006.





Item 2.

Management's Discussion And Analysis or Plan of Operation

(Unaudited)

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



- 1 -



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No financial statements are presented for the shell company, Creative Vistas, Inc., prior to the business acquisition and leveraged buyout transactions because, prior to the September 30, 2004 transactions, its assets and results were immaterial.  Prior to September 30, 2004, Creative Vistas refers to the shell company. The term the Company refers to the post business acquisition and leveraged buyout consolidated entity.

Overview and Recent Developments

On September 22, 2004, we incorporated a new Ontario company, AC Technical Acquisition Corp., in order to effect the acquisition of AC Technical Systems Ltd.  Creative Vistas, Inc. owns 50 VFV shares (voting fixed value shares) and 100 NVE shares (non-voting equity shares) of AC Acquisition.  Brent Swanick owns the remaining 50 VFV shares.  The total issued share capital was CDN$100 (CDN$1 for each VFV share).  Each VFV share is only entitled to a return of CDN$1 upon dissolution of AC Acquisition and has no share in AC Acquisitions profits; AC Acquisition is a direct subsidiary of ours and our 100 NVE shares have the entire interest in the profits of AC Acquisition.

On September 29, 2004, pursuant to a Stock Purchase Agreement with The Burns Trust (our president is one of the beneficiaries of the trust), The Navaratnam Trust (our CEO is one of the beneficiaries of the trust) and AC Technical Systems Ltd., AC Acquisition acquired all of the issued and outstanding shares of AC Technical from The Burns Trust and The Navaratnam Trust for consideration consisting of promissory notes in the aggregate amount of $3,300,000.  AC Technical became an indirect subsidiary of the Company and a wholly owned direct subsidiary of AC Acquisition.

On September 30, 2004 the shareholders (The Burns Trust and The Navaratnam Trust) of AC Technical Systems Ltd., an Ontario corporation, entered into a series of transactions to acquire a controlling stock interest in Creative Vistas.  On September 30, 2004, pursuant to a Common Stock Purchase Agreement with Miller Capital Corporation and Tudor Investments LTD Profit Sharing Plan, Sayan Navaratnam, Dominic Burns, Randy Stern and Malar Trust, Inc. purchased 28,500,000 shares of Creative Vistas, Inc.s  common stock from Miller Capital Corporation and Tudor Investments LTD Profit Sharing Plan for cash consideration of $300,000.  Immediately prior to this purchase, there were 1,500,000 shares of Creative Vistas, Inc. common stock outstanding which remained outstanding and were retained by the pre-existing stockholders of Creative Vistas, Inc.

On September 30, 2004, we entered into a series of agreements with Laurus Master Fund, Ltd., one of the selling shareholders, whereby we issued to Laurus (i) a secured convertible term note in the amount of $4.5 million, (ii) secured revolving notes in the aggregate maximum amount of $3 million, (iii) a related option to purchase up to 1,499,997 shares of our common stock at a price of two-thirds of a cent per share, and (iv) a seven year warrant to purchase up to 2,250,000 shares of our common stock at a price of $1.15 per share.  The loan is secured by all of our assets and the assets of our subsidiaries.

The Company loaned the proceeds of the term note and the revolving notes to AC Acquisition.  AC Acquisition used the funds received to repay an aggregate of $1.8 million of the principal amount of the promissory notes and to pay transaction costs.

After the completion of the business acquisition and leveraged buyout transactions Sayan Navaratnam and Dominic Burns controlled 56% and 37% respectively of the common stock of the Company.  Consequently, the acquisition of the controlling stock interest in the non-operating public shell corporation, Creative Vistas (the legal acquirer), by the shareholders of AC Technical, has been accounted for in accordance with EITF 88-16, Basis in Leveraged Buyout Transactions.

On September 30, 2004 the previous management and Directors of the Company resigned and in addition to being appointed to the Board of Directors, Sayan Navaratnam and Dominic Burns were appointed Chief Executive Officer and President, respectively.  Additionally, AC Technicals Chief Financial Officer, Heung Hung Lee, was appointed Chief Financial Officer of the Company.

Our largest customer, Loblaws Companies Ltd. accounted for approximately 22% and 32% of our revenues in each of the fiscal years ended December 31, 2004 and 2003, respectively.  We anticipate that Loblaws Companies Ltd.



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will account for a significant portion of our future revenues.  Five other customers each accounted for from 1% to 6% of our revenues during the same periods.

More than 70% of our revenues are based on purchase orders.

On December 3, 2004, the Company announced that AC Technical was awarded approximately $648,000 in orders for new security projects, providing access control and CCTV equipment plus installation and related services in three projects for the Canadian Government.

In the private sector, on December 20, 2004, the Company announced that AC Technical had been awarded approximately $607,500 in orders for security-related equipment and services for a Canadian regional healthcare facility.

On January 5, 2005, the Company announced that AC Technical was awarded orders for approximately $365,500 in security projects for a Canadian retailer.

On January 12, 2005, the Company announced that AC Technical entered into a letter of intent to acquire the privately-held dataBahn, Inc. dataBahn is based in Farmers Branch, Texas, and provides solutions to connect consumers and commercial users by providing satellite-based internet, voice and data services to the emerging broadband mobile communications markets.  The acquisition is subject, among other things, to due diligence and the negotiation of definitive documentation.  In furtherance of this acquisition, on March 9, 2005, the Company made a two-year secured loan to dataBahn in the amount of $125,000 and agreed to lend dataBahn an additional $125,000.

On February 1, 2005, the Company announced that AC Technical was awarded additional ordes worth approximately $178,200 in security projects for a Canadian retailer.

On February 7, 2005, the Company announced that AC Technical was awarded orders for over $324,000 in security projects for the Canadian Government.

On February 11, 2005, the Company announced that AC Technical was selected by BMW to implement a security project to provide the automotive manufacturer with advanced digital video surveillance equipment, plus integration and related services designed to ensure the security of BMWs locations in Canada. The project is expected to be completed during the first half of 2005.

On March 11, 2005 the Company announced that AC Technical was awarded approximately $810,000 in orders for security projects by the Canadian Government, and companies in the education, medical and healthcare markets. On March 24, 2005 the Company announced that AC Technical was awarded approximately $1,377,000 in additional orders for security projects by the Canadian Government, and companies in the education, medical and healthcare markets.

On April 1, 2005 the Company announced that AC Technical received a grant from Canadas Industrial Research Assistance Program.

Results of Operations
Comparison of  Period Ended September 30, 2004
to Period Ended September 30, 2003

For purposes of this Managements Discussion and Analysis or Plan of Operation the numbers in the financial statements covering the successor period of the day September 30, 2004 were combined with the predecessor period from January 1, 2004 to September 29, 2004 to reflect the entire nine months period ended September 30, 2004.

Since our business tends to be seasonal, most of the jobs are usually processed by us in the first or the fourth quarter of the calendar year. For example, the Canadian federal government has a March year end, and as a result, we experience an increase in government contracts in the first quarter of the calendar year.



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Sales: Sales for the nine months ended September 30, 2004 totaled $6,052,000 representing a decrease of 7.2% from the nine months ended September 30, 2003.  Our contract revenues have decreased by 10.6% which was mainly due to project delays and construction delays.  In addition, contract revenue from one of our major customers decreased from approximately $2,000,000 in 2003 to $1,300,000 in 2004.  Fiscal 2003s revenue was higher as this customer had a greater number of stores that required security system. On the other hand, our service revenue, have grown by 24% which was mainly due to more maintenance revenue. The increase in service revenue primarily represents the cumulative effect of the growth in contracts and number of customers over the past few years.  We have experienced a significant increase in the number of inquiries for systems from the government and retail sector.  This increased interest in security products and services may result in our achieving increased revenues in future periods if we are successful in attracting new customers or obtaining additional projects from existing customers.  There is no assurance that the Company will be able to attract new customers.

Cost of Goods Sold: Cost of goods sold for the nine months ended September 30, 2004 decreased to $4,109,000 or 68% of revenues from $4,073,000 or 62% of revenues, for the nine months ended September 30, 2003.  The increase was mainly due to the increase of the labor and subcontractor cost to $1,331,000 or 22% of revenues for the nine months ended September 30, 2004 from $985,000 or 15% of revenues for the nine months ended September 30, 2003. The increase was mainly due to the increase in salaries. The increase was offset by the decrease of material costs to $2,748,000 or 45% of revenues for the nine months ended September 30, 2004 from $3,044,000 or 47% of revenues for the nine months ended September 30, 2003.  The decrease of the cost of materials was mainly due to the decrease in revenue by 7%.

Project, Selling, General and Administrative Expenses:  Projects, selling, general and administrative expenses for the nine months ended September 30, 2004 increased to $3,135,000 or 52% of revenues from $2,329,900 or 36% of revenues, for the nine months ended September 30, 2003.  The increase was mainly due to the increase in research and development expenses to $128,000 for the period ended September 30, 2004 from $18,000 for the period ended September 30, 2003.  It was mainly due to the hiring of new staff and more equipment was purchased for research and development department.  In addition, salaries and benefits increased by $32,000 which was mainly due to the hiring the new Chief Financial Officer.  The travel expenses increased to $82,000 for the period ended September 30, 2004 from $66,000 for the period ended September 30, 2003 which was mainly due to more travel by the CEO and President for the business acquisition and leverage buyout transaction.  The insurance expenses have increased by $24,000 which is mainly due to the industry-wide increase in premiums.  The truck and auto expenses increased by $46,000 which was mainly due to the increase in usage of the gas and more repair and maintenance on automobile.  The investment banking fees and legal fees increased to $148,000 and $108,000 for the period ended September 30, 2004.

Operating Income/Loss: Our losses were mainly due to some projects with lower gross margins in 2004.  The gross margin for the period ended September 30, 2004 decreased by 5.5%. In addition, we hired more administrative staff.  There were increases in expenses incurred in the business acquisition and leveraged buyout transactions and also expenditures on infrastructure in preparation of becoming a public company and in preparation for future expansion.  We have also invested in research and development to improve and expand our technology base, which may result in increased margins and increased revenues in the future.

Interest Expense: Interest expenses for the nine months ended September 30, 2004 slightly increased by $6,000. The increase was primarily due to there being nine months of interest during the nine months ended September 30, 2004 on additional borrowings from the Chief Executive Officer amounting to $192,500 but only seven months of interest during the nine months ended September 30, 2003.  The loan was received in 2003 to fund the additional operating costs associated with hiring more personnel in anticipation of future growth and the completion of the business acquisition and leveraged buyout transaction.

Net Income/Loss: Net loss for the nine months ended September 30, 2004 was $1,022,000 compared to net income of $77,000 for the nine months ended September 30, 2003.  The net loss for the nine months ended September 30, 2004 was caused by the decrease in gross margin by 5.5%. In addition, we hired more administrative staff.  There were increases in expenses incurred in the business acquisition and leveraged buyout transactions and also expenditures on infrastructure in preparation of becoming a public company and in preparation for future expansion.  We have also invested in research and development to improve and expand our technology base, which may result in increased revenues in the future.



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Liquidity and Capital Resources

Since our inception, we have financed our operations through bank debt, loans and equity from our principals, loans from third parties and funds generated by our business.  As of September 30, 2004, we had $1,562,000 in cash.  We believe that cash from operations and other existing resources such as our credit facilities with Laurus Master Funds, Ltd. will continue to be adequate to satisfy the ongoing working capital needs of the Company.  During the next 12 months, our primary objectives in managing liquidity and cash flows will be to ensure financial flexibility to support growth and entry into new markets and improve inventory management and to accelerate the collection of accounts receivable.

Net Cash Used in Operating Activities.  Net cash used in operating activities amounted to $650,000 for the nine months ended September 30, 2004 compared to $232,300 for the nine months ended September 30, 2003.  The changes in operating assets and liabilities resulted in a use of cash of $455,000, which included a $60,000 increase in accounts receivable, a $178,100 decrease in inventory, a $2,900 increase in prepaid expenses, a $218,000 increase in accounts payable, a $105,000 decrease in income taxes and a $227,000 increase in deferred revenue.

Accounts Receivable

Our accounts receivable increased by 4.5% to $2,209,000 which more government related jobs during the first 9 months, which have a longer payment cycle than the non-government jobs. 70% of the accounts receivable outstanding at September 30, 2004 was less than 60 days old 
which was consistent with 70% at September 30, 2003.

Inventory

Inventory on hand at September 30, 2004 decreased to $547,000 from $715,000 at September 30, 2003.  The decrease was mainly due to the improvement of inventory control and keeping minimum levels of inventory.

Accounts Payable and Accrued Liabilities

Accounts payable increased 6.3% to $2,080,000 which was mainly due to the accrued expenses related to the business acquisition and leverage buyout transaction amounted to $166,000.

Deferred Financing Costs

Deferred financing costs represent costs directly related to obtaining of financing.  Deferred financing costs are amortized over the term of the related indebtedness using the effective interest method.

Deferred Revenue

Deferred revenue increased $343,000 in 2004 from $101,000 in 2003. Deferred revenue primarily relates to payments associated with the contract revenue where revenue is recognized on a percentage of completion basis.  (See summary of accounting policy in our consolidated financial statements).

Incomes Taxes Recoverable

The income taxes recoverable increased to $69,500 as at September 30, 2004 compared to income tax payable of $40,000 as at December 31, 2003.  The changes were mainly due to the loss incurred for the period and we expect that we will have loss carry-back for prior years.

Net Cash Used in Investing Activities.  Net cash used in investing activities was $1,800,000 for the nine months ended September 30, 2004 compared to $26,000 for the nine months ended September 30, 2003.  The increase was mainly due to the acquisition of A.C. Technical Systems Ltd. for cash payments of $1,800,000.



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Net Cash Provided From Financing Activities.  Net cash provided from financing activities increased to $4,014,000 for the nine months ended September 30, 2004 compared to $258,700 for the nine months ended September 30, 2003.  The increase was principally caused by additional borrowings from Laurus Master Fund, Ltd. including revolving facilities of $2,250,000 and convertible notes of $4,500,000. (see details of arrangement with Laurus Master Fund, Ltd. in the following paragraphs.).  In addition, the increase was partially offset by the repayment of a total of $1,000,000 of credit facilities with a Canadian Bank with the proceeds of the Companys new facilities with Laurus and $1,250,000 was deposited in the bank as restricted cash.

The cost of capital of this transaction was approximately $900,000 with total borrowings from Laurus amounting to $7,000,000.  Some of the expenses incurred have been deferred and are recorded under Deferred Charges (see Note 4 in the financial statements as at September 30, 2004).  Even though the Company has obtained a better interest rate from Laurus of prime plus 2% compared to the interest rate the Company obtained from the Canadian Bank which varied for different dollar amounts borrowed but ranged from prime plus 2% to prime plus 5%, the effective rate of the loan from Laurus will be 9.89%.  The cost of capital will not decrease.  However, instead of requiring the Company to repay principal and interest on the loans in cash, if certain criteria are met, Laurus may convert the principal and interest of the loans due from the Company to shares of the Company stock.  This will reduce the cash flow requirement of the Company in the future.  The value of the lower interest payments is offset by Laurus ability to convert the debt owed into shares of the Companys Stock and the stand-alone Warrants and Options the Company has granted to Laurus.

Increases in deferred financing costs represent costs directly related to obtaining of financing.  Deferred financing costs are amortized over the term of the related indebtedness using the effective interest method.

Our indebtedness increased to $2,250,000 as at September 30, 2004 mainly due to the additional borrowings from Laurus Master Fund, Ltd.

We plan to adopt an incentive stock option plan during the third quarter of 2005.

On September 30, 2004, we entered into a series of agreements with Laurus whereby we issued to Laurus (i) a secured convertible term note in the amount of $4.5 million, (ii) secured revolving notes in the aggregate maximum amount of $3 million, (iii) a related option to purchase up to 1,499,997 shares of our common stock at a price of two-thirds of two cent per share, and (iv) a seven year warrant to purchase up to 2,250,000 shares of our common stock at a price of $1.15 per share.  The term note and revolving notes are secured by all of our assets and the assets of our subsidiaries. Each of the agreements with Laurus is part of an integrated financing structure which, on the whole, management believes to be beneficial to our capital structure.

The principal amount of the term note and revolving notes bear interest at the prime rate plus two percent with a minimum rate of six percent. The minimum monthly payment on the term note and revolving notes are $100,000, plus the monthly interest payment, and may be paid in cash, our common stock or a combination thereof, dependant upon the occurrence of certain criteria. Laurus has the option to convert the entire principal amount of the term note and revolving notes, together with interest thereon into shares of our common stock at a conversion price of $1 ($3 before the 3 for 1 stock split), provided that such conversion does not result in Laurus beneficially owning more than 4.99% of our outstanding shares of common stock. We have agreed to register all of the shares that are issuable upon conversion of the notes or exercise of the option or warrant.  For more information regarding the Laurus Financing, see Note 7 in the financial statements as of September 30, 2004.

Our capital requirements have grown since our inception with the growth of our operations and staffing.  We expect our capital requirements to continue to increase in the future as we seek to expand our operations.  On September 30, 2004, we obtained additional funding through the series of agreements entered into with Laurus, described above.  If Laurus converts the term note and/or the revolving notes into shares of the Companys common stock, the Company may avoid or reduce any cash payment required for principal and interest payable.  As a result, it will improve our cash flow.  However, such conversion by Laurus will dilute the existing shareholders.

Recent Accounting Pronouncements - In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable



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interest entities.  FIN 46 explains the concept of a variable interest entity and requires consolidation by the primary beneficiary where there is a controlling financial interest in a variable interest entity or where the variable interest entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties.  The primary beneficiary is the party that is exposed to the majority of the risk or stands to benefit the most from the entitys activities.  In December 2003, the FASB released a revised version of FIN 46 (hereafter referred to as FIN 46R) clarifying certain aspects of FIN 46 and providing certain entities with exemptions from the requirements of FIN 46.  Based upon managements evaluation of FIN 46R, the adoption did not have a material effect on the consolidated financial statements.

In April 2004, the Financial Accounting Standards Board issued FASB Staff Position, FSP 129-1, Disclosure of Information about Capital Structure, Relating to Contingently Convertible Securities. The purpose of this FASB Staff Position is to interpret how the disclosure provisions of Statement 129apply to contingently convertible securities and to their potentially dilutive effects on EPS. FSP explains that Statement 129 applies to all contingently convertible securities, including those containing contingent conversion requirements that have not been met and are not otherwise required to be included in the computation of diluted EPS in accordance with FASB Statement No. 128, Earnings per share.  To comply with paragraph 4 of Statement 129, the significant terms of the conversion features of the contingently convertible security should be disclosed to enable users of financial statements to understand the circumstances of the contingency and the potential impact of conversion. Quantitative and qualitative terms of the contingently convertible security, disclosure of which would be helpful in understanding both the nature of the contingency and the potential impact of conversion. The guidance in this FSP is effective immediately. The Company adopted the disclosure provision required by FAS 129.

In November 2004, the Financial Accounting Standards Board issued SFAS No. 151, Inventory Costs-an Amendment of ARB No. 43, Chapter 4. The standard adopts the view related to inventories that abnormal amounts of idle capacity and spoilage costs should be excluded from the cost of inventory and expensed when incurred.  Additionally, the meaning of the term normal capacity was clarified.  Based on managements evaluation, the adoption is not expected to have a material effect on the consolidated financial statements.

In December 2004, the Financial Accounting Standard Board issued FASB Statement No. 123R (Revised), Share-Based Payment which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.  Statement No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Statement No. 123(R ) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and, for small business issuers, is effective at the beginning of the first annual period beginning after December 15, 2005.  During the year, the Company has not issued any stock-based awards to employees.

In September 2004, the Financial Accounting Standard Board issued EITF 04-8, The Effect of Contingently Convertible Instruments on Diluted Earnings per Share. This Issue addresses when contingently convertible instruments should be included in diluted earnings per share. The Task Force reached a consensus that contingently convertible instruments should be included in diluted earnings per share (if dilutive) regardless of whether the market price trigger has been met. The Task Force also agreed that the consensus should be applied to instruments that have multiple contingencies if one of the contingencies is a market price trigger and the instrument is convertible or settleable in shares based on meeting a market condition.  Based on managements evaluation of EITF 04-8, the adoption did not have a significant effect on the consolidated financial statements.

DISCUSSION OF CRITICAL ACCOUNTING ESTIMATES

Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations, and that require managements most difficult, subjective or complex judgments, due to the need to make estimates about the effects of matters that are inherently uncertain.  We have identified three critical accounting estimates: accounts receivable allowances, goodwill, revenue, inventory and accounting for income taxes.

Accounts receivable allowances are determined using a combination of historical experience, current information and management judgment.  Actual collections may differ from our estimates.  A 10% increase in the accounts receivable allowance would increase bad debt expense by $10,000.



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Goodwill represents the excess of cost over the net tangible and identifiable assets acquired in business combinations and are stated at cost.  Goodwill and intangibles with indefinite lives are not amortized but tested for impairment no less frequently than annually.  Impairment is measured by comparing the carrying value to fair value using quoted market prices, a discounted cash flow model, or a combination of both.

We derive revenues from contract revenue and services revenue, which include assistance in implementation, integration, customization, maintenance, training and consulting. We recognize revenue for contract and services in accordance with Statement of Position (SOP) 81-1, Accounting for Certain Construction Type and Certain Production Type Contracts, and SEC Staff Accounting Bulletin (SAB) 104, Revenue Recognition, and EITF 00-21 Accounting for Revenue Arrangements with Multiple Deliverables. Contract revenue consists of fees generated from installation of security systems.  Services revenue is primarily derived from maintenance fees for the security systems and other services provided to the customers such as labor and materials. Revenue is generally recognized when services are performed or over the term of the maintenance contract.

We record inventory at the lower of cost and net realizable value.  Cost is determined on a first-in, first-out basis.  We write down our inventory for obsolescence, and excess inventories based on assumptions about future demand and market conditions.  The business environment in which we operate is subject to customer demand.  If actual market conditions are less favorable than those estimated, additional material inventory write-down may be required.  A 10% in inventory reserve would increase expenses by $0.1 million.

Income taxes are calculated based on the expected treatment of transactions recorded in the consolidated financial statements.  In determining current and deferred components of income taxes, we interpret tax legislation and make assumptions about the timing of the reversal of deferred tax assets and liabilities.  If our interpretations differ from those of tax authorities or if the timing of reversals is not as anticipated, the provision for income taxes could increase or decrease in future periods.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

For further information about these and other risks, uncertainties and factors, please review the disclosure included in our December 31, 2004 Annual Report on Form 10-KSB under the caption Risk Factors.

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



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Item 3.

Controls and Procedures

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

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

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

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2004, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

We are not a party to any pending legal proceeding.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.

Defaults upon Senior Securities

Not applicable.

Item 4.

Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5.

Other Information

Not applicable.

Item 6.

Exhibits

(a)

Exhibits

|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|---- |  | --------------------------------------------------------------------------------------------------
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



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|32.1 |  | Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|32.2 |  | Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

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

|CREATIVE VISTAS, INC.     
|--------------------------
|By:   /s/ Sayan Navaratnam
|Sayan Navaratnam, CEO     



Dated:  August 10, 2005



Exhibit 31.1



CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE

ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002



I, Sayan Navaratnam, certify that:



1. I have reviewed this quarterly report on Form 10-QSB of Creative Vistas, Inc.;



2. based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. the registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under one supervisor, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5. the registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons



10



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performing the equivalent function):



a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Dated: August 10, 2005



|--------------------------------------
Sayan Navaratnam
Chairman and Chief Executive Officer
|--------------------------------------------------------------------------------------------

Exhibit 31.2



CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE

ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002



I, Heung Hung Lee, certify that:



1. I have reviewed this quarterly report on Form 10-QSB of Creative Vistas, Inc.;



2. based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3. based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4. the registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under one supervisor, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5. the registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):







---



a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Dated: August 10, 2005



|--------------------------------------
Heung Hung Lee
Chief Financial Officer
|-----------------------------------------------------------------------------







Exhibit 32.1



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Creative Vistas, Inc. (the "Company") on Form 10-QSB for the period ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sayan Navaratnam, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:



1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



|By:
------------------------------------
Sayan Navaratnam
Chairman and Chief Executive
Officer
|----------------------------------------------------------------------------------------------
|                                                                                              





August 10, 2005







---

Exhibit 32.2



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Creative Vistas, Inc. (the "Company") on Form 10-QSB for the period ended September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Heung Hung Lee, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:



1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



|By:
------------------------------------
Heung Hung Lee
Chief Financial Officer
|-------------------------------------------------------------------------------
|                                                                               





August 10, 2005